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Hastings Rare Metals Receives Strong Asian Interest In A$3m Oversubscribed Placement

Hastings Rare Metals (ASX: HAS) has received a major vote of confidence from international investors for the company's operations, highlighted by the heavily oversubscribed A$3 million placement.

Hastings has two rare earths projects in Western Australia, with the Hastings deposit hosting JORC Indicated and Inferred Resources of 36.2 million tonnes at 0.21% TREO, including 0.18% HREO, plus 0.89% ZᵣO₂ and 0.35% Nb₂O₅.

Adding some scale to this - Hastings is the largest heavy rare earth project in Australia, and ranks fourth largest globally, (HREO projects defined as > 35% HREO:TREO).

The placement was made to Australian and international investors, and will comprise two tranches.

The issue price is $0.11, a 15% discount to the last traded price, with Tranche 1 comprising 19 million shares, with Tranche 2 to be issued upon shareholder approval and includes 9 million shares and 14 million options.

Alastair Metcalf, chief executive officer, commented: "We are delighted by the extremely strong support for the placement. Asian based interest was particularly strong, perhaps reflecting the escalating demand for heavy rare earths in Asia".

Hastings will apply the funds to the he development of the Hastings heavy rare earths project, with a specific emphasis on process optimisation work at the Australian Nuclear Science and Technology Organisation.

Importantly - the Hastings project contains predominantly heavy rare earths (85% See picture for comparison), such as dysprosium and yttrium that are substantially more valuable than the more common light rare earths.

The money will also advance; pilot design work, construction and operation; pre-feasibility work; and be used in securing a strategic partner for development of the project.

Patersons Securities acted as the lead manager to the placement.

Analysis

The significance of the Hastings project containing predominantly heavy rare earths is that this allows the company to capitalise on the strong demand for heavy rare earths created by expanding new technologies - while also differentiating the project from other rare earth projects.

A recent Scoping Study confirmed the attractive economics of the project. This included a base case of a net present value of A$1.9 billion, an IRR of 26% and payback of 3.6 years, along with earnings of $223 million per annum representing a gross operating profit margin of 46%.

Astute investors will also be aware that the Hastings heavy rare earth project is the largest in Australia, and the fourth largest in the world - and the world needs heavies.

The project has resources for +25 years at 1mtpa, to produce over 10,000tpa, including heavy rare earths; 140tpa Dysprosium oxide, 830tpa Yttrium oxide, and 590tpa Mixed rare earth oxide, along with 2,630tpa Niobium oxide and 6,170tpa Zirconium oxide.

Worth noting the project has scale to continue growing, considering it is open at depth along strike to the south.

Even with Hastings ticking all these boxes, and a defined clear pathway to production - the valuation of the company is just $17 million - which remains slight when compared to its peers.

Proactive Investors considers that the current low price of Hastings will not be on offer heading into 2013 - where the company is set to deliver milestone announcements including Pilot Plant, a Pre-Feasibility Study and drilling results from a new program.

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