Announcement PDF Interim Financial Report Half year ended 31 December 2023 Hastings Technology Metals Limited ABN: 43 122 911 399 CORPORATE DIRECTORY Directors Charles Lew…………………………………………………………………………………………………………..…………………Executive Chairman Guy Adrian Robertson..……………………………………………………………………………………..……………………….Executive Director Neil Hackett………………………………………………………………………………………………………………………..Non-Executive Director Bruce McFadzean……………………………………………………………………………………………………………….Non-Executive Director Malcolm Randall……………………………………………..………………………………………………………………….Non-Executive Director Jean Claude Steinmetz….…………………………………………………………………………………………………….Non-Executive Director Joint Company Secretaries Guy Robertson Neil Hackett Principal Place of Business and Register Office Address: Level 6, 197 St Georges Terrace, Perth, Western Australia 6000 Phone: +61 8 6117 6118 Website: www.hastingstechmetals.com Email: info@hastingstechmetals.com Auditors PricewaterhouseCoopers, 125 St Georges Terrace, Perth, Western Australia 6000 Solicitors King & Wood Mallesons, Level 30, 250 St Georges Terrace, Perth Western Australia 6000 Herbert Smith Freehills, Level 11/1 The Esplanade, Perth Western Australia 6000 Bankers National Australia Bank, 100 St Georges Terrace, Perth Western Australia 6000 Westpac Banking Corporation, 109 St Georges Terrace, Perth Western Australia 6000 Share Registry Automic Group, Level 5, 191 St Georges Terrace, Perth, Western Australia 6000 Home Exchange Australian Securities Exchange Limited, Level 40, Central Park, 152-158 St Georges Terrace, Perth, Western Australia 6000 ASX Code ASX:HAS 2 | CORPORATE DIRECTORY CONTENTS DIRECTORS’ REPORT ............................................................................................................................................................4 DISCLAIMERS.......................................................................................................................................................................10 AUDITOR’S INDEPENDENCE DECLARATION ....................................................................................................................11 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2023 ..........................................................................................................................12 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023...........................13 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2023 .....................................................................................................................................................................................14 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2023 ..15 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2023 .................................................................................................................................................................16 DIRECTORS’ DECLARATION ...............................................................................................................................................28 INDEPENDENT AUDITOR'S REVIEW REPORT....................................................................................................................29 3 | CONTENTS DIRECTORS’ REPORT Your Directors submit this interim financial report of the consolidated entity consisting of Hastings Technology Metals Ltd (“the Company” or “Hastings”) and the entities it controlled during the period (the “Group”) for the half year ended 31 December 2023. Pursuant to the provisions of the Corporations Act 2001, the Directors report as follows. DIRECTORS The names of Directors who held office during or since the end of the interim period and to the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Name Particulars Mr Charles Lew Executive Chairman Mr Guy Adrian Robertson Executive Director Mr Neil Hackett Independent Non-Executive Director Mr Bruce McFadzean Independent Non-Executive Director Mr Malcolm Randall Independent Non-Executive Director Mr Jean Claude Steinmetz Independent Non-Executive Director Joint Company Secretaries Mr Guy Adrian Robertson Mr Neil Hackett REVIEW OF OPERATIONS Yangibana Rare Earths Project During the half year ended 31 December 2023, significant progress was achieved across development works for the Yangibana Rare Earths Project (“Yangibana Project”). Construction of critical non-processing infrastructure was finalised, including the practical completion of the Kurrbili Accommodation Village, comprising 294 rooms, kitchen, messing facilities, medical centre, administration buildings, sports courts, and landscaping. Airport facilities at the Yangibana Airstrip were also completed. In December 2023, the Company received delivery of the first piece of major long-lead equipment for the beneficiation plant, with the shell of the SAG Mill arriving at the Port of Dampier. At 31 December 2023, $142 million has been spent on non-process infrastructure and long-lead equipment for the beneficiation plant. During the period, the long form engineering, procurement, and construction (“EPC”) contract was signed with GR Engineering Services Ltd (“GRES”) for the delivery of the beneficiation plant and associated infrastructure. Under the $210 million contract, GRES will design and construct the Yangibana Project’s beneficiation plant and all associated infrastructure, including engineering, manufacture, supply, installation, dry and wet commissioning, and testing of the facility over a period of 18 months. The EPC contract is conditional upon a variety of conditions precedent, most significantly achieving full funding for the Yangibana Project. Under an early works agreement, GRES continues to work with the Company on engineering and procurement with detailed engineering and design for the beneficiation plant ahead of schedule at 81% complete. The engineering and design for the bulk earthworks were completed during the half, with civil and structural elements progressing in accordance with plans. Engineering and design of the Tailings Storage Facility (“TSF”) are also advancing. 