Andromeda Metals Ltd’s (ASX:ADN) positive pre-feasibility study (PFS) has reinforced the potential for Poochera Halloysite-Kaolin JV Project in South Australia to be a long-term supplier of high-quality halloysite-kaolin product.
The PFS for a proposed kaolinised granite open-cut mine and site wet-processing facility at Carey’s Well deposit has delivered further improvement in the project economics.
This has largely been achieved through the inclusion of onsite wet-processing for the production of premium grade refined kaolin clay.
Growing demand for product
This product is expected to meet the large and growing global demand from ceramics industry manufacturers for high-value bright-white halloysite-kaolin for ceramic applications.
The PFS builds on a highly positive updated scoping study released in April 2020 with the project expected to provide strong cash flows for Andromeda and JV partner Minotaur Exploration Ltd (ASX:MEP).
Initial DSO stage
This new study is based upon an initial phase of mining kaolinised granite as direct shipping ore (DSO) and toll wet-refining overseas to generate early cash flows.
The cash flow would be used to fund construction of an onsite wet processing facility and associated infrastructure during the second year of operation.
Production is then scheduled to convert to onsite wet-processing to remove the majority of the contained quartz sand in the mined kaolinised granite.
This would produce a concentrated kaolinitic product that is shipped in bulk as filter cake for final toll wet-refining overseas in order to produce a premium bright-white halloysite-kaolin product.
Key physical and financial statistics associated with the PFS and the previous updated scoping study.
26-year life of mine
The PFS outlines an expanded life of mine (LOM) of 26 years based on the updated December 2019 mineral resource with this enhancing project cashflows.
LOM key financial metrics:
- All In Sustaining Cost (AISC) averages A$354/tonne of refined premium halloysite-kaolin product with an anticipated selling price of A$700/tonne;
- Project cashflow of A$1.97 billion pre-tax and A$1.39 billion after-tax;
- A 35% increase from the previous scoping study in pre-tax NPV to A$736 million and unchanged IRR of 175%;
- After-tax NPV of A$511 million and IRR of 135%;
- Pre-production capital estimated at A$13 million with a maximum cash requirement of A$28 million prior to initial revenues being received; and
- Payback period of 15 months from commencement of mining, through direct shipping ore (DSO) mining, shipping and toll-refining activities.
Pre-tax cashflow over the first five years from the commencement of mining.
The PFS evaluated both dry-processing and wet-processing at site with the latter proving to produce significantly better project economics.
Wet processing advantages
A prime advantage of onsite processing by a wet rather than a dry method is that it delivers greater recoveries of kaolin clay and hence the generation of considerably higher revenues.
This also provides lower site processing costs due to the operating features of wet processing and efficiencies of the plant design being considered.
Inclusion of a hot drying stage under wet-processing has been made in order to comfortably meet maximum shipping moisture contents.
This has the benefit of recovering condensed water that will subsequently reduce the external water demand.
It will also lower tonnage-based transport and shipping costs on account of the reduced moisture content of the filter cake which outweighs the additional capital and operating costs of the drying plant.
Both the initial bulk DSO material and wet-processed bulk filter cake product will be shipped through existing, or under development, port facilities.
The PFS estimates a workforce 30-40 people sourced mainly from the local region.
Expanding marketing efforts
Andromeda is expanding marketing efforts throughout Asia and Europe, with testing for a range of applications underway with potential customers and distributors.
Commercial trial quantities of products are being produced in China and Japan for progressing customer offtake agreements.
The company is now directing its focus towards environmental impact assessments and Mining Lease application as part of a definitive feasibility study (DFS).
Subject to satisfactory progress negotiating agreements with key stakeholders, obtaining of all necessary regulatory approvals and completion of a DFS, the start of site activities is targeted for early 2022 with first product sales possible in mid-2022.
Andromeda can earn up to a 75% equity interest in the project by either sole funding $6 million over five years or alternatively a decision to mine is made by the joint venture partners.
On March 4, 2020, the company announced that it had met the Stage 1 expenditure commitment of $3 million within two years of execution of the agreement to earn a 51% interest.
Andromeda at the same time elected to immediately proceed to Stage 2 through the sole contribution of a further $3 million to be spent by April 2023 in order to acquire a further 24% interest.