FYI Resources Ltd (ASX:FYI) has implemented a number of actions to ensure the safety of its staff and to preserve shareholder funds during the COVID-19 pandemic while maintaining positive progress at the high purity alumina (HPA) project in Western Australia.
As from March 1, non-executive directors have agreed to suspend payment in cash of their director fees and the managing director has suspended his salary.
Corporate overheads have been reduced to maintain operations and lower priority expenditure has been curtailed including non-essential research and development activities.
Additionally, management, staff and project contractors have adjusted work practices in accordance with government regulations for virus containment and social distancing.
Despite the new working arrangements, the company continues to operate day-to-day with a “business as usual” mindset with minimal disruptions and is determined to progress the project and build on the recently released definitive feasibility study (DFS).
Positive definitive feasibility study
FYI released results of the DFS for the HPA project on March 11, 2020.
The project has a net present value of US$543 million and internal rate of return of 46% which was calculated based on high-quality metallurgical test work, including pilot plant trials, and extensive process flowsheet design.
It estimated the engineering design and cost at US$189 million.
Following the release of the DFS result and the success of pilot plant trials, FYI has a high level of confidence in the technology and process flowsheet and the company’s ability to produce a superior quality HPA product.
As well as validating the production process flowsheet, the pilot plant trials produced representative HPA samples generated from FYI feedstock that could be provided to potential customers.
This gives potential customers the confidence to test and qualify FYI’s product with surety of product provenance and quality.
Customer response to the HPA product has been favourable and the company continues to build relationships and continue the qualification and tailored specification with potential customer groups.
Several parties that have been engaged in FYI’s HPA qualifying process requested additional product finishing of the HPA samples.
This request focuses on the physical properties of the product to suit individual requirements in processing and packaging.
FYI is examining different product types to be able to supply product to individual customer specifications.
HPA project funding
Currently, there is a high level of market interest in the battery and associated power storage sectors – largely driven by Lithium-ion battery applications and the rapidly developing Electric Vehicle (EV) market.
Additionally, HPA is experiencing increased demand from its broader, more traditional markets.
The company’s financial case set out in the DFS coupled with the internally generated (via the pilot plant) high-quality and grade HPA product samples and long mine life (>25 years reserves) is considered an attractive proposition to financiers as they seek robust long-term investment opportunities.
To date, FYI has secured a standby equity financing facility for up to A$80 million which will primarily be directed towards addressing the equity component of the US$189 million project capital requirements.
FYI is continuing to explore additional project financing options to complete the financing package for the company’s integrated HPA project including one or more of the following: equity, traditional debt, off-take financing, project joint venture, strategic partners and project supported financing.
Market outlook to 2026
The global HPA market was valued at US$1.1 billion in 2018 and is projected to reach US$5.1 billion by 2026 at a compound annual growth rate of 21.7% between 2019 to 2026 (as forecasted by Allied Market Research market report 2019).
Additionally, CRU Consulting estimated that 4N+ (99.99% aluminium oxide) demand would grow from approximately 19,000 tonnes per annum to approximately 95,000 tonnes per annum by 2025.
CRU also suggests the HPA market could grow 30% to 272,000 tonnes per annum in 2028 - if sufficient supply were available.
Disrupting traditional production
In addition to the growth in the broad market diversity of HPA applications, additional global legislative and environmental regulations are promoting HPA produced from alternative sources rather than to the current hydrolysis supply.
FYI believes this is exemplified by the increasing worldwide trend to implement stringent environmental restrictions on bauxite mining and related operations due to their disproportional environment and carbon footprints.
This will result in disruptions to traditional production of HPA from bauxite and the hydrolysis process over the mid to long term.
Additionally, governments are also continuing to implement, and enforce, strict emissions control to curb carbon levels from power generation and reduction in combustion engines usage.
These factors combine to provide additional opportunity for an alternative cheaper, more environmentally suitable production of HPA sourced from kaolin.