4 | DIRECTOR'S REPORT Negotiations of key commercial agreements advanced during the half, including the power purchase agreement for the Yangibana Project’s power station. The Kurrbili Accommodation Village catering contract was also issued to the market for competitive tender in December and targeted for award in the next quarter. SUSTAINABILITY Health and Safety During the period, the Company marked five years lost time injury free, demonstrating its strong focus on health and safety. There were no recordable injuries reported during the half year period to 31 December 2023, with a Total Recordable Injury Frequency Rate (“TRIFR”) of 2.73, a 72% reduction compared to the prior corresponding period TRIFR of 9.98. Environmental, Social and Governance In November 2023, the Company published its annual Sustainability Report. The report provides an overview of the Company’s accomplishments over the 12 months to 30 June 2023 and sets out environmental, social, and governance (“ESG”) objectives as the development of the Yangibana Project progresses. Some of the performance highlights included a 40.3% female participation rate and non-material breaches across Native Title, Environmental Regulation and Corporate Governance. During the half, the Company announced it had established a Green Financing Framework under which the Company may issue Green Bonds and Green Loans. The Framework has been independently verified by DNV, confirming alignment with the International Capital Market Association’s Green Bond Principles and Loan Market Association’s Green Loan Principles. The Company’s ESG credentials are aligned with United Nations Sustainability Development Goals as a signatory of the United Nations Global Compact. The rare earth concentrate produced from the Yangibana Project will realise significant environmental benefits as critical inputs for electrification and renewable energy technologies. In addition, the accreditation also recognises Hastings’ commitment to create a more sustainable operation, including: • A target of 40-80% renewable energy sources; • 82% of water usage to be met by recovered process water for the Yangibana Project’s water requirements; and • Use of modern efficient engineering designs to achieve high recoveries. Other ESG activities progressed during the half included: • Implementation of plans to reduce plastic waste at the Yangibana Project’s mine site. This included the scheduled installation of washing basins to facilitate the use of good-quality reusable containers. In the interim, compostable packaging will be provided for crib lunches; • Ongoing engagement with local governments and communities, including meetings with the Shire of Carnarvon and the Shire of Upper Gascoyne to provide project updates and facilitating a site visit by the Board of Regional Development Australia Midwest and Gascoyne; and • Ongoing work to clean-up and rehabilitate the location of the Yangibana Project’s fly camp, including excavation of redundant buried services, removal of bulk waste items and levelling of redundant windrows. Native Title Agreement In October 2023, Hastings and the Thiin-Mah Warriyangka Tharrkari Jiwarli (“TMWTJ”) People completed the fiveyear review of the Project Agreement signed in 2017. The Implementation Committee, established in 2023 to oversee the review, met on-country and reaffirmed their mutual commitment to working collaboratively to develop the Yangibana Project. 5 | DIRECTOR'S REPORT The review included discussions around employment, training, and business opportunities as well as a review of appropriate goals and targets and included a visit to heritage sites around Yangibana with TMWTJ Senior Elder Peter Salmon. Hastings has worked closely with the TMWTJ People since 2017 to co-design the Yangibana Project with cultural consideration in mind, and to protect important heritage sites. CORPORATE Management Update In September 2023, experienced mining executive, Mr Paul Brown, commenced as Chief Executive Officer bringing a strong track record built over two decades in various senior roles in the resources sector, including the delivery and operation of several significant mining projects. Most recently, Mr Brown spent eight years at Mineral Resources Limited (“MinRes”), where he was Chief Executive – Commodities and also held the position of Chief Executive – Lithium. Prior to joining MinRes, Mr Brown’s career spanned general management, operational leadership, technical direction, project and studies management, business enhancement, mineral resource assessment, and mine strategy, including at Leighton Holdings Limited, HWE Mining Pty Ltd and Fortescue Metals Group Limited. The Company promoted Mr Tim Gilbert to its Executive Leadership Team as Executive General Manager Mining Operations, with oversight of operations, operational readiness, health and safety, environmental approvals, and exploration. With over three decades of experience across a range of strategic, operational, and technical roles in the resources sector, including as General Manager Operations for Covalent Lithium Pty Ltd, Mr Gilbert will be critical to ensuring the business is ready for the Yangibana Project’s critical commissioning phase. Commercial Subsequent to 31 December 2023, Hastings announced it had signed a binding term sheet with Baotou Skyrock Rare Earth New Material