Small-cap ASX metals explorer inks landmark alumina deal

Impact Minerals (ASX: IPT) has signed a binding term sheet with private company Playa One Pty Ltd to earn an 80% interest in the advanced Lake Hope HPA project.

Located around 290km southeast of Perth, Western Australia, Lake Hope – a dry salt lake or playa – is an advanced high-purity Alumina (HPA) project that was discovered around two years ago by geologist Roland Gotthard of Playa One Pty Limited.

I believe this to be a transformational acquisition for Impact, and myself, the Board and the entire Impact team are looking forward with great enthusiasm to the challenge that awaits us and ensuring that Impact Minerals is the next "playa” in HPA,” says Impact’s managing director, Dr Mike Jones.

Where is the Lake Hope Project?

Location of Playa One tenements with options for trucking and off-site processing

A globally unique deposit

Lake Hope's shallow high-grade aluminium clay minerals feature unique physical and chemical properties that could enable low-cost mining and offsite metallurgical processing via a novel and cost-disruptive leaching process.

Initial economic studies indicate the production of high-purity alumina (HPA) and related products from Lake Hope will be more than cost-competitive with existing developers and producers.

An exploration target for contained HPA in the top two metres of the lake sediment has been calculated from initial drilling results of between 2.6 million to 4.7 million tonnes at grades of 24.3% to 26.7% Al2O3, for 0.63Mt to 1.25Mt of contained Al2O3. However, investors should note the potential size and grade of the deposit remain conceptual in nature, and a maiden mineral resource estimate is currently being prepared, with further drilling underway. This Al2O3 can be converted into High Purity Alumina (>99.99% benchmark purity) which currently is estimated to be worth between US$15,000 to $25,000 per tonne.

Key terms of the agreement

Impact will make a $25,000 cash payment in return for six weeks to complete due diligence.

If satisfied, Impact will become the sole funder of a pre-feasibility study, for an additional $175,000 cash payment and through issuing Playa One shareholders:

• 50 million fully paid ordinary shares (escrowed for 12 months)

• 30 million unlisted options, exercisable at $1.125, vesting 12 months from the date of issue and expiring on 1 December 2025

Following completion of the pre-feasibility study, Impact can form a joint venture (JV) with Playa One shareholders. Upon formation of a JV, Impact will acquire 80% interest in Playa One by issuing up to 120 million shares capped at a maximum value of $8 million.

The final step involves completing a definitive feasibility study, which will also be funded by Impact. Upon completion, Impact will issue Playa One shareholders up to 100 million shares, capped at a $10 million value, which is the final stage before evaluating decision to mine.

Why this deal is important

Impact managing director, Dr Jones, believes this presents a significant opportunity for Impact to become a low-cost, high-margin player within the HPA market, which is tipped for strong growth in the next decade and beyond.

The Lake Hope deposit was discovered within the last two years, in what Jones describes as “a classic case of lateral thinking about the nature and source of aluminium-bearing minerals,” on the part of Roland Gotthard.

Jones says his team, as long-time followers of Gotthard’s work, were interested enough in his latest find to get in touch and evaluate the project.

[We were] astounded at what had been discovered and the potential for the project to be a significant contributor to the global HPA market.

Demand and price

Demand for 4N HPA (which refers to alumina with a purity level of more than 99.99%) is tipped to increase to around 250,000 tonnes a year by 2030, from current annual demand of up to 50,000 tonnes, according to figures from Alpha HPA, as provided by Impact. Benchmark HPA is currently selling at between $US15,000 and $US25,000 per tonne of Al2O3.

Where alumina is used

Primarily because of its brightness, hardness, and corrosion resistance, HPA has traditionally been used in:

• LED bulbs, which is a growth market for HPA as they substantially replace incandescent lighting systems because they are sustainable, durable, and safe.

• Protective coatings (in powdered form) – particularly in electronics, which require inert, incombustible and non-conductive materials.

• Anode-cathode coatings and separators in lithium-ion batteries.

• Phosphor substrate material in plasma displays.

• Semi-conductors, as used in computer microchips.

• Sapphire glass, optical lenses and specialty ceramics in high-technology imaging and bio-medical devices.

Geology of the Lake Hope Project showing drill hole locations and average aluminium grade on East Lake and West Lake.

What’s next

As indicated by Impact’s Jones, the company plans to lodge a mining lease application by mid-2023.

“We will also be building out our capabilities in metallurgical processing and end-product development to cater for the specialist requirements of the end users of HPA,” Jones says.

Disclaimer: Market Index helps small-cap ASX-listed companies connect with Australian investors through clear and concise articles on key developments. Impact 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.