Hastings Tech Metals raises $110m to accelerate flagship Yangibana rare earths project

Less than two weeks after entering a binding share purchase agreement to acquire a 22.1% stake in global rare earth processing and advanced permanent magnets producer, Neo Performance Materials (TSX: NEO), Hastings Technology Metals (ASX: HAS) has flagged plans to raise $110m.

After entering a trading halt yesterday, the Perth-based rare earth play this morning announced plans to launch a $100m two-tranche Placement for the issue around 22.7m new fully paid ordinary shares, representing around 22.4% of Hastings’ existing shares on issue.

Executive chairman, Charles Lew believes funding further validates market support for the company’s recently announced proposed strategic investment in Neo Performance Materials and longer-term aspirations of becoming a fully integrated mine-to-magnet producer.

18.8% discount to closing price

At $4.40, each new Share represents a 18.8% discount to the closing price of $5.42 per share on Friday, 2 September 2022 and a 12.3% discount to the 10-day volume weighted average price of $5.02 per share up to and including Friday, 2 September 2022.

Tranche one of the placement is set to raise approximately $67m and tranche two of the, which is subject to shareholder approval, is set to raise approximately $33m.

In addition, Hastings will also be undertaking a non-underwritten Share Purchase Plan (“SPP”) at the same price as the placement, to raise up to $10m.

Yangibana rare earths expansion

As well as helping to strengthen the company’s balance sheet, funds raised have been earmarked to further develop the company’s flagship Yangibana rare earths project.

Located in the Upper Gascoyne region of WA, Yangibana is one of the richest known localities containing neodymium and praseodymium (NdPr), vital components used to manufacture permanent magnets used in advanced technology products ranging from electric vehicles to wind turbines, robotics, medical applications, and digital devices.

The site is permitted for long-life production and construction is currently scheduled to continue until second half 2024.

Proceeds from the placement offer will be used to:

• Process plant capex at Yangibana and Onslow

• Early work development costs

• Project services costs

• Working capital and the Offer costs

Other recent developments

The recent decision to acquire a 22.1% stake Neo Performance Materials Inc – which provides Hastings a platform to access the full mine-to-magnet supply chain - coincides with a cornerstone investment by Andrew Forrest’s Wyloo Metals via a $150m convertible note.

The Northern Australia Infrastructure Facility (“NAIF”) has also approved $140m loan facility underpinning debt funding requirements.

Beyond Yangibana, Hastings also owns and operates the Brockman project, Australia’s largest heavy rare earths deposit, near Halls Creek in the Kimberley.

Hastings has $137m of cash on balance sheet as at 30 June 2022.

What brokers think

Hastings share price is up around 18% in the last 12 months and has bounced from a year-to-date low of $3.67 to $5.42.

Consensus on Hastings is Strong Buy.

Based on Morningstar’s fair value of $8.16 the stock appears to be significantly undervalued.

Macquarie notes Neo Performance Materials is accelerating plans to expand rare earth separation operations in Estonia and is constructing downstream facilities to produce rare earth permanent magnets.

The broker’s Outperform rating and target price of $6.30 are retained.

Hastings Technology Metals share price over 12 months.