Battle Of Hastings; Ionic Drill; ASM IPO; PRC's Military Comments on RE; Hard Numbers

Rare Earth 2020 August 3

We could have picked any, but we chose Hastings, as they posted CAPEX improvement news.

Hastings Technology Metalsexecutive summary of the definitive feasibility study (DFS) of November 2017 does not explicitly contain numbers for anticipated sales amounts and prices.

However, it throws in a nominal “total LOM revenue” of US$ 1.623 billion for the 2 deposits and 5 years covered under the executive summary of the DFS.

We have trouble getting to that number. We end up with a number that is >US$ 1 billion less. Wrestling with the latest Hastings investor presentation, also a derivate of the DFS, does not make it any better.

The information of the definitive feasibility study dates November 2017. What is made available to the public is an executive summary of the definitive feasibility study (DFS), not the DFS itself, which likely has never been published.

Hastings Yangibana area is 650 square kilometres, rather large, and consists of the following deposits, according to page 15 figure 4-3 of the executive summary of the DFS:

This is our graph, prepared on Hastings figure 4-3 on page 15 of the executive summary of Hastings’ DFS.

There has been a resource update by Hastings on November 19, 2019, with many changes in the indicated, inferred and probable categories.

In terms of measured, the JORC attachment to aforementioned November 19, 2019 update clarifies that reverse circulation and diamond drilling was carried out in 7 of the 14 deposits in the Yangibana region.

For better understanding on the geographical implications such as location and distance, we have marked-up figure 4-3 on p.15 of the executive summary of the definitive feasibility study:

In the introduction page of the executive summary of the DFS it says:

If so, the budgeted 2 excavators will gain a lot of mileage.

Table 16-2 says:

Since the target product is mixed rare earth carbonate (MREC), the relevant number for a feasibility consideration is an average 13,254 tons/year MREC (factory capacity 15,000 t/year).

About the price applied, the executive summary says:

We learn the Life of Mine (LOM) revenue, 5 years for the deposits covered under the DFS, Bald Hill and Fraser’s, nominally is to be US$ 1,623,000,000, based on a basket price of US$ 37/kg TREO for the mixed rare earth carbonate.

We learn about the price assumptions applied from p. 61 of the executive summary of the DFS:

That is a bit confusing, because Hastings are planning to output mixed rare earth carbonate as Hastings’ finished product, not separated rare earth oxides.

Back from p. 61 to p. 46, here is the mentioned table 12-3:

Table 12-3 unintentionally leaves the impression, as if all elements contained in the MREC would generate revenue. That is not the case.

For example Y2O3, CeO2, La2O3, Sm2O3 and Eu2O3 are massively overproduced. So mixed rare earth carbonate buyers would probably refuse to assign any value to them in a price formula for Hastings’ MREC.

Our partners at the Big 6 in China tell us, that MRECis basically traded domestically on base of neodymium, praseodymium, dysprosium and terbium contents with an assumed recovery rate of up to 80%, neglecting all other elements contained in the MREC.

This confirms, what Hastings refer to in their latest investor presentation.

Applying the above information and mid 2020 REO prices to Hastings executive summary of the DFS chart 12-3 for 2020, it looks like this:

Considering the China VAT 13% payable upon import, the current CIF China price would probably work out to be US$ 32.83/kg TREO.

Consequently, since only 4 revenue-bearing elements as TREO are contained in the Hastings MREC to be produced, we calculate the 4 elements only and expect to get to a projected revenue number (derived from table 12-3):

So, based on the China price formula, Hastings’ anticipated “nominal” revenue would be ca. US$ 550 mio, ca. US$ 1 billion less revenue for the 5-year period, than incidentally indicated as “Total LOM revenue (nominal) 5 years DFS PT” of US$ 1.623 billion in the executive summary of the DFS in table 16-3.

In their latest investor presentation

Hastings indicate - on unchanged yearly production numbers - a life of mine (LOM) of 13 years and a LOM revenue of AU$ 4,813 million (~US$ 3.418 billion), which would average US$ 263 mio per year vs. above DFS derived 5-year average of only US$ 109.5 mio per year.

