Andromeda hopes to take a bite out of global kaolin market with its Great White asset

• Australia may not be top of mind for kaolin, but Andromeda’s Great White deposit in South Australia could change that
• The project hosts a 15.1Mt ore reserve of particularly high-quality kaolin, enough to fuel a 28-year mine life
• Ukraine used to be a major supplier but its output has plunged since the war, opening the door for companies like Andromeda to fill the gap

Kaolin, an essential yet underrated industrial mineral, is experiencing rising demand throughout Europe, China and the expanding Asia Pacific region – but securing top-grade material remains hard to come by.

A closer look at what kaolin is used for shows how indispensable it is – paper, rubber, paint, ceramics, fibreglass, cosmetics and pharmaceuticals are among some notable examples – with about 5kg used in the manufacture of each car.

Like many sectors, the kaolin industry has felt the wide-ranging effects of the Russia-Ukraine war from logistical bottlenecks, raised prices and the dismantling of supply chains where Ukraine was once a key player.

In 2021, Ukraine was a major supplier of kaolin for European and Asian markets, producing 1.6Mt in 2021 as per the US Geological Survey and ranking number sixth worldwide for global kaolin production.

Spain, a major consumer of Ukrainian clay, depended on these exports for more than 26% of its supply, especially for ceramic tile production.

But ongoing military activities in the country’s Donetsk Oblast region, renowned for its white clay and kaolin deposits, have taken a heavy toll on mining operations, resulting in a 74% drop in Ukraine’s kaolin output in 2022 to 600,000t.

Several Europe-based companies like Imerys and Sibelco are now working to mitigate the impact by adjusting their operations and are on the lookout for other regions to meet the demand.

Development-ready Great White deposit

While Australia isn’t the first port of call for supplying the soft, naturally occurring clay mineral, this opinion might change given that it is home to Andromeda Metals’ (ASX:ADN) development-ready Great White kaolin deposit in South Australia.

Backed by 15.1Mt in high-grade ore reserves, this premium Australian product is set to fuel a 28-year mine life – proof that quality runs deep.

A 2023 bankable feasibility study estimated CAPEX at $194m for a three-stage development that could supply up to 330,000 wet metric tonnes of product per annum, generating an NPV and IRR of 763m and 43% respectively.

Interestingly, it already has customers lined up with 100% of the planned capacity of Stage 1A+ underpinned by four binding offtake agreements covering sales of Great White CRM (a refined, dried and bagged product) and Great White KCM 90 (a semi-refined, high-quality kaolin concentrate) for use by end users in the high-end ceramics market.

Some of the customers ADN has already locked in include global trader Traxys, family run company IberoClays based in Spain, Japanese ceramics company Plantan and  China-based ceramics company Foshan Goaming.

MST Access analyst Michael Bentley reckons Great White is an overlooked quality project, yet within the global kaolin industry there is clear recognition of the projects potential.

“M&A is a clear potential catalyst as larger companies may seek quality Australian-based industrial minerals,” he said.

What makes Great White so unique?

ADN independent non-executive director Miguel Galindo is the founder and executive director of Galesk Consultancy, an independent business specialised in industrial raw materials for the ceramics, glass, fertilisers and electric batteries’ sectors.

He told RIU conference goers in Sydney last year that the kaolin found at Great White project boasts unique properties.

“Right now, globally speaking, you can’t find a kaolin with that chemistry, that quality and that colour for the applications in high end ceramic and porcelain tiles,” he said.

“We have among the best aluminium-iron ratios in the world, there’s colour – we have an L value that when you fire our kaolin it gives you a 97 colour, that’s extraordinary, so extraordinary that there is a lot of development work going on currently to see if we can actually replace between 10 to 15% of zircon in a tile body.

“The low iron in our deposit makes it ideal for porcelain tableware … and we have fantastic mechanical strength, that’s important when you’re making a large tile, you don’t want it to fall apart.”

Growth trajectory

Galindo added that the kaolin market is large and growing but one of the biggest disruptors in the market globally is the situation in Ukraine, creating an interesting opportunity for Andromeda.

“Ukraine had at one time the largest industrial mineral kaolin deposits especially the high-end ones that served the Mediterranean and Spanish markets, it was where the majority of the high-end formulations were made,” he said.

“There is also a very interesting long-term trend both in terms of demand and steady CPI price growth for the last 30 years.

“Our strategy is a value in use strategy, we are positioning our product for the best value in the best end uses with the best customers, we are looking for growth and looking for customers that need that type of value be it in ceramic tiles, frits and glazes or porcelain tableware.”

With all key permits in place, an experienced project team and an execution plan in place for implementation, project funding is the next near-term catalyst for a material share price re-rating.

Once funded, key catalysts to value creation include starting construction, signing additional offtake agreements for project expansion, commencing production and ramping up to full capacity of 300dmktpa (300,000 dry metric tonnes per annum) of kaolin.

At Stockhead we tell it like it is. While Andromeda is a Stockhead advertiser, it did not sponsor this article.