Andromeda Metals Ltd’s (ASX:ADN) 12.5 million tonnes maiden ore reserve at Carey’s Well deposit within the Poochera Halloysite-Kaolin Project JV in South Australia supports a 26-year mine life at an annual mining rate of 500,000 tonnes.
The reserve of bright white kaolinised granite in the probable category comprises 15% halloysite and 78% kaolinite in the minus 45-micron fraction.
Focus on DFS
With the reserve milestone passed, Andromeda is now focused on completing a definitive feasibility study (DFS) and the Mining Lease application process with site mining activities targeted for early 2022.
This new JORC 2012-compliant reserve has been estimated based upon a pre-feasibility study (PFS) prepared by the company and announced on June 1, 2020.
Carey’s Well reserve is underpinned by the mineral resource estimate released on December 23, 2019.
Initial DSO phase
The PFS is based on shallow open pit mining of kaolinised granite mineralisation, with an initial phase of Direct Shipping Ore (DSO) and toll wet-refined overseas to generate early cash flows.
During the second year of operation, production is scheduled to convert to on-site wet processing to remove sand content, which is approximately 50%.
This product will then be shipped in bulk as filter cake for final toll wet-refining overseas in order to produce a premium bright white halloysite-kaolin product.
Poochera JV project covers two main geographic areas of interest, both in the western province of South Australia.
The primary focus area is Carey’s Well deposit, which is near Poochera on the western part of the Eyre Peninsula, about 130 kilometres southeast from Ceduna and which was the subject of the PFS.
Joint venture terms
Under the JV terms, Andromeda can earn up to a 75% equity interest in the project by sole funding $6 million over five years or alternatively a decision to mine is made by the JV partners.
On March 4, 2020, the company announced that it had met the stage-1 expenditure commitment of $3 million within two years of the agreement and had, therefore, earned a 51% interest in the project.
At the same time, the company 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.
On Andromeda reaching a 75% interest, each party will then contribute to the project budget as per their equity interest or otherwise be reduced as per the standard industry dilution formula.
If an equity interest falls below 5%, that party’s interest will convert to a 2% net smelter royalty over the project.