WA Kaolin to scale-up production after strong ASX debut, $22m IPO
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The company’s shares were trading at 25c in the afternoon, up from its IPO issue price of 20c per share which valued the company at $56.5m.
Proceeds from the share issue will go toward scaling up the company’s production with the construction of a new processing plant.
“We are looking to boost production at Wickepin, and funds from our IPO will allow us to accelerate that process,” chief executive, Andrew Sorensen, said.
The new production facility at East Wickepin will operate at a rate of 200,000 tonnes per year by the end of 2022, and at 400,000tpa by end-2023.
A definitive feasibility study supports the production ramp-up based on the kaolin producer’s 644.5 million-tonne resource.
This resource of high-grade premium kaolinise granite is at the company’s Wickepin project located 220km south-east of Perth.
The Wickepin project contains one of the world’s largest remaining primary resources of kaolin and has a 30-year mine life.
Kaolin is a white to grey-coloured mineral consisting of hydrated aluminium silicate that has a broad range of uses.
Its uses include in paper, plasterboard, ceramics, fibreglass, paints, coatings and plastics.
The product is also used in rubber products, pharmaceuticals and medicine, cosmetics, concrete and agriculture.
Since acquiring the Wickepin project from Rio Tinto in 1998, WA Kaolin’s founders and investors have invested $42m to develop its resource.
Significant investment has gone into optimising the company’s K99 Process for dry processing kaolin and in building its export markets.
The K99 Process takes place at WA Kaolin’s plant at Kwinana near the port of Fremantle, which produces at a rate of around 200,000 tpa.
The low-cost production process is unlike other industry methods. Other processing methods may use chemical bleaching and multiple wet mechanical and magnetic separation methods, said Sorensen.
Customers place a premium on WA Kaolin’s ultra-bright kaolin product that is prized for its purity, high quality and brightness.
One such customer is Dak Tai Trading which has an off-take deal with the company for the delivery of 338,000 tonnes of kaolin over six years.
Dak Tai Trading is a Taiwan and China-based fibreglass company, and WA Kaolin has other customers in Taiwan, Japan, Vietnam, China and Australia.
WA Kaolin has off-take agreements for 551,000 tonnes over the next three years, representing 83 per cent of its targeted production of 664,000 tonnes for the three-year period.
The global kaolin market is valued at $US4.7bn ($6.4bn) and is forecast to reach $US6.3bn by 2027, a compound annual growth rate of 3.5 per cent.
Four companies, including Imerys and BASF, have a combined 26 per cent share of the global kaolin production base.
Total market demand for kaolin is set to rise to 37 million tonnes by 2027 from a current level of around 29 million tonnes.
The paper industry is the largest consumer of kaolin worldwide with a near 39 per cent share of the market.
The ceramics sector is expected to become the fastest-growing application for kaolin, as the number of ceramics producers in China increases.
Kaolin has been trading at an average price of $US162 per tonne this year and its price is expected to rise to $US167 per tonne in 2027.
Lead manager for the IPO was Canaccord Genuity and the co-manager was JP Equity Partners.