1 SCOPING STUDY CONFIRMS PROFITABLE POTENTIAL OF HASTINGS HEAVY RARE EARTH PROJECT The Manager Company Announcements Office Australian Securities Exchange 4th Floor, 20 Bridge Street SYDNEY NSW 2000 Hastings Rare Metals Limited ACN 122 911 399 Level 9, 50 Margaret Street Sydney NSW 2000 PO Box R933 Royal Exchange NSW 1225 Australia Telephone: +61 2 9078 7674 Facsimile: +61 2 9078 7661 admin@hastingsraremetals.com www.hastingsraremetals.com Directors David Nolan (Chairman) Steve Mackowski (Director) Anthony Ho (Director) Advisory Board Tony Grey Dr Tony Mariano ASX Code: HAS Shares on Issue 71,000,000 Options on Issue 52,500,000 Hastings set to develop one of the world s richest heavy rare earth deposits Hastings Rare Metals Ltd (ASX:HAS) is pleased to announce the results of a scoping study on its 100% owned Hastings Heavy Rare Earth Project located near Halls Creek in the Kimberley Region of Western Australia. The study highlights the project s potential for excellent returns on the back of remarkably strong market fundamentals for heavy rare earths in both the medium and long term. This is significant, given that the project comprises one of the richest heavy rare earth deposits in the world today. While the study assumed an initial mine life of 15 years, this is regarded as a conservative estimate. Based on the current JORC-compliant 36Mt Inferred and Indicated Resource, the project has a potential operational life exceeding 20 years. Hastings Technical Director, Steve Mackowski, said: The scoping study results demonstrate the excellent potential for commercial success of Hastings heavy rare earth project. Completion of the scoping study is a major milestone, confirming the value of historical test work and the pilot plant in positioning the company years ahead of other heavy rare earth project. The study provided invaluable insight for ongoing metallurgical test work and future bulk processing trials, exploration and infill drilling. Key conclusions Scoping study shows great potential for success 36 Mt rare earth resource amenable to simple open cut mining Long mine life Total heavy rare earth oxide (HREO) resource of 62,500 tonnes places the project in the top 10 in the western world Very high proportion of HREO (85%) of total rare earth oxide ratio (and relatively high HREO content of 0.18% compared with other projects) Pre-feasibility study warranted 1
Highlights of scoping study Mine Life: 15 years Production of 150 tonnes of Dy2O3 and 1,000 tonnes of Y2O3 per annum based on 1mtpa mining rate Annual net cash flow (EBITDA) exceeding $150m per annum Short Capital payback period of <5 years Heavy Rare Earth (yttrium/dysprosium) primary product >8% demand growth in last 3 years Both yttrium and dysprosium are on the US Department of Energy s critical supply list in short and medium term (5-10 years) Financial returns have potential to improve significantly with further work Mr Mackowski added, This is a world-class resource and there is great scope to further develop the project through pre-feasibility and bankable feasibility studies. The positive results of the study follow completion of a large drilling program and release of a new 36Mt JORC-compliant resource in September 2011, which included for the first time assays for all rare earth elements and identification of previous test work results at the Hastings heavy rare earth project. Summary The internal scoping study primarily considered various production scenarios and was based on a plant capacity of 1 million tonnes per annum producing critical heavy rare earth oxides of yttrium and dysprosium products in addition to other rare metal products. The study modeled an open pit mining operation and the on-site production of marketable products, primarily heavy rare earth oxides and also niobium and zirconium concentrate products. An analysis of varying mill throughput volumes was also assessed. Based on the study assumptions, the project has a net present value in excess of $500 million using a discount rate of 10% and an IRR of >20%. These results compare favourably with other heavy rare earth company studies. Input parameters for the study included results from historical test work and pilot plant results and a JORC-compliant resource estimated by an independent geological consulting firm. Preliminary Process Design Based on a significant amount of historical test work including the construction of a pilot plant in the late 1980s, the project mineralisation is amenable to standard rare earth rare metal treatment involving the following stages of processing: Crushing Grinding Sulphation Leaching Solvent extraction Refining 2
Ongoing test work is aimed to verify recoveries achieved by this process, as well as testing new technologies to determine the optimum route forward. The results of this test work will be incorporated into the pre-feasibility study. The study contemplates the annual sale of: 150 tonnes of Dy2O3 1,000 tonnes of Y2O3 2,500 tonnes of Nb2O3 6,500 tonnes of ZrO2 Additional Value The study has only assumed the production of heavy rare earth oxides of dysprosium, yttrium, zircon and niobium concentrates. The project contains other rare earths and rare metals such tantalum and hafnium. Incorporation of these products could add significant value to the project. Current JORC Compliant Indicated and Inferred Resource of 36Mt has significant potential to increase, particularly to the south where recent geological traverses have identified apparent strong mineralization over wide intervals. The mineralized zone is known to extend for some 750 metres to the south of the defined resources. An increase in the resource has potential to increase throughput and mine life, with resultant increase in project value. About Hastings Rare Metals Hastings is an Australian based rare earth company. Its lead project is the Hastings Heavy Rare Earth Project located in the Kimberley, Western Australia that contains a 36Mt JORC Inferred and Indicated Resource. Hastings also holds a majority (60%) interest in the Yangibana Project (West Australia), which is recognised as a significant rare earth project by Australian government departments containing a high proportion of a critical rare earth, Neodymium. For Further Information please contact: Steve Mackowski, Technical Director +61 2 9078 7660 smackowski@hastingsraremetals.com David Nolan, Chairman +61 2 9078 7660 dnolan@hastingsraremetals.com Robert Williams, Investor Relations +61 2 8264 1003 r.williams@fcr.com.au Email: admin@hastingsraremetals.com 3
