Ann: RIU - HAS Yangibana JV with Wyloo, page-22

*This joint venture (JV) agreement between Hastings Technology Metals Ltd (HAS) and Wyloo presents both positives and potential concerns for Hastings shareholders. Here’s an analysis:

Why This Could Be Good News for Hastings Shareholders:

1. Debt Reduction & Financial De-Risking:

   • The JV includes the cancellation of all exchangeable notes owed to Wyloo, which would have matured in October 2025 with a face value of ~$220 million.
   • Hastings avoids the risk of major dilution from raising equity to repay this debt.
   • Wyloo, a well-backed private entity owned by Tattarang, will help finance project development, reducing Hastings’ immediate capital burden.

2. Project Acceleration & Expertise from Wyloo:

   • Wyloo will act as the project operator, bringing technical and financial expertise.
   • Given Wyloo's experience in critical minerals, it could enhance project execution and increase confidence in financing and construction.

3. Hastings Retains 40% of Revenue & Cash Flow:

   • Despite selling a majority stake (60%) in the project, Hastings still holds 40% of rare earths, niobium, and other by-product revenue and free cash flow.
   • The project has an NPV11 of $865 million, an IRR of 31.28%, and is expected to generate $258 million EBITDA per year, suggesting a strong long-term revenue stream even with a minority stake.

4. Niobium By-Product Revenue Upside:

   • The Yangibana project includes high-value niobium, a critical mineral with increasing demand, particularly in high-strength steel and next-generation lithium-ion batteries.
   • Niobium could provide additional revenue diversification beyond rare earths.

5. Reduced Equity Requirement for Hastings:

   • Hastings' remaining capital cost is now $126 million instead of the full $316 million.
   • Depending on project debt financing (target 50% gearing), Hastings' final equity contribution could be as low as $13 million to $32 million, easing its financial burden.

6. Future Expansion & Saudi Arabia Potential:

   • Hastings will retain a 40% interest in Stage 2 (Hydrometallurgical plant) and maintain the option to pursue downstream processing in Saudi Arabia.
   • If this materializes, it could further increase the project's value and provide additional processing revenue.

Why This Might Be Concerning for Hastings Shareholders:

1. Loss of Majority Control (Wyloo Gains 60% Stake):

   • Hastings is now the minority partner (40%), giving Wyloo control over strategic decision-making as the project operator.
   • Wyloo also has the option to increase its stake to 70%, further reducing Hastings' influence.

2. Valuation & Exchange Terms Favor Wyloo:

   • Wyloo is effectively buying 60% of the project by cancelling $220M of debt.
   • Hastings also gave up its 19.99% stake in Neo Performance Materials (~$79.8M) as part of the exchange.
   • This could suggest Wyloo is getting a favorable deal at a time when the rare earth market is weak, but Yangibana’s long-term value could be much higher.

3. Potential for Further Dilution:

   • If Hastings fails to meet capital calls, Wyloo can dilute Hastings' ownership further.
   • Wyloo also has a right of first refusal if Hastings tries to sell its stake.

4. Uncertainty Around Saudi Arabia Downstream Plans:

   • The Saudi Arabia processing plant is still non-binding, meaning it may not happen.
   • If it doesn’t materialize, Hastings might miss out on the higher-value downstream revenue.

Final Verdict:

• Short-Term View (Next 12-24 Months):Positive

  • Hastings eliminates a huge financial risk by cancelling its $220M debt, securing a strong JV partner in Wyloo, and keeping a 40% stake in a highly prospective project.
  • The lower capital requirements make it easier for Hastings to progress without heavy dilution.
  • Niobium presents additional revenue potential, making the project more attractive.

• Long-Term View (Beyond 2026):Mixed

  • Hastings loses majority control, which means less influence over future decisions.
  • Wyloo's option to acquire another 10% at a fixed price could undervalue Hastings’ stake in the long run.
  • The success of Saudi Arabia downstream plans will be crucial in determining if Hastings retains long-term upside.

Conclusion:

For existing Hastings shareholders, this deal de-risks the company and ensures the project advances without excessive dilution. However, long-term value capture is now partially in Wyloo’s hands, meaning shareholders should closely monitor Wyloo’s next moves.
*gpt40