Co. Ltd (“Baotou Skyrock”) for an integrated processing and offtake arrangement (“Integrated Arrangement”) where the Company will receive payment for rare earth oxides, less a capped multistage processing fee. Negotiations are ongoing with other potential customers to conclude similar offtake arrangements for the remaining Yangibana Project volumes, potentially via the offtake arrangement with thyssenkrupp Materials Trading (“thyssenkrupp”). Additionally, Hastings has been reviewing opportunities to optimise Stage 1 (Yangibana mine and beneficiation plant) of the Yangibana Project to further de-risk the Yangibana Project and enhance economic returns. This included a review of the mine plan which has been optimised for the first five years by bringing forward the mining of lower strip ratio zones while maintaining the grade to the beneficiation plant, resulting in higher free cashflow in the early years of operations. Capital Cost Estimate Subsequent to 31 December 2023, Hastings announced an increase in the capital cost estimate of Stage 1 of the Yangibana Project to $503 million. This increase was as a result of the requirements to install a concentrate dryer to meet product moisture content specifications, as well as additional holding costs due to changes in the funding and production schedule. The remaining capital cost is estimated at $361 million, with $142 million already invested in early works as of 31 December 2023. Project Finance Following the completion of the Staged Development Feasibility Study in the first half of calendar year 2023, the Company completed refreshed independent due diligence reports during the period, including a technical review by lenders’ Independent Technical Expert, Behre Dolbear Australia Pty Ltd (“BDA”) which considered cost estimations to be reasonable and appropriate. A refreshed market consultant report by CRU has also verified the Yangibana Project’s competitive position on the first quartile of the global margin curve, confirming that Hastings will be one of the highest margin producers of rare earths globally. 6 | DIRECTOR'S REPORT During the half, Hastings received non-binding indicative financing proposals from multiple parties, including from global mining funds, senior debt, and fixed income investors (debt capital markets), to fund the Yangibana Project in line with the target gearing ratio of 60% of the total funding package. This is in addition to the previously announced financing support from commercial banks and government agencies. Final due diligence has progressed which included investor and bank site visits, and due diligence calls with Hastings’ partners such as thyssenkrupp, ALS and GRES. Following confirmatory due diligence by various financiers and favourable debt capital market conditions, Hastings will progress determining the optimal financing pathway and harmonise terms and pricing with the preferred syndicate/consortium. As part of the Company’s project funding strategy, Hastings secured an At-the-Market (“ATM”) facility with Alpha Investment Partners (“AIP”). This ATM facility represents a strategic equity financing option for up to $50 million, offering the Company the flexibility to raise capital incrementally over a four-year period at an issue price referable to prevailing market prices, subject to a floor price that is set by Hastings. The ATM facility does not impose restrictive conditions, preserving the Company’s operational and capital raising freedom. This makes the ATM facility a compelling option for Hastings, aligning with the Company’s long-term growth strategy and commitment to maximising shareholder value. This standby equity capital facility aligns with Hastings' commitment to prudent financial management, facilitating a controlled approach to capital raising, and minimising shareholder dilution. The facility may be terminated by Hastings at any time without penalty to the Company. As collateral for the ATM facility, Hastings issued 6.5 million shares to AIP during the half. DIVIDENDS No dividends have been paid or declared since the start of the interim period and the Directors do not recommend the payment of a dividend in respect of the interim period. OPERATING RESULTS FOR THE HALF YEAR AND FINANCIAL YEAR The total comprehensive loss of the Group for the interim period, after providing for income tax amounted to $21,291,286 (2022: $71,211,230). The Group’s operating income increased to $2,907,800 (2022: $2,259,894) as a result of dividends from the Group’s investment in Neo Performance Materials Inc. (“Neo”) in October 2022. Net loss after tax increased to $13,247,021 (2022: $9,270,421) primarily because of increased finance costs of $16,622,336 (2022: $9,962,658). The increase reflects the borrowing costs paid on convertible notes used to fund the Neo investment. Netted off within expenses is the reversal of $8,620,036 in onerous contract provisions relating to excess accommodation at Onslow previously recognised as of 30 June 2023. The reversal is the result of achieving on-selling of the excess accommodation. Furthermore, a $2,205,053 fair value gain on embedded derivatives relating to convertible notes was recognised during the period. Other comprehensive loss was $8,044,265 (2022: $61,940,809) as a result of the decrease in the fair value of the investment in Neo. Capitalised exploration and evaluation costs increased to $92,693,240 (30 June 2023: $88,297,476) reflecting costs incurred for environmental and geology. Plant and equipment increased to $248,600,644 (30 June 2023: $212,684,152) reflecting the costs incurred for early works construction and the delivery of long lead items for the Yangibana Project. Net assets decreased to $293,941,365 (30 June 2023: $315,172,510) primarily because of the $21,291,286 total comprehensive loss for the period. 