Andromeda Metals’ Poochera scoping study estimates potential $1.95b revenue

Andromeda Metals’ (ASX: ADN) has unveiled a scoping study for its Poochera halloysite-kaolin project in South Australia, with the study confirming the asset’s long 15-year potential and estimated revenue of $1.953 billion.

The $1.953 billion is expected to be generated over the mine’s initial 15-year life with payback from the first stage operation expected in 15 months.

Life of mine revenue is underpinned by an assumed selling price of $700 per tonne.

Andromeda expects to install a 500,000t per annum operation to produce an annual average of 187,000tpa of premium refined kaolin.

Capital costs are projected at $62 million which includes an initial start-up and working capital expenses of $25 million with construction of a dry processing plant planned of the second year and estimated to cost $28 million.

The company anticipates the processing plant will be funding by internal cashflow, which is projected to total $800 million over the mine’s 15-year life – equating to more than $53 million annually.

Building on the scoping study, Andromeda plans to kick-off a pre-feasibility study in October along with environmental studies, with the pre-feasibility study scheduled for completion in mid-2020.

Poochera halloysite-kaolin project

Andromeda is earning a 75% interest in Poochera under a joint venture agreement with Minotaur Exploration (ASX: MEP).

Under the agreement, Andromeda is spending $6 million over five years or a decision to mine.

Andromeda will have secured its first 51% stake by spending $3 million on advancing the project by April next year.

Three tenements covering 1,576 square kilometres make up Poochera, which is 70km east of Streaky Bay.

Tenement applications have been lodged for a further 648sq km of highly prospective ground adjacent to the project.

Within Poochera is the high-grade Carey’s Well deposit which has a resource of 9.7 million tonnes with minimum raw kaolin ISO brightness of 75.

Additionally, the -45 micron fraction contains an average halloysite grade of 18.4%.

Strong offtake interest

In recent months, Andromeda has received strong interest from potential offtake parties for the Poochera ore.

The company revealed in late August it has secured three more letter of intent agreements for purchasing a combined 405,000tpa of direct shipping ore from Poochera.

These deals followed earlier offtake agreements for 307,000tpa of dry-processed halloysite-kaolin from Poochera with a number of Chinese end-users.

Additionally, last year, Andromeda revealed that parties had registered interest to purchase up to 208,000tpa of wet-processed ore.

By mid-morning trade, Andromeda’s share price had lifted 1.35% to $0.075.