Ord Minnett has emerged as a fan of Hastings Technology Metals (ASX: HAS).

The broker released a report late last week tipping the stock to double to 30 cents in spite of the cold shoulder its shareholders gave its capital raising in May.

There were four reasons why it found Hastings attractive. First was its high value orebody at its Yangibana project.

“Yangibana contains one of the world’s highest concentrations of the highly sought rare earth NdPr which represents 35 per cent of the resource and ultimately 40 per cent of its future production,” said analyst Dylan Kelly.

Its resource, 21.7 million tonnes, enabled the product to have a basket price of US$20 per kilo, substantially higher than existing producers.

Second, Hastings’ shortcut to the market in producing only a mixed carbonate and not fully separate rare earths. That reduces product risk and capital expenditure.

“Historically new rare earths projects have had a chequered history, particularly for vertically inegrated producers,” said Kelly. “Typically capital costs exceed US$1 billion and take lengthy periods to commission – Lynas took 6 years.”

“Aversion to such risk is why we like the Yangibana project and HAS approach to development. HAS plans to only progress partially down the value chain to the second stage of producing a mixed intermediary product.”

The ore is sent to customers in Asia which will separate them.

Who’s got Hastings’ back?

Third, the company is backed by two German industrial giants – elevator manufacturer Thyssenkrupp and vehicle rolling element manufacturer Schaeffler. The latter is Volkswagen’s electric vehicle technology supplier.

Hastings has signed 10-year off-take memorandums of understanding with both and this has helped secure $200 million in German government financing. The broker compared this to Japan’s backing of Lynas in the last decade.

Finally, Ord noted that executive chairman Charles Lew owned 11.5 per cent of the company and self-funded most development to date. The next largest shareholder, Malaysian entreprenuer Mark Chang Mun Kee, put in $3.5 million last week.

But most importantly was the market. Ord forecasts production to commence in mid-2021 and the long term pre-tax price of NdPr at US$68 per kilo. That and a AUD/USD rate of 0.70 led to its 30 cent price target and 49 cent project target.

Nonetheless its project value was highly sensitive to NdPr and forex rates. At one extreme a $90 per kilo rate could lead to a price between 72 and 86 cents but the other, a $90 per kilo rate could lead to a price between 10 and 19 cents.

It also admitted it had to secure government approval and the full amount of capital. While 83 per cent of its capacity was covered by Memorandums of Understanding, this had to be converted into a formal contract.