ADN Site Visit Confirms Major Upside Potential, page-51

Have done this further analysis just to demonstrate the big difference in capital intensity. It also demonstrates some key factors that I think make ADN a great investment.

ADN's strategy is essentially to first put into production a simple in-demand product (Dry-processed Ore) at low capital intensity, make some nice $$$ and then use the cashflow to assist in bankrolling growth into downstream products such as wet-processed Halloysite, pure Kaolin products and 4N HPA.

ADN peers are pursuing a strategy directly focused on 4N and 5N HPA. This comes with very costly development studies that heavily dilute shareholders. Once the studies are complete the shareholders face a very challenging and often highly dilutive financing process because of the very high CAPEX burden. The financing alone can take over 3 years ( and some of it comes from very dilutive capital raises ... the finance takes so long because of the high CAPEX burden that companies continuously pass round the tin for working capital ). Other factors complicating the finance are technical risk and hence the years of development studies required to create a Bankable Feasibility Study that can be used as the basis for debt financing.

Another peer has been working on developing their HPA plant for over 8 years ( and in that time the shares on issue have gone from 100M shares on issue to 723M shares on issue ... that's dilution or shareholder capital by over 600% ).

The charts below put into perspective the very low CAPEX burden and hence capital intensity expected from ADN's strategy to achieve cashflow. It's this very low capital intensity on a cashflow basis that makes ADN a unique investment.

In the three columns we have:

• ADN on basis of first production module at 250 kt of Dry-processed Ore. Indication is production by end of 2020.
• An ADN peer that based on their PFS are pursuing 8,000 tonnes PA of HPA. Development timeframe in PFS is 48 months (but for one peer has been 8 years).
• GOR ... a new gold producer but provides some perspective for a cashflow and CAPEX comparison (development timeframe from their PFS was 3 years).

Must qualify this ... we need to wait for the scoping study to confirm CAPEX and cashflow for ADN but we have a fairly good indication based on the site visit that brokers and shareholders attended. I used $10M as a more conservative figure for CAPEX although indication from site visit was up to $5M.

Even if it is $20M CAPEX, capital intensity will be very, very low compared to peers purely on a $M generated basis. Looks like it will be easily under 1/20th of the capital intensity of one peers or worst case under 1/10th of the capital intensity of that peer ... that is to get ADN to a position of strength ... i.e. generating real $$$ that sustainably funds growth.



Incidentally ... the share price estimates I have given in previous posts are on a fully-diluted basis, so outstanding options have been factored into those share price estimates.