HASTINGS TECHNOLOGY METALS LTD — Capital/Financing Update 2012

Sep 4, 2012

ASX Announcement 5[TH] September 2012

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Hastings Rare Metals Limited ABN 43 122 911 399

ASX Code: HAS

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

Board and Management David Nolan (Chairman) Alastair Metcalf (CEO) Anthony Ho (Non-executive Director) Steve Mackowski (Technical Director) Guy Robertson (CFO)

Advisory Board Tony Grey Dr Tony Mariano

www.hastingsraremetals.com

SCOPING STUDY CONFIRMS STRONG BUSINESS CASE FOR HASTINGS HEAVY RARE EARTHS PROJECT

HIGHLIGHTS

• Compelling economics with a base case net present value (‘NPV’) of A$1.9 billion, an IRR of 26% and payback of 3.6 years for the 100% owned Hastings Project

• Earnings of $223 million per annum represent a gross operating profit margin of 46%

• Revenue is predominantly heavy rare earths, differentiating the project from others

• Hastings Project to advance to piloting and feasibility study

Hastings is pleased to announce that the Scoping Study undertaken by Jacobs Engineering Group confirms a strong business case for development of the Hastings heavy rare earths project. The Scoping Study incorporates the results of extensive testwork completed by the Australian Nuclear Science and Technology Organisation (‘ANSTO’).

Based on the Scoping Study and detailed work completed by the Company and its consultants over the last six months, the Company is now able to confirm:

• The resource at the Hastings Project can be mined by conventional open-cut methods

• The mine life would be 25 years based on the existing Resources of 36.2 million tonnes. With further drilling, the Resource could be increased

• Ore will be processed through a plant built on-site in Western Australia, without the need to transport intermediate products interstate or overseas

• The flow sheet has been confirmed, with metallurgical recoveries of 75% for rare earths and 70% to 75% for rare metals

• The project is to produce over 10,000 tonnes of rare earths oxides and rare metal oxides annually for 25 years. The saleable products will be high purity oxides that are significantly more valuable than rare earth carbonates or concentrates

• The strong demand and supply shortage projected for heavy rare earths is highly opportune for the Project. Heavy rare earths, such as Dysprosium and Yttrium that are both on the US Department of Energy’s ‘critical’ list, represent the majority of the projected revenue

• The project has a base case net present value (‘NPV’) of A$1.9 billion, with substantial upside. For example, using price forecasts from BCC Research, including Dysprosium at US$2,170/kg (currently US$950/kg), would more than triple the NPV of the Project

• The Scoping Study has successfully reduced the risks and identified options to further optimise the project.

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ASX Announcement 5[TH] September 2012

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Advancing the Project

Completion of the Scoping Study and related work is a major step forward for the Project. The next steps towards production are the completion of a pilot plant (to start in the first quarter 2013) and a full feasibility study (to begin in the second quarter of 2013). Product and process optimisation work will continue in parallel, with positive results improving the economics further.

The Company is now in a position to advance negotiations to secure a project partner to fund the next major stages of development. Preliminary discussions have confirmed that the product suite is very attractive to numerous parties in the major manufacturing countries.

Alastair Metcalf, CEO of Hastings Rare Metals, said, “We are delighted with the successful completion of the Scoping Study. The Project is forecast to produce substantial quantities of heavy rare earths, including Dysprosium and Yttrium that are forecast to be in strong demand and short supply. The business case is compelling and we will be progressing to the next stage of development.”

Steve Mackowski, Technical Director of Hastings Rare Metals, said “With Jacobs Engineering and ANSTO, we have just completed six months of design, engineering and assessment work on the Hastings heavy rare earths Project. One of the advantages the Project has is the extensive chemical work and pilot plant completed in the 1990s and recently verified by ANSTO. This chemical development enabled the Scoping Study to be delivered in under 6 months. This time advantage allows us to advance the Project rapidly to a pilot plant early next year.”

Further information is attached. Additional information on the importance of rare earths to modern manufacturing can be found in the Company’s release of 20 August 2012.

