With all the talk of on-shoring, near-shoring, friend-shoring, or whatever is the popular term this week, it’s easy to lose sight of the fact that most commodities are global in nature. I know I’ve become fixated on North American solutions when it comes to critical materials and rare earths but that’s a somewhat myopic view. There are plenty of countries out there, near and far, that we consider our friends and who may or may not have cost advantages that overcome any incremental transportation fees to compete in our domestic market. Thus, we shouldn’t fall into the trap of thinking that just because the U.S. Inflation Reduction Act, and other similar legislation, look to limit parts of the world from contributing to “made at home” solutions, as perhaps, North American miners and explorers aren’t necessarily the best option.

One such example is Hastings Technology Metals Limited (ASX: HAS | OTCPK: HSRMF), a Company engaged in the exploration, development, and mining of rare earths and specialty metals in Western Australia. This Perth-based company is primed to become the world’s next producer of neodymium and praseodymium concentrate (NdPr). Hastings’ flagship Yangibana Project (which comprises a mine and beneficiation plant at the Yangibana site, and a hydrometallurgical plant at Onslow), in the Gascoyne and Pilbara regions of Western Australia, contains one of the most highly valued NdPr deposits in the world with NdPr:TREO ratio of up to 52%. The Project is permitted for long-life production, with offtake contracts signed and debt financing in an advanced stage. The first product to ship is targeted for H1/2025. Hastings also owns and operates the Brockman project, Australia’s largest heavy rare earths deposit, near Halls Creek in the Kimberley.

Earlier this month, the Company increased the mineral reserves at the Yangibana Project and it now has JORC-compliant Proved and Probable Ore Reserves of 20.93 million tonnes at 0.90% TREO which includes a 37% component NdPr, making it one of the largest and highest-grade rare earths projects in the world. The company has made significant progress in advancing the project over the past few years, with a Pre-Feasibility Study completed in 2018 and a Definitive Feasibility Study (DFS) completed in 2020. The DFS confirmed that Yangibana is a highly viable project, with low operating costs and strong economic returns.

But where I find this story gets interesting is all the various financial dealings that Hastings is involved in. More than half of ~A$400 million of total debt financing required for the Yangibana Project has been secured from the Northern Australia Infrastructure Facility (NAIF), which recently increased its financial support to A$220 million with a 12½-year tenor. Hastings also completed a Two-Tranche Placement to raise A$110 million in new equity to progress the Yangibana Project in October 2022. Nothing unusual about these two deals but here’s the one that intrigues me. On October 14, 2022, the Company announced the completion of the acquisition of an approximate 19.9% shareholding in Neo Performance Materials Inc. (TSX: NEO) for an aggregate price of C$134.6 million. The acquisition was funded by a A$150 million cornerstone investment in Hastings by Wyloo Metals.

It would appear that the management team at Hastings does not doubt that this mine is moving forward. The NEO acquisition provides Hastings with a strategic stake in NEO and exposure to the global downstream processing of rare earth materials into magnets, critical components of environmentally friendly products such as electric vehicles and wind turbines. Additionally in October (seemingly a very busy month for the Company), Hastings signed a non-binding offtake Memorandum of Understanding (MOU) with Solvay, a French-based global leader in Materials, Chemicals, and Solutions. The deal outlines the intent of both parties to enter into a binding commercial offtake agreement for the supply of Mixed Rare Earth Carbonate (MREC). Under the agreement, the supply of an initial 2,500 tonnes per annum of MREC will be sent from Hastings’ Yangibana Project to Solvay’s plant in La Rochelle, France. Deals like this might explain why NAIF was comfortable increasing its financial support for the project.

Lastly, it’s worth mentioning that Hastings has implemented rigorous environmental and social sustainability standards to ensure that its operations are in line with international best practices. This commitment and transparency were recognized with an exceptional ESG risk rating by Morningstar Sustainalytics with Hastings ranked 4th out of 159 companies rated in the Diversified Metals Mining subindustry category and placed 9th out of 193 companies in the Diversified Metals industry category. Hastings also undertook an EcoVadis assessment and achieved 68/100 which placed the company in the top 5% of companies assessed. This has not only helped the company attract investment from socially responsible investors but also win recognition for its efforts.

