Scoping Study / JORC Mineral Resource / Feasibility Studies / Permits, page-52

DYOR. Not advice. Speculative analysis.
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Here are my current thoughts on a base-case trajectory of after-tax cashflows based on current activities. It seems pretty clear from exploration activities on the ground they are looking to significantly scale up production beyond what is in the current Scoping Study.

https://www.asx.com.au/asxpdf/20191205/pdf/44c9l9w4p5ksp8.pdf
https://www.asx.com.au/asxpdf/20191129/pdf/44c3bd3ntknm60.pdf

The business priorities are quite clearly:

• Resource growth ( particularly in time for inclusion in Feasibility )
• Feasibility

I think we'll see significantly increased production targets in the Feasibility Study. My current thought is they will look to add a second 500 kt pa module at Poochera soon after the first.

Don't forget they also have exploration planned at Mt Hope. It has a historic non-JORC resource of 12.26 Mt of Kaolin. My thoughts on this were posted in this thread. Historic resource suggests a project about 50% of the size of Poochera as it currently stands ... however historic resources are generally always upgraded with further exploration.

These are the assumptions for a base case on cashflow:

• Poochera (current project @ 500 kt pa) - chart below shows in red after-tax cashflow on a 75% basis. The downblip represents startup CAPEX.
• Second Poochera ( @ 500 kt pa ) - chart below shows in pink a duplicate project at the same scale. My assumption here is that they will have the financial capacity to self-fund the initial CAPEX for the second project 2 years after they bring the first project online. Important to remember that they will be able to leverage environmental and feasibility work done for the first project. If they pre-plan location of plant carefully ( by ensuring sufficient footprint defined for growth ) then they will make the approvals process more straightforward.
• First project at Mt Hope - current historic resource suggests ( assuming similar grade and purity and halloysite distribution ) a project of about 50% of the scale of the first project at Poochera. I've assumed this will start sometime in approx 2025 ( allowing time for resource definition and feasibility / approvals, however they may pull it off faster ). Whilst the resource is smaller, the 100% ownership helps to account for this in terms of cashflow generated.

Here's how that looks if I plot out after-tax cashflows in a chart. Highly speculative but helps to pictorialise my current thinking on where we are heading ... growth to in the order of AUD $75M after tax potentially by 2026 timeframe.





Bullish Case

Now there is speculation that the PFS will improve on recovery yield, OPEX and price. I think a fair bottom-end assumption for improvement is 30% increase on current after-tax cashflow numbers. This is how that would look as a bullish case ... growth to in the order of AUD $80M after tax cashflow (ADN share) potentially by 2026 timeframe.



Upside from Purified Halloysite

Don't forget there is likely to be significant upside from High-purity Halloysite which will sell for in the order of AUD $5,000 per tonne. Envisage a margin at 50% or greater. What we don't have a clear picture of yet is demand. Numbers could get very interesting if they can achieve 10,000 tonne of offtakes ( at the moment though we just don't have any data to confirm likely demand ) ... what I am wondering though is could the purified halloysite push total project cashflow beyond AUD $100M within 5-6 years?