Further information is attached. Additional information on the importance of rare earths to modern manufacturing can be found in the Company’s release of 20 August 2012.	Further information is attached. Additional information on the importance of rare earths to modern manufacturing can be found in the Company’s release of 20 August 2012.
	HASTINGS HEAVY RARE EARTHS PROJECT
Project	Hastings Project,Western Australia,100% owned byHastings Rare Metals(ASX Code HAS)
Processing	1 million tonnes per annum, with upside to 1.5mtpa
Recoveries	75% for Dysprosium,Yttrium and Niobium,70% for Zirconium
Average Annual Production	• 140 tonnes of Dysprosium oxide • 830 tonnes of Yttrium oxide • 590 tonnes of a mixed rare earths oxide • 2,630 tonnes of Niobium oxide • 6,170 tonnes of Zirconium oxide
Mine Life	25 years from existing Resources
Prices	August 2012 China FOB prices for Dysprosium, Yttrium, Niobium and Zirconium. 2.5% p.a. price increase for Dysprosium and Yttrium due to forecast strong demand and supply shortage
Exchange rate	A$deflatingto 85c by2016
Capital cost	$720 millionplus$96 million contingency
Earnings	Revenue of $482 million, operating costs of up to $259 million, generating EBITDA of $223 million
Netpresent value	$1.9 billion(pre-tax,100% equity,8% discount rate,real terms)
Internal rate of return	26%
Notes to table: August 2012 Scoping Study. In Australian dollars

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ASX Announcement 5[TH] September 2012

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For further information please contact:

Alastair Metcalf, CEO +61 2 9078 7678 Mark Westfield, Westfield|Wright +61 457 805 838

About Hastings Rare Metals

• Hastings Rare Metals is a leading Australian rare earths company, with two rare earths projects in Western Australia.

• The Hastings deposit contains JORC Indicated and Inferred Resources totaling 36.2 million tonnes at 0.21% TREO, including 0.18% HREO, plus 0.89% ZᵣO ₂ and 0.35% Nb ₂ O ₅ .

• Rare earths are critical to a wide variety of current and new technologies, including smart phones, hybrid cars, wind turbines and energy efficient light bulbs.

• The Hastings deposit contains predominantly heavy rare earths (HREO) (85%), such as dysprosium and yttrium which are substantially more valuable than the more common light rare earths (LREO).

• The company aims to capitalise on the strong demand for heavy rare earths created by expanding new technologies. It is currently validating the extensive historical work and undertaking further scoping studies to confirm economics.

Competent Person’s Statement is included in the attachment

All values are presented in Australian dollars unless stated otherwise.

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ASX Announcement 5[TH] September 2012

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Results of the Scoping Study and Project Update

Jacobs Engineering Group was appointed to progress development of the Hastings Project through to Pre-Feasibility Study (‘PFS’) stage by completing a Scoping Study. This included development of the flow sheet, processing plant design, and capital and operating cost determinations. ANSTO was engaged to validate and verify the process flow sheet as previously developed and to conduct additional process testwork. The program included various bench-scale tests to investigate the extraction of rare earths and rare metals by sulphation baking and water leaching, followed by solvent extraction and purification.

Hastings Heavy Rare Earths Project – The Hastings Project is Australia’s largest Heavy Rare Earths Project*, containing significant quantities of Dysprosium, Yttrium, Niobium and Zirconium. The project is 100% owned by the Company.

The Project is located in the East Kimberley region of Western Australia with access to existing infrastructure, including the town of Halls Creek and the ports of Wyndham and Derby. Other mines in the region include the Argyle diamond mine, the Savannah nickel mine and the Ridges iron ore mine.

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*Heavy Rare Earths Projects are defined by the Company to be projects with a Resource where the heavy rare earth oxide (‘HREO’) to total rare earth oxide (‘TREO’) ratio is greater than 35%.

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ASX Announcement 5[TH] September 2012

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Resources – Hastings completed drilling and geological interpretation work in 2011 defining JORC Resources of 36.2mt, consisting of 27.1mt of Indicated Resources and 9.1mt of Inferred Resources. The deposit has the significant advantage of containing a very high proportion of heavy rare earths to total rare earths (85%). Heavy rare earths are less common and are generally more valuable than light rare earths. For example, the current price of Dysprosium is over 50 times that of Lanthanum or Cerium, the most common light rare earths.

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The Resource also contains significant quantities of rare metals such as Niobium and Zirconium.

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Longitudinal section and plan showing distribution of current resources

Mining – The Scoping Study is based on a conventional open cut mining operation. A preliminary pit design has determined that the current resource is sufficient for approximately 25 years of mining. The orebody is open along strike and at depth providing the potential to extend the mine life and improve the economics. Mining would be by conventional drill, blast, load, haul and dump methods.

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Mineralisation at site
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Meeting with the Jaru traditional owners
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ASX Announcement 5[TH] September 2012

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Processing – The Scoping Study examined various levels of production, including 1.0mtpa and 1.5mtpa. While no impediment was identified to increasing production to 1.5mtpa, the Company has retained its preference for a 1.0mtpa base case.

