I haven't been following ADN as long as others here, but I do hold and thought I'd update. All of this fundy info comes from the company website, particular their recent ANNs, including the Scoping Study released on 30 September.
As you can see from the earlier posts in this thread, ADN was a gold and copper explorer (under the name Adelaide Resources) before it switched its main focus to their Kaolin (clay) deposits on the Eyre Pennisular. They still hold most of their original gold and copper permits and are currently in the process of expanding the JORC resource estimate for the kaolin deposit at Poochera ("Carey's Well") ( and some satellite deposits they hold called Camel Lake and Tomney East.) The Poochera operation is a JV with Minotaur Exploration (ASX:MEP) but ADN is running the show and has the option to buy out the MEP stake in the future..
ADN has recently done a (small) Capital Raising to fund a Feasibility Study and environmental work. Their stated ambition is to bring Carey's Well into production within two years. This is a very low capex project (<$20M?)and the recent CR and options (Nov 2020 with a strike price of 1.2 cents) is believed to be sufficient to get the project into into production. The "mine" is very simple - little overburden, no blasting, just scoop up the clay, sift out the sand and send it to the local port for export. There's at east 30 years of production of this kaolin from the Carey's Well deposit alone and that will almost certainly be expanded with the reassessment currently underway.
So why has this got (some) people excited?
Clays ain't clays. Firstly, Kaolin is an aluminium-silicate clay and, in higher, whiter, grades, is the main feedstock for the fine and industrial porcelain industry. ADN's kaolin is of the highest, whitest, grade. Certain types of kaolin are also used in paper manufacture and as additives to paint. ADN's kaolin fits the bill. Traditional high quality kaolin producers have largely either exhausted their supply (after >2000 years of production, this is probably inevitable) or are being closed for environmental/planning reasons as Chinese cities expand. ADN is in discussion with at least 20 end-users in China, Japan and Europe, and has non-binding off-take letters from several of them. Export grade kaolin sells for around $300 per tonne.
Moreover, these high quality kaolin clays contain a proportion of the makings for HPA (High Purity Aluminium) - for which there is an expanding market, especially in the battery market. Different grades (purity) of HPA feedstock sell at different prices. ADN believes it can get to Grade 4 in one processing cycle. That sells for USD3,000 per tonne.
Wait, there's more!. The HPA component in ADN's Poochera deposits has been tested to be present mainly as Halloysite - a tubular "nano structure" form that, apart from being highly suitable as the basis for HPA production, has the scientific world particularly excited as a POSSIBLE basis for everything from slow-release cancer drugs, hydrogen storage, molecular seives and even CO2 recovery. The Halloysite in ADN's kaolin ranges up to 30%. As far as I can tell, the market for pure Halloysite right now is pretty small, being mainly used as lab product and for some catalysts.
ADN’s pivot to Kaolin/Halloysite coincided with the appointment of James Marsh as MD. He has thirty years experience in this industry and is seen by many people as the key to ADN’s potential. ADN recently confirmed a research partnership with the University of Newcastle on uses of Halloysite in Hydrogen storage. The Federal Government chipped in $100,000 for this research (I guess nobody told them that renewables were involved).
ADN currently has a market cap $60.6M and is trading at around 4.3 cents PS (after closing at 7.5 cents a few weeks ago). It was at 0.5 cents on 1 May this year, giving canny long-term holders a nice 15x value increase if they sold at the peak.
As I see it, the positives about this stock are:
- extremely high grade resource with huge volume – possibly “the best in the world”
- very low capex requirement and quick timeline to reach production of first stage kaolin for export
- highly respected management with good contacts in the market/s
- potential for different products into different markets, some of them booming (batteries) and some blue-sky (Halloysite nano tubes)
- other (copper and gold) assets – maybe as backup assets for financing processing if things go boom?
- supportive (SA State) government which sees potential for allied business and regional development.
The downsides are:
- no binding offtakes (yet)
- as a small-cap mining stock, with recent buy-in from “sophs”, it is subject to “funny business” (I would not allege share price manipulation, oh no) and the price does react strangely to news (it fell on the release of a very positive SS and a small cap raise -12% dilution - recently).
- at some stage the JV partnership will need to be resolved (buy out?) with the possible need for more cash
- The DFS and environmental approvals, as well as resource enlargement, are still in progress
Other ASX companies in the Kaolin/HPA/Halloysite business include:
ASX:ATC $93m MC HPA from Kaolin plant construction
ASX:A4N ~$84m MC HPA from industrial waste Pilot Plant construction
ASX:KRR ~ $39m MC
ASX:AXE ~$26m MC Halloysite + lots of other interesting prospects
ASX:MSE ~$16m MC
ASX:FYI ~$15m MC
ASX:MEP ~ $18m MC diverse mineral exposure to ADN via JV
It is worth looking at the stories of these companies, especially regarding the size and quality of their resource, their path to production and how they see their markets.
There are few other micro cap plays currently singing from the HPA songsheet.
I don’t know (of course) if the current ADN price represents a short- or medium- term trading opportunity or whether this is just one to watch for 2020/21. I’m in up to my armpits.
This is certainly not investment advice.
Strangely, there do seem to be a couple of knowledgeable posters on the HC ADN threads (as well as the usual P&D crowd and 100+ opinionated nobodies who know more than company management). I’m sure you’ll easily work out which is which.
Happy to be corrected on any of the above and to hear others’ views about ADN or the Kaolin/HPA/Halloysite field in general.