Little contemporary thought is given to construction materials outside the carbon cost of cement, but they are quite literally the backbone of modern society.
Suvo Strategic Minerals Ltd (ASX:SUV) saw an opportunity in the large and ever-increasing global consumption of both high-grade kaolin and silica sands and the depleting global resources available to be mined.
The company has now acquired several assets in this sector with multiple product streams, positioning them to take advantage of looming supply shortages both locally and throughout the Asia Pacific region.
Suvo executive chairman Robert Martin spoke to Proactive about the company’s opportunities, advantages and forward outlook.
In this article:
- White Gold: Kaolin and silica sands in demand
- Standing on kaolin Cloud 9
- A diversified spread of product streams
- Sand, glorious sand
- Looking to the future
White gold: Kaolin and silica sands in demand
Clay and sand are not sexy.
They don’t glitter like gold or hold the dangerous fascination of uranium, but the profit margins for industrial materials like kaolin and silica sands are certainly attractive.
The global kaolin market size was estimated at US$3.1 billion in 2020 and is projected to reach US$4.1 billion by 2025, at a compounding annual growth rate (CAGR) of 5.5% from 2020 to 2025. The material is mostly used in ceramics, paper, fibreglass, paints and coatings, rubber, pharmaceuticals and plastics.
In recent years high-purity alumina (HPA) has been synthesised from kaolin deposits, for use in lithium-ion batteries and other similar emerging technologies that have been taking the market by storm.
While currently occupying a smaller market share – US$1.3 billion in 2019, expected to reach US$4.8 billion by 2026 – HPA has been predicted to grow at a CAGR of 20.7%, trouncing even the lithium-ion market’s growth of 19%.
Silica sand has also experienced a major supply squeeze in the last few years, holding the crown of second most consumed raw material on the planet after water. It’s used in a wide variety of applications including construction, glass, computer chips, solar panels and even electric vehicles.
Silica sand is in short supply after several countries banned the mining of river sand, after the overexploitation of the resource caused devastating erosion on coastlines and riverbanks. This supply pressure has pumped up demand, netting silica sand a CAGR of 7%.
Altogether these industrial materials represent a market experiencing increasingly high demand, sharp supply shortages and the potential for impressive EBITDA (earnings before interest, taxes and depreciation) numbers.
Standing on kaolin Cloud 9
Suvo Strategic Minerals is a dual-commodity mining company based in Australia, looking to take advantage of this emerging market space with operations in Victoria and the kaolin and silica sand projects in Western Australia.
The company was catapulted into 'Producer' status following the acquisition of the Pittong Hydrous Kaolin Project in Victoria (pictured), originally owned by French multinational company Imerys S.A, one of the world’s largest kaolin miners.
Originally purchased seeking a ready-made team of experts to help develop its White Cloud kaolin deposit in Western Australia, Suvo instead found it had acquired a fully operational kaolin mine, complete with processing facilities, multiple baked-in offtake partner, including Imerys, and a site that only required small upgrades to push decades more life out of the operation.
“We ended up spending A$1.88 million on the purchase, so we didn't pay a lot of money for it, it really was a steal.” Suvo Strategic Minerals executive chair Robert Martin said.
“We thought it could be full of problems, but the upside was, it offered us Australia’s only hydrous kaolin personnel ... nevertheless the more we got under the hood and started having a look, the more we started to realise this is a really good asset with a very long mine life that could be and currently is very profitable.”
“In the first nine months we made about A$2.5 million in EBITDA, so it's paid for itself already,” Martin explained.
The Pittong Kaolin Project’s product stream was well developed when Suvo obtained it, with 21 top quality products developed by global leaders in the field, Imerys.
Now the proud owners of the only operational hydrous kaolin processing facility in Australia, Suvo made the strategic decision to not only continue operations at Pittong, but to expand its offerings through the leveraging of a kaolin/halloysite deposit on the project grounds and upgrades to its processing plant.
“Finding Halloysite at our yet to be mined Trawalla deposit was one of the bonuses when we bought Pittong from Imerys, because when they originally drilled that deposit, they drilled it looking for kaolin for paper, paint and coating applications which is a flat, platey kaolin, while halloysite is more cylindrical in shape and very good for ceramic applications, a product line that is not yet produced from Pittong.”
A diversified spread of product streams
Kaolin has been a hot topic in the market as the new core feedstock of high-purity alumina (HPA), a highly sought-after material that has a subjective price based in very specific quality requirements.