For personal use only 22nd November 2011 Figure 1 HASTINGS RARE METALS LOCATION PLAN Figure 2: Hastings Project Location APPENDIX MAIN SCOPING STUDY ASSUMPTIONS AND PARAMETERS Set out below is a summary of the main assumptions and parameters adopted in the preparation of the Scoping Study. The Scoping Study has been subject to an independent economic review. Financial The model is based on a 15 year mine life period using constant prices and costs. The scoping study is not a feasibility study and therefore it is preliminary in nature and has been prepared on the basis of assessing the economic viability of the project based on certain assumptions which require further validation and verification with a variance for +/- 50% on capital and operating costs and other inputs. The scoping study is based on a pre-tax NPV model. Metal Prices The following sets out the price assumptions used in the study: Prices Yttrium oxide Dysprosium oxide Nb concentrate Zircon concentrate Scoping Study (Base)1 US$150/kg US$2,000/kg US$12/lb US$2.50/lb ¹ Base prices are adjusted within the study to reflect the quality/purity of the anticipated product. 4
Figure 1: Rare Earth Price Chart Resource and Rare Earth Composition During September Quarter 2011 the Company completed its initial drilling programme at the Hastings Heavy Rare Earth Project. As announced on 8 th September, the drilling resulted in a major increase in the JORC-compliant resources for the project. The upgraded resource estimate was conducted by independent geological consulting firm Coxrocks Pty Limited at a 1500ppm Nb2O5 cut-off and comprises:- Category Tonnage Ppm ppm ppm ppm ppm ppm ppm ppm ppm ZrO2 Nb2O5 Ta2O5 Ga2O5 HfO2 Dy2O5 Y2O3 TREO HREO Main Indicated Oxide 1,400,000 8860 3507 183 113 322 190 1132 2151 1828 Indicated Fresh 25,400,000 8914 3547 182 110 318 186 1120 2100 1802 HW Zone Indicated Fresh 300,000 9080 3625 183 104 311 185 1096 2130 1772 Total Indicated 27,100,000 8913 3545 182 110 318 186 1120 2103 1803 North Extensi on Main Deep Inferred Oxide 250,000 8860 3507 183 113 322 190 1132 2151 1828 Inferred Fresh 2,100,000 8914 3547 182 110 318 186 1120 2100 1802 Inferred Fresh 6,750,000 8914 3547 182 110 318 186 1120 2100 1082 Total Inferred 9,100,000 8914 3547 182 110 318 186 1120 2100 1082 TOTAL 36,200,000 8913 3546 182 110 318 186 1120 2102 1802 These figures represent major increases in the grades of, and contained tonnes of the majority of the potentially economic minerals. In addition, the analyses carried out during the programme provide the first detailed breakdown of the rare earth content of the deposit. The deposit has an unusually high proportion of the more valuable heavy rare earth oxides (HREO) to total rare earth oxides (TREO), as shown in the pie chart below. 5
Of particular interest is the presence of the heavy rare earth oxides of dysprosium and yttrium which were both identified in December 2010 by the US Department of Energy as being in critical short supply in both the short term (0-5 years) and the medium term (5-15 years). Based on rare earth pricings as at 5/10/11, the Hastings Heavy Rare Earth deposit has one of the highest in situ value per kg of REO amongst its HREO peers. The distribution of this value by individual oxide is provided in the pie chart below. Capital Expenditure Initial Capital Expenditure of $500m has been assumed in the study, which includes: All process plant General infrastructure Mining / pre- strip Working capital Salvage costs and mine closure costs are assumed to negate each other. 6
Production Strip ratio - 11:1 Mill feed - 1 million tonnes per year Metal recovery for each product - 75% for all Revenues and prices Only revenues for the Dy2O3 and Y2O3 Rare Earth products have been included in the model. Only 80% of the Oxide price is utlised in the model. Process flow sheet/metallurgy The test work to conclusively demonstrate the successful metallurgical extraction of rare earth oxides and zircon oxide and niobium oxide concentrate is not yet complete, and the final product will require market assessment and acceptance in relation to its unique composition. Infrastructure The project is located 20km from regional town of Hall Creek. Power - for the purpose of the study it is assumed that a diesel power plant will be built on site and supplemented by an on-site sulphuric acid plant. Ports options include Wyndham and Derby, which are located 380km and 450km respectively from Halls Creek by road for the importation of raw materials and transportation of the products. Competent Person s Statement The information in this presentation that relates to Resources is based on information compiled by Simon Coxhell. Simon Coxhell is a consultant to the Company and a member of the Australian Institute of Mining and Metallurgy. Simon Coxhell has sufficient experience relevant to the styles of mineralisation and types of deposits which are covered in this presentation and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves ( JORC Code ). Simon Coxhell consents to the inclusion in this presentation of the matters based on his information in the form and context in which it appears. The information in this presentation that relates to Exploration Results is based on information compiled by Andy Border. Andy Border is a consultant to the Company and a member of the Australian Institute of Mining and Metallurgy. Andy Border has sufficient experience relevant to the styles of mineralisation and types of deposits which are covered in this presentation and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves ( JORC Code ). Andy Border consents to the inclusion in this presentation of the matters based on his information in the form and context in which it appears. 7