A new option will apear and right click that and hit Import Element, a browser will apear and locate your Hat Proxy that you downloaded, select that and hit open. Expand all the drop down options.
This is where it gets complicated, so be careful.
You will see in you're new options there is something called "mtlName" and next to that it says Place Material Here.
This process doesn't always work, so I will show you how to do the other one later.
in the very top drop down option were it says your_item_GameModel, there should be a tag called modelName, click in the text box next to that and hit CTRL + A to select all, the hit CTRL + C to copy and click in the text box next to mtlName and delete the Place Materials here text and hit CTRL + V to paste the already copied text from modelName.
Once you have done that delete the .mdl from the end of the copied text and your item MAY turn black, if it has this process worked, if it didn't, go to Step 3(i).