21/02/2022 - 15:47

Labour, commodities hike Yangibana costs

21/02/2022 - 15:47

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Revisions to Hastings’ rare earth project have more than doubled its forecast return to $1 billion, but higher labour and commodity prices have run up capital costs by $142 million.

Labour, commodities hike Yangibana costs
Hastings Technology Metals estimates a net present value for Yangibana of more than $1 billion. Photo: Hastings Technology Metals

Revisions to Hastings’ Yangibana rare earth project have more than doubled its forecast return to $1 billion, but higher labour and commodity prices have run up capital costs by $142 million.

Updated economics for the 15,000 tonnes per annum mixed rare earth carbonate project are based on a definitive feasibility study completed in 2017, which was revised late last year.

Released today, the figures show an 84 per cent increase on Yangibana’s post-tax net present value, appraising the asset at $1 billion.

It also yielded an elevated internal rate of return from 21 per cent to 26 per cent and increased forecast free operating cash flow by 71 per cent to $4.3 billion.

In turn, however, the revisions also recognised a tighter labour market and increased commodity prices emerging in recent years as fallout from the COVID-19 pandemic.

Total capital cost now sits at $658 million - factoring in contingencies - compared to $516 million in July.

It comes amid what Hastings observed as an approximate 13 per cent increase in labour rates and equipment since its capital estimate in July on account of current construction market conditions.

“Additionally, the large volume of major infrastructure projects throughout Western Australia has resulted in pressure on prices of concrete and steel, labour, consumables, and shipping costs,” Hastings said in a statement.

With new funding requirements to consider, Hastings said discussions with potential partners were well advanced and flagged the possibility of a corporate transaction or joint venture arrangement.  

These would be in addition to the $101 million it raised across two placements for Yangibana in 2021 as well as a $140 million backing from the federal government’s Northern Australia Infrastructure Facility.

Hastings chair Charles Lew said the updated economics demonstrated a world-class rare earth project.

“The updated project economics tell a story of a world-class rare earths project that will be capable not only of delivering up to 8 per cent of global NdPr demand for a period of at least 15 years, but generate significant long-term value for all shareholders,” Mr Lew said in a statement.

“We are well advanced on discussions with a range of funding partners (in addition to NAIF) and are now focused on finalising the appropriate capital structure that best positions Hastings for success in bringing Yangibana into production by 2024.

“This includes undertaking a corporate transaction or seeking a joint venture partner(s).”

Hastings owns 70 per cent of the proposed project, located over 650 square kilometres in the Gascoyne, while UK-owned Cadence Minerals holds the remaining 30 per cent.

Plant construction is set to commence in Q3 2022 with a $20 million early works program.

Fellow rare earth play Iluka Resources also ran into cost increases at its phase two rare earth project last month observing cost escalation in the order of 25 per cent on equipment and services.

It, too, largely attributed the increase to COVID restrictions, which had exacerbated supply chain pressures and reduced labour mobility.

Hastings Technology Metals shares closed the day down 5.08 per cent to trade at 28 cents.  

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