Andromeda Metals secures offtake agreement with Chinese customer

Plans for a new kaolin mine on South Australia’s Eyre Peninsula have taken a major step forward with its proponent striking a deal to sell most of its early production.

Andromeda Metals' Great White Kaolin Project

Andromeda Metals has secured a major offtake agreement for its Great White Kaolin Project on South Australia’s Eyre Peninsula.

The legally binding agreement with Chinese commodity trading house Jiangsu Mineral Sources International Trading Co. (MSI), is for 70,000 tones a year of high-purity kaolin used in paints and coatings.

The contract price, which is locked in for the first three years of a five-year agreement, was not disclosed, but Andromeda said it was “significantly higher” than the $700 per tonne used in its pre-feasibility study.

Andromeda managing director James Marsh said the agreement followed “many months of intense negotiations”.

“This contract really underwrites the whole business for us,” he said.

“We’ve now reached the stage where the DFS (definitive feasibility study) is sufficiently advanced, we’ve made many tonnes of commercially produced material that’s been tested in the market.

“This material that we have is in short supply in the world and people are looking very closely at this and they want to access it.”

The Great White Kaolin Project proposes an open-cut mine up to around 30 metres deep, at a site located 130km south-east of Ceduna,

Andromeda is working through a DFS, which would involve a $50m to $100m start-up cost, including construction of an on-site processing plant.

The raw material would be processed on-site into refined halloysite kaolin used in the paints and coatings market, and a second variant used in the production of ceramics.

Around 116,000 tonnes is expected to be produced in each of the first two years of the project, doubling to around 220,000 tonnes from the third year of operations.

Once at full capacity, the projected is expected to create 350 direct and indirect jobs in the region around Poochera and Streaky Bay, including 75 on-site jobs.

Andromeda is hoping to break ground on the project in February following government approvals and project funding.

Minotaur Exploration holds a 25 per cent interest in the project, which is expected to have a mine life of at least 34 years.

“We’re working with banks to raise debt funding and we will also raise equity to fund the project,” Mr Marsh said.

“With enough binding offtakes in place to justify the business, that makes the whole process much easier - it’s a big step forward.

“We are now going to expand our offtakes more into ceramics, and we also have a new product coming through - an additive for concrete.

“If you add a small amount of this halloysite kaolin into concrete you get some very good and very clear benefits in the way the concrete handles and also some strength improvements - it’s a new application that we’ve patented and we’re now pushing that forward.”

Andromeda said discussions were continuing with MSI for the potential supply of ceramic grade product under a separate agreement, in addition to ongoing discussions with other potential offtake partners.

It said Chinese industrial company Jiangsu Holly International Technical Engineering Co. was supporting MSI in the offtake agreement by acting as its financier.

Andromeda shares were trading 3.7c, or 17.4 per cent, higher in early morning trade at 25.2c.