Hastings Rare Metals Limited (ASX:HAS) is an Australian company headquartered in Sydney, New South Wales, focused on the exploration, development and production of Heavy Rare Earth Oxides (HREO) from its world class deposit located in the North West of Western Australia.
The company recently completed a “Scoping Study” on its 100% owned 36.2 million tonne Hastings deposit. The base case study returned a mine life of +25 years, NPV of A$1.9 billion, IRR of 26% and a payback period of 3.6 years.
The Hastings project contains significant quantities of Dysprosium and Yttrium, both considered critical strategic materials by the US Department of Energy.
HAS also owns 60% of the Yangibana rare earths project located near Carnavon in the North West Western Australia.
We have maintained our Speculative Buy recommendation and retained a 12-month price target of $0.30 per share.
Hastings investment case
Australian investors appear to not understand the HAS story or are confused by the complexity of the rare earths market.
Hasting has a market capitalisation of around $14m at present with approx. $3.2m in cash (giving an enterprise value of $11m), making it the lowest valued rare earth company with a viable resource, this is despite the fact that the Hastings deposit is a Heavy Rare Earths (HREO) project, which are considered the most valuable, containing substantial quantities of the most critical HREO Dysprosium.
Hasting Rare Earths Project facts:
The Hasting project is considered the largest HREO project in Australia and the third largest globally. The Hasting deposit has the highest ratio of HREO to TREO of any deposit globally at 85%. Development of the Hastings project is more advanced than many investors realise, with bench top metallurgical and process flow sheet studies completed in the late 1980’s, backed up with pilot plant work at Warren Spring laboratory, UK in 1990 and recently verified by ANSTO (Australian Nuclear Science and Technology Organisation) as part of the Scoping Study. The fact Hastings has a viable flow sheet places the company a couple of years ahead of the majority of its peers. The two main products to be produced from Hastings, Dysprosium and Yttrium, are both considered critical metals by the US Department of Energy, and are likely to experience supply shortfalls over the next decade. Pilot plant study expected to commence in the first quarter of 2013 with full feasibility study to commence in the second quarter 2013 (100kg Bench level metallurgical test completed, 30t pilot plant to commencing within 6 months) Hasting has ample cash (~$3.2m) to complete its 2012 work program.
If global growth in wind turbines, and electric and hybrid vehicles is to continue, more sources of Dysprosium will be required to fill the forecast supply shortage. Dysprosium is a critical element in the manufacture of the high performance magnets required in these technologies.
Global growth in LEDs (Light Emitting Diode), LCD’s fluorescent lamps and industrial/military lasers is likely to result in a shortage of Yttrium from 2015 requiring new supplies to be developed to fill the forecast supply shortage. Yttrium is a key material in phosphors for fluorescent lamps, LED’s and LCD screens.
The Hastings deposit contains significant quantities of both critical elements Dysprosium and Yttrium.
Comparing HAS to various other rare earth companies globally (which generally contain an inferior resource and are not as far down the development process as HAS), an argument could easily be made for a market capitalisation for HAS of between $60m - $80m.
An argument could easily be made for a market capitalisation for HAS of between $60 million and $80 million.
We believe the most important (and critical) next step for Hastings is find a strategic partner to take part in the project (ideally an end user of Dysprosium and/or Yttrium) to fund the major components of the feasibility study and provide funding for the construction of the project. The project is too large for a company the size of Hastings to sole fund.
(20min delay)