Suvo Strategic Minerals to acquire Australia’s only wet producing kaolin operation from French multinational Imerys

West Australian kaolin and silica sand resource company Suvo Strategic Minerals (ASX: SUV) will shell out $2 million to acquire Australia’s only significant wet producing kaolin operation from French multinational owner Imerys SA.

The assets consist of three mining leases and a 40,000 tonne per annum processing plant located in the Victorian rural town of Pittong, from where Imerys has been producing and selling kaolin products since 1972.

Under the terms of the acquisition, Suvo will buy out Mircal Australia Pty Ltd (the holding company of Imerys’ Australian operations) as well as wholly-owned subsidiaries Kaolin Australia Pty Ltd (owner of the Pittong and Lal Lal mines and greenfield Trawalla deposit) and Imerys Minerals Australia Pty Ltd (owner of the Pittong processing plant).

The target group (excluding dormant company Australian Vermiculite Industries Pty Ltd) was put up for sale following Imerys’ decision to divest its kaolin operations due to limited synergies with its other industrial minerals businesses.

Suvo will pay Imerys $2 million cash on the receipt of shareholder approval following an extraordinary general meeting next month.

It will also replace $1.85 million in environmental rehabilitation bonds currently supported by Imerys.

Only kaolin producer

Pittong is the only wet processing kaolin plant in Australia, with four production lines to output a high solids slurry used in paper and board manufacturing; and lump products with varied moisture contents used in the paper, coatings, paint and specialist industries including rubber and pharmaceutical applications.

Imerys has strong sales channels in Australia, New Zealand and the Asia Pacific region, and exports up to 25% of products from Pittong to South East Asia.

In calendar 2019, the company reported audited sales of $13 million on 25,000t of products sold, and generated $2.1 million of normalised earnings before interest, taxation, depreciation and amortisation.

With production having already spanned 48 years, Imerys has previously announced plans for the eventual upgrade and modernisation of the Pittong assets.

Unique operation

Suvo executive chairman Robert Martin said the proposed acquisition presented an opportunity to acquire a unique operation.

“This is a fantastic opportunity for our young company … we will have access to Australia’s only experienced kaolin mining and wet processing personnel from whom we will learn tangible applications for our White Knight kaolin project [in WA’s Yilgarn Craton],” he said.

“We are excited to become a producer as well as continuing to focus on our existing [local] kaolin and silica exploration and resource definition activities.”

Capital raising

In conjunction with the proposed acquisition, Suvo has received firm commitments from investors to raise $6 million before costs via a conditional placement of 60 million ordinary shares at $0.10 each.

The placement is being co-managed by Canaccord Genuity (Australia), Westar Capital Ltd and Sandton Capital Advisory Pty Ltd.

The issue will be subject to shareholder approval of the placement and the acquisition.

Mr Martin said $3.85 million of the funds will be used for the combined kaolin operations and rehabilitation bonds, while another $1.34 million has been committed to immediate maintenance at the Pittong site and for general working capital.

“Some of the processing plant infrastructure and equipment at Pittong is ageing and will require replacement in the near term,” he said.

“[We will] assess the need to replace, upgrade and possibly expand the existing infrastructure and equipment within the first 12 months of ownership, and will develop a plan and budget to address any urgent deficiencies.”