Transcription of The Stock Network Interview with Impact Minerals (ASX:IPT), Managing Director Dr Mike Jones
Lel Smits: Impact Minerals has released a positive early-stage scoping study for its 50% owned aluminous high-purity alumina business favouring staged US development. Further technical validation, customer qualification and funding are required before a construction decision. Its complementary Lake Hope HPA project in Western Australia is progressing in parallel.
I’m joined today by Managing Director Dr Mike Jones to discuss aluminous, the US strategy and Lake Hope.
Mike, welcome back to The Stock Network.
Mike Jones: Thanks, Lel, always great to be here.
Lel Smits: Lovely to have you on. And look, the preferred case estimates the project could be worth around $518 million after tax with a 42.3% return. What does this early-stage result mean for Impact’s 50% interest and also which key assumptions need validating?
Mike Jones: So great question, Lel.
Yes, so we put out the scoping study on the aluminous technology. And for those who haven’t followed the story, we purchased the technology to produce HPA out of administration just about 18 months ago. And since that time, we’ve been putting the pilot plant together, moving it towards continuous operation.
It’s been working in batch mode. It is a process that produces HPA from a chemical feedstock and goes through a solvent extraction process and produces HPA. When we looked at the technology, we always thought that there was a great value in there.
And that has actually been proved now by the scoping study. As you mentioned, the post-tax NPV is $518 million. Our share of that is 50%, which is just $260 million to round it off.
And you consider that we’ve only spent $2.85 million on the project, including the acquisition, to end up with an almost 100-fold return on our investment is a great validation of our acquisition from last year. So we believe that it is a groundbreaking technology because we can produce modular plants of, say, 2,000 to 4,000 tons, which is what we’ve the scoping study on. And we can build those plants in a modular fashion in any place around the world where we can get access to the feedstock or close to end-user customers.
So it is a revolutionary process in that sense. So what we’ve discovered during the process is that at the front end, which is the solvent extraction, that process is working very well. In fact, we believe it’s going to work a lot better than was originally designed.
The biggest assumption, which are listed in the announcement, they’re sort of the risks associated with the project. At the back end, there is still quite a bit of work to do with the precipitation, the filtration of the final material that we take to produce high purity alumina. And that is something that we’re focusing all of our efforts on at the moment.
We’ve had a few breakthroughs in the last few weeks, so hopefully that will all come to fruition. Obviously, the other big assumption is that we can get the customers that require the HPA. And one of the things is that in America, there’s only one small producer of HPA, but massive demand.
And it’s being increasingly recognized now that HPA is part of a lot of supply chains in the Department of Energy, in particular in battery technologies, battery storage technology, and also the semiconductor industry. And increasingly in the Department of War, Artificial Sapphire has a wide range of uses in Pentagon related activities, apparently. And so we believe that there’s a huge avenue for us to establish our first commercial plant in the US, which was the outcome of the scoping study.
Lel Smits: And Mike, when it comes to staged US development, why is a US Gulf Coast facility scaling from 2,000 to 4,000 tonnes annually preferred?
Mike Jones: So the scoping study was based around four cases. The first one was actually what would it take us to build a commercial plant here in Perth, which would perhaps be our preferred option given this Australian technology. However, we discovered that for an equivalent plant size in the US, something in the order of 20 to 25% cheaper, both on the capex and the operating costs.
That’s a bit unfortunate, but one of the things about the East Coast of the USA is that there’s a wide access, ready access to chemicals direct from suppliers, whereas building it in Perth means we would have to import some of the key chemicals that we need. So that’s one of the key things. We’ve looked at an equivalent facility, 2,000 tonnes, but we believe that the demand will be sufficient and we can scale up production over a period of time, say two to three years from 2,000 tonnes initial capacity and then add on up to 4,000 tonnes capacity.
And that’s a more realistic way, looking at some of our peers in the business, of scaling their business up. And so being able to build a plant of 2,000 tonnes with a 4,000 tonnes future capacity is a massive commercial advantage for us. And the capital efficiency, that is how much it costs us to install every 1,000 tonnes of HPA, is about one quarter of anybody else globally.
And that is a huge, huge breakthrough for us that we believe we can capitalise on by setting up in the US.
Lel Smits: Yes. And Mike, what pilot testing customer qualification and also funding milestones are needed to advance it?
Mike Jones: So we’ve already announced that we’ve had this relationship with the battery technology company C4V, based out of the University of Binghamton in New York State.
We announced a few months ago now that they’ve done some initial test work on the HPA from Illuminis, and physically it’s ideal for battery separators and lithium battery storage facilities. So we believe that’s a very big market. We’re preparing samples for the chemical test work now, also with C4V.
And so that’s the first step in our customer qualification. We believe that that will increase our ability to enter the battery market much quicker than dealing with many different battery companies. So that’s the first step there.
That’s obviously going to be an ongoing process from here on in, now that we’re in a position to be able to produce HPA almost at will, but not yet at scale. So in terms of funding, we’re going to take that pilot plant and we’re going to convert that into a demonstration plant and also R&D facility. So that will still become a critical part of our overall strategy.
So we’re not abandoning Australia to go and build the first commercial plant in the US. There is still a lot of demonstration work to be done, scaling up of the process, and that will all be done here in Perth. We’re putting together a bit of a scoping study on what that might cost at the moment, but it’ll be in a few million dollars of costs, not tens of millions of dollars of cost.
To date, we’ve probably spent no more than 10 million dollars on all of our HPA work, both on Lake Hope and on the Luminous. And we’ve got NPVs for the two projects combined of well over 1.5 post-tax Australian dollars. It’s been a great return on the investment of our money spent so far, and that is going to continue as we go forward.
Lel Smits: Excellent. And looking closer at Lake Hope, how is Lake Hope’s Definitive Feasibility Study progressing really alongside Luminous? And also, how do their target markets differ and what comes next in terms of milestones for both?
Mike Jones: Yeah, so Lake Hope, we’re still developing that at pace. We will be announcing very shortly that we’ve just engaged project managers and engineers to build the pilot plant for the Lake Hope process.
And people will ask, why are you doing the two? And said, well, it’s because we have established in terms of our market research that in order to access the widest range of products possible, then we need both processes. So with Lake Hope, we can produce potash as a by-product that’s been established. They have an intermediary product called Aluminium Chlorohexahydrate, for those who are interested, or ACH to shorten it.
There’s quite a significant market for that in ultra-pure material, and that will help funders get through to the production of HPA. So it’s those three products there. But very importantly for Lake Hope, we’ve been able to produce Uranium and Thorium values at less than one part per billion in the final product.
And that’s actually a key entry into the semiconductor industry. And that industry, demand for HPA is exploding. It’s used as a thermal filler in and around the semiconductor.
And it’s also helped to polish the particles that go into the semiconductors. It’s a huge field. We believe that that’s the speciality for Lake Hope.
On the luminous side, we have an intermediary product, Aluminium Trihydroxide, again, for those that are interested, ATH. Big demand for that in the direct lithium extraction industry. We’ll have some news on that shortly, as well as HPA.
They are much more advanced, and we believe that’s our faster market approach. And being able to build the first commercial plant in the US is all part of that overall strategy. So in terms of next milestones, we’ll have an announcement out on the piloting very shortly on Lake Hope.
And then with the luminous, there’ll be further information about what’s going to happen in the US going forward. So very exciting times for us. It certainly is.
Lel Smits: Mike, thank you for the update from Impact Minerals.
Mike Jones: Thanks very much.
Ends