Two alternative product suites have been examined as part of the Scoping Study. This provides the Company with the alternative of producing either a suite of rare earth carbonate products or a suite of separated rare earth oxides. Producing rare earth carbonate products would reduce the initial capital expenditure as the final processing stage would be completed by another party. However, the Scoping Study work indicates that it is preferable to produce a suite of oxide products in order to maximise value for shareholders.

Processing would occur on-site without the need to transport intermediate products across state or international boundaries. This is beneficial in reducing environmental and permitting considerations. Facilities at or near the project site would include a crushing plant, processing plant, sulphuric acid plant, power co-generation plant, solvent extraction plant, separation plants, water recycling and tailings facilities.

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Multi stage SX at ANSTO Bulk solution handling at ANSTO

Flow sheet – Determining the process flow sheet and the preferred operating conditions are critical for rare earths projects. The Hastings Project has substantial benefit from historical work completed in the 1980s and 1990s. This work included transporting 100 tonnes of material to a pilot plant in the UK. While testwork was incomplete, recoveries of 75% for Dysprosium and Yttrium and 80% for Niobium and Zirconium were determined and a flow sheet was designed.

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Mini pilot reaction vessels at ANSTO

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Sludge planetary mixing at ANSTO

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ASX Announcement 5[TH] September 2012

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With the benefit of this historical work, ANSTO was engaged in April 2012 to validate and verify Stage 1 of the flow sheet as part of the Scoping Study. Hastings announced on 5 July 2012 that the ANSTO test work had been successful, with the recoveries of heavy rare earths in the range of 70% to 80% when testing different operating conditions. Subsequent work has confirmed the recoveries for Niobium and Zirconium to be 75% and 70% respectively.

A simplified version of the flow sheet as confirmed by Jacobs Engineering is shown below.

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Production of saleable materials – The Scoping Study is based on producing a suite of high purity heavy rare earths and rare metals oxides. The rare earths products are of 99% purity and attractive to customers as they can be utilised with little further processing. They are significantly more refined than a carbonate product and of much higher rare earths content than a rare earths concentrate.

At 1.0mtpa, annual production from the Hastings Project is expected to be:

• 140 tonnes of Dysprosium oxide

• 830 tonnes of Yttrium oxide

• 590 tonnes of a mixed rare earths oxide

• 2,630 tonnes of Niobium oxide

• 6,170 tonnes of Zirconium oxide

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ASX Announcement 5[TH] September 2012

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The quantities of heavy rare earths, particularly Dysprosium, are significant when viewed in a global context. Dysprosium is in high demand and forecast to be in short supply, with global production limited to approximately 1,300 tonnes per annum. There are currently no suppliers outside China. Hastings’ production would represent approximately 10% of current global supply and could be produced for 25 years. Potential exists to increase the Resource and the annual output by increasing production to 1.5mtpa. Demand for Yttrium and Niobium are also expected to be strong.

Capital costs and infrastructure – The Hastings Project is located 18km south east of the town of Halls Creek. The project has the benefit of being able to use some existing facilities, such as the Port of Wyndham, the existing highway to the port and facilities at Halls Creek (e.g. airport, medical facilities). The Scoping Study assumes that freight logistics, the camp, mining and crushing are contracted out, with all other activities undertaken as part of the project.

The major components of the capital costs would be:

$m
187		Processing plant
54		Process utilities
175		Sulphuric acid plant
35		REO purification plant
104		Infrastructure (82% on site)
46		Construction Indirects
26		Owners Costs
93		EPCM
$720	million*

*Excludes contingencies of $96 million (25%)

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Port of Wyndham

Revenue and operating costs – Revenue, mining and processing costs of rare earths projects are very specific to each project and the products being produced. The Hastings Project will produce predominantly heavy rare earths which are significantly more valuable than light rare earths. The Scoping Study has determined that it is preferable to undertake a high level of processing to produce high quality oxide products.

The Scoping Study and economic evaluation has estimated total annual revenue to be approximately $482 million, with operating costs of $258 million, generating earnings (EBITDA) of $223 million per annum based on current assumptions. This represents a gross operating profit margin of 46%.

Revenue is based on current market prices for products of equivalent composition, being US$950/kg for Dysprosium, US$85/kg for Yttrium, US$45/kg for Niobium and US$3.70/kg for Zirconium. Mining costs are based on current contract mining rates. Processing costs are based on current labour, energy and consumable costs.

