Andromeda Metals signs first binding Great White Project offtake with Japanese porcelain manufacturer for premium-grade kaolin

Andromeda Metals Ltd (ASX:AND) has signed its first legally binding offtake agreement for the Great White Kaolin Joint Venture Project in South Australia, with highly respected Japanese porcelain manufacturer Plantan Yamada, which has factories in Japan and China. The agreement is for 5,000 tonnes per annum (tpa) of the Great White CRM high-quality halloysite-kaolin product designed for the porcelain manufacturing industry.  The customer has also agreed to pay A$700 per tonne, equivalent to the price used in the Great White Project pre-feasibility study (PFS).  The Great White Kaolin Project, which is a joint venture between Andromeda and Minotaur Exploration Ltd (ASX:MEP) (OTCMKTS:MURXF), remains on track for the commencement of open pit mining in February 2022. Potential offtake deals The project’s marketing and logistics consultant, Conrad Partners, is actively engaging with high-end ceramic end-users and potential toll refining companies in China. A senior Conrad executive is meeting with all ceramic customers in China who had signed previous letters of intent (LOIs) in addition to other potential customers and distributors, who have shown interest in acquiring Great White product for their ceramic manufacturing factories. Conrad hopes to convert these into binding offtake agreements. Previous visits to China by Andromeda representatives confirmed substantial product offtake volumes through the signing of LOIs for direct shipping ore (DSO), dry-processed and wet-processed material sourced from the Great White Project. Eight Chinese ceramic companies signed LOIs for 211,000 tonnes per annum of the premium wet-refined grade of Great White halloysite-kaolin and LOIs have also been provided for 405,000 tonnes per annum of DSO and 307,000 tonnes of dry-processed product. ADN is considering the construction of an onsite wet processing facility instead of a dry processing facility. Testing product Freight restrictions due to COVID-19 slowed the delivery of processed Great White CRM product to other Asian and European ceramic end-users, who had expressed interest in testing the material. This is now resolved, with quality control testing on a 6-tonne batch of Great White CRM produced in China now complete and product is being sampled for additional customer targets throughout Asia and in the Middle East, where there is significant sales potential. Testing of product material sent to Germany has also delivered the same high-quality results. First Test Minerals in the UK has been engaged to update the kaolin market report prepared in June 2020 exclusively for the PFS to again include all known existing production and sales information. The report will focus on the high-end ceramic market and also the high-value paint and coatings market, which are both target markets for the project. This report will be referenced by the independent marketing consultant as part of their verification of the high-end ceramic market in addition to formalised binding offtake agreements, a number of which are envisaged to be in-place for consideration by project funding parties. DFS In a bid to further de-risk the project, a definitive feasibility study (DFS) will evaluate alternative scenarios of a start-up 500,000 tonnes per annum plant or a two-staged 250,000 tonnes modular phased wet-processing plant to be constructed at site, in preference to an initial DSO phase moving to 500,000 tonnes from year 2 as contemplated under the PFS. In addition, product specifications under the DFS have been altered from those considered in the PFS to meet the requirements of high-end ceramic manufacturers. The expected benefit of the new DFS approach is that high-value product will be manufactured at site from the commencement of operations, from either an immediate 500,000 tonnes or two-staged wet-processing plant, tasking project management with direct control to meet product quality specifications. The option to undertake DSO in the first two years of operations as proposed by the PFS will be further analysed under the DFS to consider the technical capabilities of identified refineries and perform more cost-benefit analysis to ensure this to be the best option for the project. Capital expenditure Either of the early start-up scenarios will require bringing forward capital expenditure for construction of the plant. Under the PFS, processing plant capital expenditure was initially deferred such that plant construction would be funded by DSO sale revenues generated in the first two years of operation. Funding options are being considered under the DFS and for the following bankable feasibility study (BFS) with assistance being provided by corporate advisors Origin Capital. Project debt funding will be sourced to the benefit of both parties to the joint venture, with similar terms to apply to each. Importantly, for Minotaur Exploration as minority participant with a 25% interest in the project, this arrangement obviates the need to seek separate financing avenues and streamlines the joint venture manager’s negotiations with bankers. Primero Engineering Group, the EPC contractor is completing detailed design and costings for the wet-processing plant to be used in the DFS, which is scheduled for completion in the second quarter of 2021. Work on these two new market applications is not as advanced as for ceramics in both testing and product marketing, and so have been separated from the DFS due to the required level of detailed analysis needed to support the studies. Alternative market opportunities Alongside the DFS, which is purely focused on the ceramics market, separate pre-feasibility studies are being prepared for recently identified alternative market opportunities for Great White material, being the addition as a rheology modifier product for the concrete industry, and also separately as a product suited for the high-end paint and coatings industry. Both of these applications will be sourced from different parts of the Great White mineral resource and would complement the Great White CRM market application.