This ASX small-cap could have a big Impact on the global HPA market

Impact Minerals (ASX: IPT) has today announced the completion of a bulk sampling and test pits program at its flagship Lake Hope High Purity Alumina (“HPA”) project, which is located approximately 500 km east of Perth. The company said 5.5 tonnes were collected from 25 sites across West Lake and East Lake, which are the two main target areas of the Lake Hope deposit.

Location of Impact’s projects in Western Australia. Source: Impact Minerals

The samples will be tested to provide further information for the ongoing Pre-Feasibility Study (“PFS”) on the Lake Hope deposit, which based upon an earlier Scoping Study released in June, contains a mineral resource of 3.5 million tonnes at 25.1% alumina for a contained 880,000 tonnes of alumina. The company believes the resource could eventually support a multi-decade operation that could produce 10,000 tonnes of HPA per year.

Lake Hope Alumina Mineral Resources. Source: Impact Minerals

No more exploding phones!

HPA was recently listed on Australia’s list of critical minerals and is used in the manufacture of LED lighting, semiconductor substrates, ceramics, and lithium-ion batteries. It’s the latter application that most likely caught your attention! FYI, HPA is used to construct the separator between the anode and cathode in a battery.

Some of you may remember when a certain Samsung phone model had an issue with exploding batteries a few years ago. This was largely to do with the separator not doing its job properly. HPA helps maintain a hard, chemically resistant, and thermally inert barrier, which helps avoid heat transfer within batteries.

Potentially big Impact on global HPA market

In terms of the development timeline of Lake Hope, Impact has indicated it expects to complete the PFS in the third quarter of 2024. It is upon this completion that Impact can acquire an 80% interest in the project. The plan is to then move immediately to a Definitive Feasibility Study (“DFS”), with a very rough-best case guide for first production in 2026.

On this last point, Impact has made some substantial claims about their HPA production potential, saying they believe they could eventually become “dominant player” in the production of HPA globally. As part of this claim, the company has also forecast it would likely be one of the lowest cost producers of HPA in the world. This is because Impact believes Lake Hope has “many natural advantages for both mining and processing” including shallow depth, low transportation costs, and purity of the feedstock.

Rough estimates for capital expenditure (“CAPEX”) is $250 million versus a project net present value (“NPV”) of $1.3 billion*. As always, this is a super-rough guide, especially for a company like Impact which is relatively early in the development process. But Impact is working its way through that process, and it’s far from your standard ASX mining speccy that’s just kicking over rocks in the desert.

Follow the money

As with any small-cap resources company, funding is the major issue – you don’t want to buy just before a massively dilutive or heavily discounted capital raise. On this point, Impact estimates the PFS and DFS will cost “about $2.5 million over the next two years”. This compares favourably with Impact’s current cash balance of just over $4 million, which suggests Impact appears to be well funded to progress development at Lake Hope in the medium term.

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*Source: Impact Minerals Managing Director, Dr Mike Jones, “Market Index Company Insights, Impact Minerals” 13 November, 2023. Available at: https://www.youtube.com/watch?v=HHUDWUJcNuM

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.