FYI: Producing 99.999pc HPA has a profound effect on shares, possibly economics
FYI Resources (ASX:FYI) has produced an extremely high purity alumina and reckons it will be good for the economics of its Cadoux kaolin project in Western Australia.
The company told investors today it has produced a 99.999 per cent, also known as 5N, HPA product from its kaolin.
FYI says it is the first ASX-listed company to prove it can produce a high-purity 5N product from kaolin.
“Achieving 99.999 per cent or 5N HPA is an extremely encouraging result,” managing director Roland Hill said.
“Not only is it an incredible outcome to attain this level of purity, it also has a potentially profound impact on the overall project economics.”
And investors liked that news, sending shares up over 36 per cent to an intra-day peak of 7.5c on Wednesday morning.
FYI is focusing on the more common 99.99 per cent, or 4N, HPA market, but it wanted to also develop a 5N product because it is expected to be the most lucrative market.
HPA is a processed premium non-metallurgical alumina product characterised by its purity level.
The market price, application and performance of HPA varies widely according to its degree of purity.
“Demonstrating the strong premium to the 4N market, Allied Market Research estimates 4N HPA product to sell in a range from $US30,000 – $US35,000/t in 2018-19 versus over $US50,000/t for 5N,” Mr Hill said.
According to Allied Market Research, the Asia-Pacific 5N HPA market generated revenue of $US430m in 2015 and is estimated to generate a revenue of nearly $US1.6 billion by 2022, growing at an annual rate of 21.9 per cent during that time.
4N HPA is increasingly being used in the electric vehicle, battery and power storage markets.
5N HPA, meanwhile, is generally “tailor-made” for each customer and is used in traffic lights, outdoor displays, and high performance back light units.
Mr Hill told Stockhead FYI could make “as much or as little as we’d like” of the 5N product from its kaolin.
But FYI doesn’t want to “kill the market” with too much 5N so it will limit the amount it eventually produces.
“The process is capable of making 100 per cent 5 nines,” Mr Roland said.
“All we need to do is essentially a few tweaks on the process without further capital.
“4 nines will always probably be our staple product market focus, but if we can increase our margin slightly by producing the 5 nines without any added capital or opex then that’s a good thing.”
With FYI confident it can produce such a high purity product, the company is now spending time finding the right buyers for its future production.
“We’ve got a number of high-level negotiations and discussions going on so we hope that it’s going to be fairly soon,” Mr Hill said.
“To fit into our normal development timeline we need those off-take MoUs done probably by the end of the September quarter.”