Transcription of The Stock Network Interview with Impact Minerals (ASX:IPT) Managing Director, Dr Mike Jones
Lel Smits: Impact Minerals is an Australia-focused mineral exploration company. Its flagship Lake Hope high-purity alumina project extends across a circa 238 square kilometre area located in southern Western Australia. The Lake Hope project encompasses several promising salt lakes that contain an extraordinary deposit of high-grade aluminium-clay minerals.
Impact Minerals is now positioning itself to revolutionise high-purity alumina production through cost-efficient mining in concert with an innovative acid leaching technology. Impact Minerals also has three other projects on its books located in WA and New South Wales. Joining me today is Impact Minerals Managing Director, Dr Mike Jones. Mike, welcome to the Stock Network.
Dr Mike Jones: Thanks, Lel, and this is our inaugural interview, so looking forward to it.
Lel Smits: Absolutely, I’m glad that you’re here and keen to understand more about what you’re doing. The mining and refining components of the development plan for Lake Hope is now taking shape. Can you outline the core elements of your mining and refining plan and also how you were able to bring them together so quickly?
Dr Mike Jones: Yes, it’s been a very busy two years, or just over two years, since we first got the Lake Hope project, which is about 500 kilometres east of here in Perth. And for those of you who don’t know, it’s a very unique set of lakes out in that area that have a special mineral in it that we can convert in a relatively straightforward manner into high purity alumina, which is a little known niche mineral, but a crucial part of the energy transition using a wide range of emerging high tech.
So over that two years, we’ve just completed now pre-feasibility study, which shows that the project has incredibly strong economics. It’s got a net present value of nearly one and a half billion dollars, including by-product credits. And importantly, though, we believe that because it’s going to be relatively easy to mine and straightforward to process, it’ll be the lowest cost producer of HPA globally, as far as we understand, by a significant margin.
So it’s been a very exciting couple of years. But for people who haven’t followed the story, in the last couple of months, we’ve actually purchased the assets of one of our competitors in the HPA space that went into administration. That was because of financial mismanagement rather than anything else. Excellent technology. And we believe that we can bolt that onto the front end of our process for Lake Hope. So we’re in this transition zone now where we’ve done a pre-feasibility study, but we’re now looking to see how we can bolt on this back end. And we believe that that could actually reduce our operating costs even further. So there’s a lot of science and technology going on in the background.
Lel Smits: Excellent. Now, more on that PFS recently, you released your pre-feasibility study for Lake Hope, which highlighted the exceptionally strong economics. Can you recap for us those key messages that are coming out of this study?
Dr Mike Jones: That’s correct. So in any feasibility study, there’s a number of key figures, probably three or four that are the key ones. First one, as I’ve already mentioned, is the net present value. And that’s exactly how much the deposit is worth in the ground to us now. So someone came along and write a check, what would that deposit worth be worth to them so that they could still go on and make money out of it? And the answer to that is about 1.2 billion Australian dollars, which is a huge number in its own right.
And that number didn’t include byproduct credits. We still have some more test work to do to really nail down the byproduct value, but we believe it’s going to add another 200, 250 million to the NPV. The other important number there is the discount value.
What inflation rate to simplify things we’ve applied to that calculation. And we’ve used 10% per annum. And that’s actually one of the more conservative discount rates that you will have seen in any PFS study in about the last two years. Some are even down at five, which is a little bit dodgy in my view. So excellent NPV. The other one is the capital expenditure.
We believe it’s going to cost about 250, 260 million dollars to build that plant. And if you divide that number into the NPV, you get a ratio of about one to four, one to five, the capital efficiency ratio.
Lel Smits: That’s an excellent number, one to two is also is a very good threshold and we’re well above that. The third one is what’s your operating cost? How much is it going to cost us to produce a ton of high purity lumina?
Dr Mike Jones: And the answer is about 4,500 to 5,500 US dollars per ton. And that depends on the byproduct credit. Let’s assume that works. Then that number is sort of 30% or more below any other producer of HPA that we know of globally. And so that’s going to be a huge entry point for us into the marketplace. So those are the three numbers that really can. Excellent. Now on to high purity alumina or HPA for short.
It’s acknowledged as a metal critical to the energy transition process now occurring, of course, across the globe. But not all HPA is created equal as you know.
Lel Smits: Can you really tell us what type of industrial processes is HPA used in and also what type of HPA do you plan to create?
Dr Mike Jones: I mean, one of the first interviews that can say alumina straight off the bat. It normally takes a few interviews before they can get that right. So look, HPA is used in three main areas. The first one is LEDs, light emitting diodes. So every light globe that’s going into any place in the world now is predominantly LED. They’re energy efficient and there’s been a prescribed legislative move away from incandescent light globes because of the energy efficiency.
And in every LED is a thin piece of sapphire, which is a form of aluminium oxide or alumina. And so what we do take the HPA, we basically remelt it and convert it into artificial sapphire. And it can go into the LEDs, but also now into a burgeoning use of a number of industries, which include medical devices, optical equipment, satellites, also sapphire glass on your on mobile phones, on elegant watches and also the windows of like all jet fighter planes and on missile tips as we’ve discovered.
So a burgeoning range there. It’s also using ceramics, wide range of alumina ceramics. There’s a vast market of what we call 3N, so it’s not quite as pure as the high purity alumina.
And we believe that that’s probably a good entry point for us. We can make 3N just as a matter of course, and it’s a good way of getting to market quickly and getting revenue. The other big use now, which is for super high purity material is actually in semiconductors.
And it’s used in two main areas there. One, it acts as a thermal barrier, so it stops heat build up in semiconductors. And that’s an important thing as you can imagine, with these new data centres going in millions and millions of GPUs and semiconductors, they create tremendous heat and high purity alumina is a very important component of that.
And also it’s used to help polish some of the particles that are used in semiconductors. And so the alumina is, it’s thermally inert, chemically inert and a very, one of the hardest substances known to mankind. So massive use there.
And finally, which I won’t dwell on, it’s used in lithium ion batteries to again, prevent heat buildup. So all in all, it’s a vast market. It’s growing at about 20 to 25% per annum.
And there’s a bit of a tightening of supply in the next couple of years. So hopefully we’ll get our timing right to get some into the marketplace.
Lel Smits: Well, Mike, thank you so much for the update on Impact Minerals and all the things you’re working on. Certainly at the opportunity that you’re pursuing, look forward to hearing more in the coming months.
Dr Mike Jones: That’s great Lel, and be glad to be here again.
Ends