7 | DIRECTOR'S REPORT REVIEW OF FINANCIAL CONDITIONS As at 31 December 2023, the consolidated entity had $38,757,189 in cash and cash equivalents (June 2023: $98,644,239). Offsetting the cash assets are borrowings of $149,711,314 (June 2023: $133,187,086) and lease liabilities of $1,191,849 (June 2023: $1,608,491). Cash and cash equivalents are earmarked for construction, corporate costs, and working capital. The total cash held by the Group inclusive of restricted cash (Trade and Other Receivables) of $3,600,488 is $42,357,677. GOING CONCERN Notwithstanding the $38,757,189 in cash and cash equivalents held by the Group as of 31 December 2023, the Company will need to secure additional funding in order to meet forecasted expenditure including outstanding commitments and commence main construction of Stage 1 during the next 12 months. As a consequence, a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern and, therefore, that the entity may be unable to realise its assets and discharge its liabilities in the normal course of business. However, the Directors believe that there are reasonable grounds that the use of the going concern basis remains appropriate as the Board raises funds via the ATM, and looks at other debt and equity options including share purchase plans and placements: • There is demonstrated historical ability of the Group to raise new capital from debt and equity sources; • Hastings has received underwritten capital raising proposals from multiple investment banks and brokers; • Hastings has received non-binding project finance proposals from multiple parties, including from global mining funds, commercial banks, and fixed income investors (debt capital markets). This is in addition to the previously announced financing support from government agencies; and • The GRES EPC contract is subject to certain conditions including Hastings obtaining project financing. Therefore, should financing not be obtained, the Group will not be committed to making payments under the EPC contract. The independent auditor’s review report highlights the existence of the material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern. For further information, refer to Note 1(b) to the financial statements, together with the independent auditor’s review report. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no significant changes to the state of affairs of the Company during the period. SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE On 29 January, the Company announced it had signed a Memorandum of Understanding (“MoU”) with the Estonian Government’s investment agency Ettevotluse ja Innovatsiooni Sihtasutus to collaborate on a joint scoping study into the potential development of downstream rare earth processing capabilities in Estonia. This firmly aligns with the Estonian Government’s objectives to strengthen Estonia’s and the European Union’s ability to provide strategic materials needed for electric vehicles and renewable energy technologies. Recently the German government’s Budget Committee highlighted the necessity for Germany to set up a €1 billion equity fund to finance strategic raw material projects within the European Union. This MoU is aligned to Hastings’ long-term vision to build a European-centric mine-to-magnet supply chain and further reinforces its strategic 21.15% shareholding in Neo, a leading global manufacturer of rare earth magnetic 8 | DIRECTOR'S REPORT products. Neo currently owns the only operating commercial rare earth separation facility in Europe, located in Sillamae, Estonia, and is currently constructing a sintered rare earth magnet manufacturing facility in Narva, Estonia with production expected from 2025. On 16 February, the Company announced it had signed a binding term sheet with Baotou Skyrock for an integrated processing and offtake arrangement allowing Hastings to receive payment for higher-value rare earth oxides, less a capped multi-stage processing fee. The Integrated Agreement is expected to support the realisation of significantly improved economics for the Yangibana Project. Established in 2006, Baotou Skyrock is a privately-owned Chinese high-tech enterprise specialising in the production of rare earth metals and permanent magnet materials. Its main products are sintered neodymium boron and sintered samarium cobalt magnets. Hastings had previously signed an offtake contract with Baotou Skyrock in November 2018 for the sale of mixed rare earth carbonate which lapsed in November 2023. The Integrated Arrangement provides for a competitive fee structure for the multi-stage processing of the Yangibana Project’s concentrate through to an MREC product, and further to separated rare earth oxides. Final rare earth oxides product will be sold at a price linked to benchmark indices for individual oxides. Other than as outlined above, there are no matters or circumstances that have arisen since the end of the financial period that have significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations, or state of affairs of the consolidated entity in future financial periods. AUDITORS INDEPENDENCE AND NON-AUDIT SERVICES Section 307C of the Corporations Act 2001 requires our auditors, PricewaterhouseCoopers, to provide the Directors of the Company with an Independence Declaration. This Independence Declaration is set out on page 11 and forms part of this Directors’ report for the interim period ended 31 December 2023. Signed in accordance with a resolution of the Directors. Charles Lew Executive Chairman 15 March 2024 9 | DIRECTOR'S REPORT DISCLAIMERS FORWARD LOOKING STATEMENTS AND IMPORTANT NOTICE This report