Hastings’ estimate production cost of AU$ 142 mio per year (~US$ 101 mio) as per the executive summary of the DFS and CAPEX at AU$ 449 mio (~US$ 319 mio).

Like this the envisioned free cashflow of AU$ 160 mio per year won’t materialise.

Creating ever more derivates of the DFS, whose actual contents remain unknown, won’t help it.

Like most other junior RE miners, Hastings need a doubling of RE market prices, in order to live up to expectations.

Rainbow have already proven that point in their annual report 2019: Sales price US$ 1,949/t, cost of production US$ 4,067/t.


The number crunch find at the end of this post.

Thanks for reading, have a wonderful week ahead!

//Companies

Ionic Rare Earths (ASX:IXR) mobilises second drill in Uganda

The company is in the middle of a 3700-metre phase two drill program to test the site’s 26-kilometre-long mineralisation corridor. The overall aim is to increase the site’s resource estimate, which currently sits at 78.6 million tonnes at 840 parts per million in total rare earth oxide.

So far, Ionic has drilled 393 metres across 22 holes, with notable intercepts including 4.4 metres at 981 parts per million total rare earth oxides.

Comment: 78.6 mio tons at 0.084%, ca. 66,000 t of TREO is not exciting, even for ionised clay. Looking forward to feasibility data.

Hastings Technology Metals to relocate part of rare earths plant to save costs

July 29 (Reuters) - Australia’s Hastings Technology Metals Ltd said on Wednesday it would reduce its capital spend on the Yangibana rare earths project by about A$68 mln ($48.73 mln) through decoupling and relocating a part of it.

The rare earths explorer will relocate Yangibana’s hydrometallurgical cracking and leaching plant to the Pilbara region from the Gascoyne region in Western Australia, citing benefits like lower on-site costs and easier access to port facilities.

Cadence Minerals Yangibana Rare Earth project costs reduced by A$68m

Cadence Minerals plc (LON:KDNC) has noted that, further to the Hydromet Plant relocation announcement, Hastings Technology Metals (ASX:HAS), Cadence’s joint venture partner at the Yangibana Rare Earth Project in the Gascoyne region of Western Australia, has updated its Capital expenditure requirements previously estimated at approximately AUD$517m (ASX Investor Presentation 2 December 2019), which included a 114km gas pipeline and 14Mw gas fired power station.

Solid first day on the ASX for rare earths play Australian Strategic Materials

Rare earths newcomer Australian Strategic Materials (ASX:ASM) has had a rousing welcome on its first day of listed life following its demerger from Alkane Resources (ASX:ALK).

Shares in the company closed up 12 per cent to $1.40 from its opening price of $1.25 per share, giving Alkane shareholders – who were issued one ASM share for every five Alkane shares they held – a substantial bonus.

While the company did not raise any funds for its listing, it starts life with $20m in the bank and no debt thanks to the largess of its parent.

Investor Presentation: RareX July 2020 investor presentation

The company has additional free-carried in the NSW lachlan Fold Belt via its 10% equity in TSXV listed Kincora Copper and 35% free carry interest in the projects.

A U.S. Company Seeks to Reduce China’s Dominance in Rare Earth Production

SCB: Where does Energy Fuels fit into the rare earth supply chain?

Chalmers: You're probably aware that it was only mid-April that we announced that we were going to enter the rare earth space. We think we're at a very unique advantage, mainly because of our White Mesa Mill in Utah. It is completely constructed and permitted to recover uranium and process uranium ores, and can produce both uranium and vanadium. With historical sources of monazite streams that contain uranium and thorium, we are ideally placed to process these at White Mesa to recover rare earths from those streams.

Comment: Only 7% of the uranium consumed in the US is also made in the US. Energy Fuel’s break-even is substantially higher than current uranium prices, so they are looking for alternative use of their facilities.

