Hastings Technology Metals’ (ASX: HAS) stock skyrocketed 25 per cent to 39 cents after the company revealed a game-changing alliance with Andrew Forrest’s Wyloo Consolidated Investments.
The bold partnership is set to fast-track and unleash the full potential of Hastings’ colossal Yangibana rare earths and niobium project in Western Australia’s Gascoyne region.
The deal, which has already been approved by both Wyloo’s Investment Committee and the Hastings board is currently at the non-binding term sheet stage ahead of shareholder approval and final documentation, due in March.
When completed, a joint venture agreement will see Wyloo take a 60 per cent stake in Hastings’ Yangibana rare earths project with an option to move to a 70pc stake. Wyloo will manage and operate the project.
In exchange for a controlling interest in the project, Wyloo has agreed to extinguish $115 million of a $200m company loan to Hastings.
Hastings will retain a 40pc share in Yangibana while maintaining full ownership of its Brockman heavy rare earths and Ark gold projects in WA and other key exploration tenements.
Additionally, the remaining $85m loan balance has now been moved off the books after the company transferred its 21.5pc ownership of Canadian industrial magnet maker Neo Performance Materials - also worth $85m - to Wyloo.
Hastings and Wyloo initially fell into bed with each other three years ago when Wyloo provided a $150m exchangeable loan note – more recently valued at $200m with interest and charges - so that Hastings could buy 21.5pc of Neo, which is listed on the TSX.
The grand plan was to create an integrated mine-to-magnet enterprise with Hastings supplying the raw materials and Wyloo eventually converting the loan into Hastings’ shares.
With the recent retreat in rare earths markets, the $200m loan note was seen as a millstone around Hastings’ neck. While security for that loan was set against 9 million Neo shares bought by Hastings at C$15.00 per share in 2022, those shares have since significantly retreated to C$8.63 or A$85 million in value, resulting in the loan note becoming problematic.
The new deal package will now see Hastings shed all of its massive debt burden and the capable, deep-pocketed, Twiggy Forrest-owned Wyloo, partner with Hastings to develop Yangibana.
By applying a notional price of $115m for a 60pc stake in the project, Wyloo appears to have recognised the embedded value of the project built by Hastings - a company with a market capitalisation of $56m.
The new joint venture is expected to double down on efforts to complete the development of the rare earths and niobium project to turnkey production while moving onto planning a stage two development to build a downstream hydromet to magnet processing plant.
The fully permitted Yangibana project has an ore reserve of 20.9 million tonnes and, when up and running, will become a major player in the global push for renewable energy and electric vehicles. When developed the site is expected to process 1.1mt of material per annum to produce an impressive 37,000 tonnes per annum of rare earth concentrates across a 17-year mine life.
Running at 27pc total rare earth oxides, the ratio of neodymium and praseodymium oxides comes in at 37pc or almost 3400tpa. These metals are critical for the manufacture of the high-performance super magnets used in wind turbines, electric vehicles and other green technologies.
An additional resource of 6.7mt grading 2305 parts per million for 15,501t of niobium pentoxide, when extracted, will also provide a handy bolt-on revenue stream.
In the race to take advantage of what many believe will be an inevitable second coming for rare earths, Hastings has a clear advantage among its peers. By the end of 2024, the company had spent $158m of its own cash laying the groundwork for the Yangibana project, which it estimates will cost a further $316m to construct, including contingencies.
The site is now fully kitted out with a 294-room accommodation village and a 2-kilometre airstrip ready to handle 70-seater aircraft. It is also serviced by a 25km access road and a water bore field, including six bores linked to a 20km pipeline.
A network of communications towers has been installed onsite to provide high-speed internet access.
The company also has long lead-time processing plant equipment such as a SAG mill, regrind mill, flotation cells and belt feeders stashed away in Perth warehouses, giving it a serious head start when the decision is made to go mining.
While Hastings’ Yangibana mine is well endowed with rare earths, typically, downstream processing of those concentrates provides exponential product margins. Hastings is working various angles to get a hydrometallurgical plant built to take advantage of those downstream margins.
The company has so far spent $67m on long lead items and project costs to design a hydromet plant capable of producing 15,000tpa of mixed rare earth carbonate at a grade of 59pc.
Hastings originally toyed with the idea of building the plant near Onslow in WA, however, as the project progressed, opportunities for funding construction in other parts of the world surfaced.
Twelve months ago, Hastings signed a non-binding memorandum of understanding with the Estonian government to work on a joint scoping study looking into in-country processing options.
The company has since also signed a non-binding memorandum of understanding with Saudi Arabia’s Ministry of Investment as one of nine parties selected for its Global Supply Chain Resilience Initiative - a program designed to futureproof the Saudi supply chain of critical metals. The initiative has a US$9 billion (A$14.5b) budget.
Partnering with Wyloo brings incremental technical expertise and strong financial backing to our project, which is already one-third complete. In addition, with the strong relationships we have built up in Saudi Arabia, Hastings will continue to pursue opportunities for building downstream hydromet to magnet processing plants in the kingdom, which will benefit our JV with Wyloo.
Hastings Technology Metals Executive Chairman Charles Lew
Wyloo chief executive officer Luca Giacovazzi said Yangibana was one of Australia’s most advanced rare earths projects with the potential to become a globally significant source of niobium pentoxide.
By partnering with Wyloo on the project, Hastings has potentially substantially reduced its equity dilution and funding burden to bring the project on stream.
In reducing its equity to 40pc and with a target gearing ratio of 50pc to 60pc, the company says it will now have a more manageable equity contribution to make that could be as low as $13m and up to $32m. With Forrest’s backing, Wyloo should also be well-placed to raise debt for the project when the need arises.
In what is looking like a distinctive trend, fellow rare earths hopeful Arafura Resources, with its 56mt Nolans project in the Northern Territory, has also attracted the interest of Australian billionaire Gina Rinehart, who owns a 10pc stake in the company.
Hastings also recently locked in a strategic investment from JL Mag Rare-Earth Co, the world’s leading producer of rare earth permanent magnets. JL Mag holds a 9.8pc shareholding in the company.
The common idiom is that those with the biggest wallets are generally not affected by short-term fluctuations in prices. They are also the parties most likely to be able to fast-track project development by funding residual capital expenditure before production and downstream processing.
When the rare earths market starter’s gun fires again, projects such as Yangibana will be well in the sprint. Hastings’ commitment to putting tens of millions of dollars into capital equipment in the past few years - while a punt - will ultimately give it a three or four-year head start on other shiny rare earths projects that will start flat-footed. No doubt, the point is not lost on Twiggy or Wyloo.
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