contains reference to certain intentions, expectations, future plans, strategies and prospects of the Company. Those intentions, expectations, future plans, strategies and prospects may or may not be achieved. They are based on certain assumptions, which may not be met or on which views may differ and may be affected by known and unknown risks. The performance and operations of the Company may be influenced by a number of factors, many of which are outside the control of the Company. No representation or warranty, express or implied, is made by the Company, or any of its directors, officers, employees, advisers, or agents that any intentions, expectations or plans will be achieved either totally or partially or that any particular rate of return will be achieved. Given the risks and uncertainties that may cause the Company’s actual future results, performance or achievements to be materially different from those expected, planned or intended, recipients should not place undue reliance on these intentions, expectations, future plans, strategies and prospects. The Company does not warrant or represent that the actual results, performance or achievements will be as expected, planned or intended. The Company is under no obligation to, nor makes any undertaking to, update or revise such forward looking statements, but believes they are fair and reasonable at the date of the presentation. COMPETENT PERSONS STATEMENT The information in this release that relates to Mineral Resources and Ore Reserves has been extracted from the release title ‘Annual Report to shareholders’ dated 28 September 2023 which is available to view at www.asx.com.au under the code “HAS” (the original release). Hastings confirms the form and context in which the Competent Person’s findings are presented have not been materially modified from the original release. The information that relates to Mineral Resources is based on information compiled by Mr David Princep and Mr Lyn Widenbar. Both Mr. Princep and Mr Widenbar are independent consultants to the Company and members of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Princep and Mr Widenbar have sufficient experience relevant to the styles of mineralisation and types of deposits which are covered in this announcement and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2012 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (“JORC Code”). The information that relates to the Ore Reserves at Bald Hill, Simon’s Find, Fraser’s, Auer, Auer North, Yangibana and Yangibana North is based on information reviewed or work undertaken by Mr. Stephen O’Grady, member of AusIMM, and a Director of Intermine Engineering Consultants. Mr O’Grady has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the preparation of mining studies to qualify as a Competent Person as defined by the JORC Code. Mr O’Grady consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears. The scientific and technical information that relates to process metallurgy is based on information reviewed by Ms Narelle Marriott (ex-General Manager Process Development) of Hastings Technology Metals Ltd. Ms Marriott is a member of the AusIMM and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined by the JORC Code. Ms Marriott owns shares in the company and participates in the company employee share plan. Ms Marriott consents to the inclusion in this announcement of the matters based on their information in the form and context in which it appears. The information that relates to exploration results in relation to the Yangibana Project is based on information compiled by Dr Louis Schürmann (PhD) (Chief Geologist) of Hastings Technology Metals Ltd. Dr Schürmann is a Fellow of the AusIMM and has sufficient experience that is relevant to the activity being undertaken to qualify as a Competent Person as defined in the JORC Code. The Qualified Person has verified the data disclosed in this release, including sampling, analytical and test data underlying the information contained in this release. Dr Schürmann consents to the inclusion in the announcement of the matters based on his information in the form and context in which it appears. 10 | DISCLAIMERS Auditor’s Independence Declaration As lead auditor for the review of Hastings Technology Metals Ltd for the half-year ended 31 December 2023, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review, and (b) no contraventions of any applicable code of professional conduct in relation to the review. This declaration is in respect of Hastings Technology Metals Ltd and the entities it controlled during the period. Anthony Hodge Partner PricewaterhouseCoopers PricewaterhouseCoopers, ABN 52 780 433 757 Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840 T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation Perth 15 March 2024 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2023 Consolidated Notes 31 Dec 2023 $ 31 Dec 2022 $ Continuing operations Other income 2,907,800 2,259,894 Administration expenses 2 (718,080) (521,706) Consulting and professional fees (599,275) (283,018) Depreciation – plant and equipment (133,707) (90,888) Depreciation – right-of-use assets (104,452) (100,699) Directors’ fees (513,743) (919,346) Employee benefits expense (4,617,511) (2,936,648) Fair value gain/(loss) on embedded derivatives 2,205,053 (1,304,697) - 4,855,315 (16,622,336) (9,962,658) Insurance (159,843) (800,857) Legal fees (226,335) (457,088) 8,620,036 - Occupancy expenses (101,562) (101,936) Travel expenses (214,148) (169,100) (2,768,081) - Fair value gain on foreign exchange forward Finance costs Reversal of provision relating to occupancy expenses 4 3 Impairment exploration expenditure on relinquished tenements 6 Share-based payme