Marketing – Supply and demand projections, including from the United States Department of Energy, CSIRO, The Economist, BCC Research and REE World indicate that there will be strong demand and a shortage of heavy rare earths both in the medium term and the longer term. Hastings major products Dysprosium and Yttrium oxide are both at critical supply risk according to the United States Development of Energy.

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ASX Announcement 5[TH] September 2012

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Critical Supply Matrix (5-15 years)

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Hastings
REE mix
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United States Department of Energy (Dec 2011)

The Company has held initial discussions with a range of end users of rare earths and is comfortable that demand will be strong for the Company’s production, especially as there are few non-Chinese sources of supply for heavy rare earths. It will be negotiating off-take arrangements as part of the feasibility stage of development.

Economic evaluation – The assumptions adopted in the Base Case assessment include the following:

• production based on 1.0mtpa of processed ore, resulting in a mine life of approximately 25 years. This is based on the known Resources of 36.2mt, reduced to allow for pit design, without allowance for future increases in the resource that may result from future drilling

• metallurgical recoveries of 75% for rare earths and 70% to 75% for the rare metals

• capital expenditure of $720 million incurred over two years, plus contingencies

• prices for rare earth oxides and rare metal oxide based on current market prices for products of equivalent composition

• processing costs based on current prices for labour, energy and consumables (plus a contingency), with mining costs based on current contract mining rates

• costs and prices are presented in real dollars (constant dollars). As such, revenue and costs remain constant in current dollars, with the exception of Dysprosium and Yttrium that are assumed to increase at 2.5% per annum based on the forecast strong demand and supply shortage

• a real discount rate of 8% per annum

• the Australian dollar returning to a long term average of 85cents to the US dollar

• the net present value has been calculated on a pre-tax basis (but after royalties). No allowance has been made for the benefit of gearing or research and development rebates that may apply to the project.

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The net present value of 100% of the Project is $1.9 billion, with an internal rate of return of 26% and a capital payback of 3.6 years. These base case economics are attractive.

The Company has adopted a more conservative approach by not factoring in the substantial price rises that could result from the supply shortage that is forecast for both its major products, Dysprosium and Yttrium. For example, adopting the BCC Research forecast of US$2,170/kg for Dysprosium and US$275/kg for Yttrium in 2016 would more than triple the net present value of the Project.

Further potential – While the results of the Scoping Study demonstrate attractive economics, further potential exists to improve the project. Examples include:

• Drilling of the Southern Extension would increase the mine life and improve the economics. Additional drilling is planned during the next six months.

• The opportunity to increase production to 1.5mtpa, which was one of the scenarios reviewed by Jacobs Engineering

• Process optimisation work currently being undertaken by ANSTO may increase the recoveries or optimise the flow sheet. The pilot plant may also identify process improvements or cost reduction opportunities

• There may be the opportunity to contract additional components of the operation rather than incur the capital expenditure.

Next steps – The Scoping Study demonstrates the strong economics of the Hastings heavy rare earths project. Significant previous metallurgical testwork has allowed the Project to advance more quickly than some other projects. The Company is now in a position to proceed to the next major stages of development, which are:

• Design, construction and operation of a pilot plant at the ANSTO facilities to process an initial 30 tonnes of ore. The purpose is to further confirm the flow sheet, identify improvement opportunities and produce samples of the saleable products. Design is scheduled to begin in late 2012, with three months of operation starting in the first quarter 2013. Costs for the pilot plant will be minimised by utilising existing ANSTO equipment

• Drilling the Southern Extension with the objective of increasing the mine life beyond the current 25 years and improving the economics

• Pre-feasibility work, including a significant infill drilling program to upgrade resources, more detailed mine planning, geotech, geohydrology, and environmental baseline surveys

• Commissioning engineering and geological consultants to commence work on a feasibility study upon completion of the above.

A strategic partner will be sought to fund the major components of the feasibility work in return for a direct project interest. Preliminary discussions have confirmed that the product suite is very attractive to a number of parties in the major manufacturing countries and the Company is confident of being able to secure a suitable partner.

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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. The information in this presentation that relates to Exploration Results is based on information compiled by Andy Border, an employee of the Company and a member of the Australian Institute of Mining and Metallurgy. The information in this presentation that relates to metallurgy is based on information compiled by Steve Mackowski, an employee of the Company and a fellow of the Australian Institute of Mining and Metallurgy.

Each have 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”). Each consents to the inclusion in this presentation of the matters based on his information in the form and context in which it appears.

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