Hastings (ASX:HAS) signs binding offtake agreement with Baotou

Hastings Technology Metals has signed a binding term sheet with China’s Baotou Sky Rock Rare Earth New Material Co for integrated tolling and offtake from its Yangibana rare earth project northeast of Carnarvon in Western Australia.

The pact holds for rare earth concentrate to be toll treated in China to produce separated rare earth oxides, providing a notable rise in revenue and cashflow compared to Hasting’s previous profit-sharing model.

The structure applies to a minimum 10,000 tonnes per annum of concentrate for seven years from execution, with an option to extend for another five at Hastings’ discretion.

And while certainly significant, the deal is more a supplement to an offtake contract with thyssenkrupp Materials Trading – already in place for two-thirds of Yangibana’s annual production.

Hastings Chief Executive Officer Paul Brown said the company continued to evaluate ways to both de-risk and optimise the flagship project’s first stage, in line with its strategy to maximise value from the project.

“We have identified the opportunity to utilise excess downstream rare earth processing capacity available in China by partnering with privately-owned rare earth processing and magnet manufacturers which are seeking to secure a long-term and steady supply of concentrate feedstock,” Mr Brown said.

“The integrated arrangement under the binding term sheet with Baotou Sky Rock will facilitate Hastings extracting greater value from our concentrate under a multi-stage toll treatment arrangement and, combined with our optimised mine plan, delivers a more attractive project.

“The ability to secure this innovative tolling and offtake arrangement demonstrates the strong demand for the Yangibana project’s NdPr-rich concentrates and gives us confidence in the outlook.”

The company says negotiations are ongoing for similar offtake agreements for remaining volumes, and improved economics are being incorporated into an updated financial model to support a funding process now in an advanced stage of due diligence.

Processing power

While rare earth production is an increasingly geopolitical issue, Hastings’ is not the first offtake deal struck between Australian and Chinese companies.

The Chinese Government put out a white paper over a decade ago warning of depletion and low-quality remaining seams, a problem believed to have been exacerbated by illegal mining activities.

And while China still holds the processing power, Australia and the United States are both putting in the cash to play catch-up.

Processing rare earths is a key focus for ANSTO – the Australian Nuclear Science and Technology Organisation’s – Minerals unit after a $13.9 million funding allocation.

Even the Pentagon put money towards an Australian company to build domestic capacity, showing that even through they are currently experiencing depressed prices, rare earths remain firmly on the global agenda.

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