//Politics

Cutting off rare earths is only the beginning. China sanctions another industry, and the United States suffers

[China National Network Military Affairs, published July 26, 2020]

The cut of rare earth supplies is only the first step in the beginning of sanctions. Recently, China has decisively ordered sanctions against the United States for another 100 billion market industry, which is Lockheed's other business in China. 

It is important to know that Lockheed Martin is not only responsible for the production of US’s main fighter jets, but also invested in a new generation of nuclear reactor technology and general-purpose helicopters in China. The investment in the energy and electronics industries is as high as 100 billion yuan [US$ 14.9 billion]. After the sanctions, the company's investment in China may not be able to pay back to a large extent, which will have a direct impact on Lockheed Martin's operating conditions.

Lockheed Martin is one of the most important military companies in the United States. It was founded in 1912 and provided a large amount of weapons and equipment for the US military. 1/3 of the US military’s annual arms procurement costs are given to this company, and they also control the world. With a 40% share of the defense market, there has been good development in both military and private sectors.

In 2019, the company's annual net sales were 59.8 billion U.S. dollars and net profit was 6.2 billion U.S. dollars. Lockheed Martin is one of the most profitable companies in the United States, and the American media even commented on him as the "shadow government" that controls the United States.

Lockheed Martin is one of the most important military companies in the United States. It was founded in 1912 and provided a large amount of weapons and equipment for the US military. 1/3 of the US military’s annual arms procurement costs are given to this company, and they also control the world. With a 40% share of the defense market, there has been good development in both military and private sectors.

The company's business in our nation mainly includes aircraft, energy and electronics. For example, the Shanghai Sikorsky Aircraft Company was co-founded by Loma’s Sikorsky and our nations’s Changhe Aircraft.

In the past few years, Shanghai Sikorsky has sold more than 20 Schweizer 269s in China. In terms of energy, the company has also participated in an important nuclear reactor project in our country.

In addition, as early as 2006, we have approved the 433MHz RFID produced by Savi Technology, and this company is also a subsidiary of Lockheed Martin.

Comment: You can’t dance at two wedding parties at the same time.

Industry needs a rare earths supply chain outside China

When China said this month it would impose sanctions on Lockheed Martin in retaliation for a US decision to sell missiles to Taiwan, it did not elaborate on what this would entail. But the Global Times, China’s state-owned nationalist tabloid, speculated that Beijing would probably “cut off material supply including rare earths, which are crucial to advanced weapons production”. That would mark the latest phase in the weaponisation of rare earths — a group of 17 metallic elements that are embedded in most high-tech products.

Canberra has identified 15 rare earth and critical minerals projects struggling to attract commercial funding and is offering state-backed loans to help develop them. So far, however, private investors remain reluctant to bankroll the dozen or so junior miners and entrepreneurs seeking to create a non-Chinese supply chain.

The collapse in 2015 of Molycorp, a debt-laden US company that operated the Mountain Pass rare earths mine in California, highlighted such risks to investors. And in 2016 Lynas was only saved from collapse when shareholders, including state-owned Japan Oil, Gas and Metals National Corporation, agreed to a debt restructuring.

Comment: Global Times is not state-owned, it is 100% owned by the People’s Daily. People’s Daily is a work unit under the Central Committee of the Communist Party of China and its official news organisation. Editor in chief Hu Xi Jin set up the Global Times on July 7, 1994. The English version of Global Times was born in 2009.

//Numbers

The Basics and the Year-To-Date Development

Dedicated rare-earth-only companies are a minority among the >90 companies. We included also those companies where RE is only a peripheral mining, exploration and production activity. They should be on the radar if one wants exposure to RE, but doesn’t want the full risk.

We have converted market caps, EBITDA and share prices to US$ for comparison. The share price increases and decreases are in the original currencies. Owing to the sheer number of data, more than 90 companies, there may be errors contained, so please do your own deeper research if you consider investment.

The Top 10:

The Bottom 10:

You may download the full spreadsheet and play with it at your own account and risk.