Exploring High Purity Alumina: The battery metal that's flying under the radar

High Purity Alumina or HPA is an under-the-radar industrial and battery metal that’s known for its superior hardness, corrosion resistance and purity. The material is a staple for LED light globes and experiencing growing demand from future facing industries such as EVs, semiconductors and advanced micro-LEDs. 

The HPA market has been a difficult sector for investors to approach because of the lack of ASX-listed players in the space and the opaque nature of HPA market prices – making valuations tricky to predict.  

To help with this deep dive into HPA, I sat down with Dr Mike Jones, the managing director of Impact Minerals Limited (ASX: IPT), where we talked all-things HPA as well as the company’s recently acquired Lake Hope HPA Project in Western Australia. In this article, we explore:

• What makes HPA a critical metal

• A recent production breakthrough

• What industries use HPA 

• How it's priced 

HPA 101

The average investor is probably familiar with alumina – a white, crystalline powder that is made by processing bauxite mined by household names like South 32 (ASX: S32). 

So what’s the significance of adding the two words ‘high purity’ in front?

The purity level of alumina can affect the properties of the final aluminium product such as its strength, conductivity and corrosion resistance. Alumina with 99% purity typically contains small amounts of impurities such as silica, iron oxide and various minor elements, which can limit its use in certain high-performance applications.

Alumina with 99.99% purity, otherwise known as HPA, passes the threshold required for applications in industries such as advanced electronics, aerospace and medical devices. Even then, small trace amounts of impurities can have a significant impact on performance.

As Dr Jones explained, that extra 0.99% purity enables the material to be “chemically inert, with a high melting point and acts as a very good insulator. It’s used to coat separators between cathodes and anodes in lithium-ion batteries to reduce the heat transfer during the chemical process which basically stops them from exploding.”

A production breakthrough

HPA is traditionally produced by taking raw bauxite and converting it to pure alumina via the environmentally harmful Bayer process which requires caustic soda leaching and produces a toxic by-product known as “red mud”. This impure alumina is then refined by various energy intensive processes to produce HPA. 

Several players are now trying to disrupt this process via two different hydrometallurgical processing techniques. Instead of using bauxite as a starting material, HPA is produced from either:

1. A variety of primary mined minerals such as those at Impact’s Lake Hope project and also kaolin

2. Chemical feedstocks that are by-products of other industrial chemical processes 

Both these new processes require much lower energy and are much more environmentally friendly. 

Dr Jones noted peer company Alpha HPA (ASX: A4N) as a big success story in this space. Shares in the $800m developer are up almost 50% year-to-date after being dormant for almost two years following the COVID pandemic.

“Alpha not actually mining the raw product for HPA. They’re using a chemical feedstock from Orica plus some material from Rio Tinto – a mystery set of feedstocks that clearly must contain aluminium in some form.”

“Our research suggests this process, and also new processes using acid leaching, are significantly cheaper than the incumbent producers who have operating costs anywhere between US$10,000 to US$20,000 a tonne," said Dr Jones. 

“The new hydrometallurgical techniques should bring the costs down to around US$6,000 to US$7,000 a tonne. This is extremely disruptive for the entire industry and we believe that our process will also put us at the lower end of those costs.”

Demand and price outlook

Global HPA consumption by application in 2022, according to Grand View Research, is as follows: 

• LED lighting (~50%)

• Semiconductors (~20%)

• Phosphors (~10%)

• Lithium-ion batteries (~10%)

• Sapphire and other applications (~10%)

The report forecasts a compound average growth rate of at least 20% per annum between 2023 to 2030 for the global HPA market – Growing from US$3.2bn in value in 2022 to almost US$16bn by 2030. 

A supply deficit had already started to emerge in 2019 and that’s expected to grow due to increasing demand from high-tech industries and limited supply due to the complex production process. 

Like graphite and rare earth metals, finding market pricing for HPA can be extremely challenging.

“We generally refer to a benchmark price for 99.99% pure HPA, or 4N as it is known, of between US$15,000 to US$25,000 a tonne,” said Dr Jones, “There’s also 5N or 99.999% and that can sell for US$30,000 to US$50,000 a tonne although that is a relatively small market.”

Lake Hope: What lies beneath

Impact Minerals recently acquired an 80% interest in the Lake Hope Project, an advanced HPA project located near Hyden, WA.

The project has an Exploration Target of between 2.6 million to 4.7 million tonnes of ore at grades of between 24.3% to 26.7% for a contained alumina content between 630,000 tonnes to 1,250,000 tonnes, most of which can be converted to HPA. This is based on extensive drilling and further work is currently underway to convert the target into a maiden Mineral Resource Estimate. 

In plain English: Lake Hope is a high-grade alumina prospect with a large resource that’s in its early days. Further drilling and an ongoing Pre-Feasibility Study will help uncover unknowns such as the true thickness and extent of the deposit, and how much HPA may be able to be recovered.

“Given a benchmark price of between US$15,000 to US$25,000 per tonne of HPA this indicates a very valuable resource lies within the top few metres of the lake bed,” says Dr Jones.

In terms of certainties, Dr Jones said the resource is very shallow, describing it as a “perfect orebody whereby there’s two metres of material that’s exclusively this mix of high grade aluminium-bearing minerals ... It’s naturally very fine grained which means there is no crushing or grinding required, and with the high grades found so far it also means the material is basically  Direct Shipping Ore and it can be mined simply, easily and cheaply and then trucked to an off-site processing plant. The environmental footprint will be miniscule compared to most other mining operations”

When it comes to perspective, Dr Jones likened the value of Lake Hope to that of De Grey’s (ASX: DEG) 10 million ounce Hemi gold deposit. While he believes the economics for Lake Hope and HPA projects more broadly speaking, are ‘outstanding’ but bringing such projects to fruition can be easier said than done.

He believes the two key risks for emerging HPA players that investors should be aware of are:

1. Scaling up and optimising of the metallurgical process to produce the alumina

2. Producing an end product to the specification of the end-users, who have stringent requirements on both the chemistry and the physical properties of the HPA including factors like particle shape, size and distribution.

For the latter, HPA hopefuls need to establish relationships with customers and send off materials for testing up to 3 years before  production.

“That’s one of the reasons why Alpha HPA has taken off because people think “wow this might work and the margins are ridiculous” and that’s why people are trying to get into the HPA space but it's technically very difficult,” said Dr Jones. 

“However, I think that Impact has a great chance of getting there. We are looking forward to playing what we hope is a significant part in the disruption of the HPA market.”

DISCLAIMER: Market Index helps small-cap ASX listed companies connect with Australian investors through clear and concise articles on key developments. Impact Minerals was a client at the time of publishing. All coverage contains factual information only and should not be interpreted as an opinion or financial advice.