“The other benefit from our Pittong operations is our ability to produce high-quality pharmaceutical-grade kaolin that sells for between $2,500 to $3,000 per tonne, finding deposits that can do this are rare and there are not that many good quality ones left.” Martin highlighted.
In June 2020 Suvo announced a maiden JORC resource for the White Knight Project, which holds the White Cloud deposit, of 35.1 million tonnes kaolin, with an average ISO brightness of more than 80% and yield of 40%.
The company has been developing HPA from White Cloud kaolin, so far achieving 99.992% purity with an ISO brightness of 89.2%, a rating of 4N.
While testing is ongoing, this places Suvo’s HPA just below the second-most valuable form of HPA, 5N, which boasts 99.999% purity.
HPA with a purity of 4N nets a price of US$15-US$40 per kilogram, coming in at about US$15,000–US$40,000 a tonne. HPA N4 is the most widely consumed form of HPA on a global basis, especially in the Asia-Pacific, which cornered 61% of the HPA market in 2020.
Ceramics is another area of kaolin/halloysite demand, with supply shortages underscored by a tightening of regulations for Chinese kaolin miners, causing several mines to close in what is historically both the source and market for halloysite and kaolin, especially in ceramics.
Given Suvo is currently the only hydrous kaolin producer in the country – and the prime location of its White Cloud Project near several Western Australian ports with good infrastructure – the company has already secured multiple established export options, with a hungry market to feed their product into.
Sand, glorious sand
By the company’s account, the in-ground value of Suvo’s Nova Silica Sand Project could be in the tens of billions.
“We have something there that is multi-generational, very large, with infrastructure we can lean on. If you look at it from that perspective, it's very valuable,” Martin explained.
“It's so big we have just stopped drilling, because we just don't need to do anymore.”
In October 2021 Suvo released a mineral resource estimate for Nova, defining its JORC-compliant inferred resource at 216 million tonnes, comprising silica glass sand, silica flour and coarse silica sand up to 99.24% silicon dioxide (SiO2) depending on its form.
“You can make a lot of money for a low capex (capital expenditure) spend, especially on the silica side of the business,” Martin said.
“You’re talking $40 to $50 million to build a large, good quality plant. It's not difficult mining, it's not difficult processing, it's more like a bulk earthmoving operation.”
Depending on the composition and form, silica sand can net anything from US$38 a tonne to US$250 at the highest quality requirements.
At high purities, it’s used in a wide variety of products, including semiconductor moulding compounds, optical fibres, electric vehicles and also more importantly in the manufacture of solar panels, a market that is expanding rapidly and will require a quality supply of silica.
“Fifteen years ago, you probably weren’t exporting kaolin, and you definitely weren’t exporting silica sand in any bulk form, but as those assets deplete globally and the prices come up, Australia and in particular Suvo is in the box seat to fill the void,” Martin explained.
“There's an increasing demand for good quality silica and we are seeing an increased demand for quality kaolin. We're full at Pittong, that’s why we are in the process of upgrading, so we can meet demand, it’s also the reason we are working so hard in WA to bring our other deposit online.”
Looking to the future
Suvo looks to be shaping up into a global kaolin and silica sand producer with long mine life, low capital expenditure projects and multiple revenue streams.
The company currently has about A$5.37 million in the bank, amounting to an impressive 23 quarters of funding even without taking into account ongoing revenue from its operations.
Suvo also appears to be taking its environmental, social and governance responsibilities very seriously, looking to develop the White Cloud and Nova projects with ESG in mind from the ground up.
“We're aiming to be as compliant as possible. We have two full-time people working for us, we take it extremely seriously and we'll be coming up with a lot of initiatives between now and March next year,” Martin said.
During the 2021 calendar year, Suvo signed multiple memorandums of understanding and cooperation agreements with large, well-known global producers and research and development organisations.
These include LIXIL AS Sanitary Manufacturing (Tianjin) Co Ltd which has an annual turnover of A$20 billion and Rezel Catalysts Corporation a leading global catalysts, zeolite and molecular sieve producer.
Rezel’s first 1,000-tonne order of refined kaolin product was shipped ahead of schedule from Pittong, with further work underway to increase these numbers over the coming year.
Being the only hydrous kaolin producer in Australia with material offerings, multiple established offtake partners, two promising projects in Western Australia and with potentially excellent ESG credentials, Suvo is certainly strategically placed to take advantage of a red-hot global market.