Hastings Technology Metals looks ready to take on the rare earths supply market and become a force to be reckoned with. The Company had A$172.2 million in cash and equivalents as of December 31, 2022 and seemingly no issues raising additional capital as needed. Agreements are in place for ~70% of production for the first 10 years and there is still plenty of blue-sky exploration upside to further expand the resource at Yangibana. It appears I need to start looking past my own backyard for resource opportunities that are world-class.

Hastings Technology Metals Ltd. (ASX: HAS), an Australian junior mining company, has recently made some interesting moves in the rare earths space.  Its major announcement on August 26th was that through an investment from Wyloo Metals in Hastings in the amount of A$150 million, it was acquiring the majority of Oaktree Capital Management’s shares in Neo Performance Materials Inc. (TSX: NEO). Oaktree acquired a controlling position in NEO in 2015 as it emerged from the bankruptcy of Molycorp. This will result in Hastings owning somewhere in the range of 20% of NEO on the same day that NEO announced a bought deal of C$65 million, which would dilute the original 22.1% position Oaktree was selling. From their press release: “Hastings views the Acquisition as the first step in its Hastings 2.0 strategy, to create a fully-integrated mine-to- magnet supply chain business. Wyloo is supportive of this vision and Hastings is pleased to have the support of Wyloo as a strategic partner.”

Wyloo Metals is a company owned by Andrew “Twiggy” Forrest, an Australian billionaire, who made his money selling iron ore from Australia. Earlier this year Wyloo outbid BHP for Noront, whose deposit in the Ring of Fire, Northern Ontario is a high-grade nickel-copper-platinum-palladium deposit with a bid worth C$616.9 million.  This recent choice by Wyloo to invest in Hastings is another move in their aim “to develop and invest in the next generation of mines”. Given the funds available from Wyloo is it possible Hastings will increase its position in NEO, given the recent record profits from NEO? They have said there is no plan to increase their holding.

On September 7th Hastings announced a A$110 million two tranche placement with the goal to accelerate its rare earths deposit in Western Australia. In addition, they announced a non-underwriting share purchase plan (SPP) to raise up to A$10 million. The aim is to accelerate the rare earth deposit they are developing, which is known as the Yangibana deposit in Western Australia. The deposit had a JORC resource reported in 2019. There are seven areas reported as shown in the chart below:

The reported percentages of Neodymium(III) oxide (Nd2O3) and Praseodymium oxide (Pr6O11) are high compared to most other global deposits, which is intriguing, as these are the main revenue drivers in all deposits globally except for ionic clay deposits, like the ones in Southern China. What is challenging is the TREO (Total Rare Earth Oxides) grade averaging 1.22%, which will increase operating costs. By comparison, MP Materials’ Mountain Pass mine in California is reported around 8%. However, Yangibana average Nd/Pr of 43% is about 3 times higher than Mountain Pass.

On February 21st of this year, Hastings announced an increase in the NPV of the Yangibana project of 84% to $1,012 million and an IRR of 26%. When looking at Shanghai Metal Markets pricing in mid-February Neodymium oxide (Nd2O3) was $190/kg USD and Praseodymium oxide (Pr6O11) was $172/kg.  Today those prices are $91.11/kg or a 50% reduction.

Looking at Hastings’ August and September presentations, their focus is not on separating the rare earths into single elements but view that as NEO’s focus. Their stated plan is to produce 15,000 tonnes per year of a mixed rare earth carbonate, which typically is around 45-50% total rare earth oxides (TREO). This would generate 6,750-7,500 tonnes of TREO.  This is over double the current capacity of NEO’s plant in Estonia. Hastings has already committed 70% of their first 10 years’ output to ThyssenKrupp and Skyrock, so this would leave 2,000-2,250 TPY for NEO.  ThyssenKrupp will likely sell the material to China as it does for Rainbow Rare Earths. Skyrock is a part of the Baotou rare earth group, so the majority of the Yangibana deposit will end up in China, unless there is an out clause and NEO expands its non-Chinese capacity.

It will be interesting to see how this new relationship in the rare earths space develops. This is certainly not the end of the story.