Ann: WAK - Three Year Offtake Agreement Signed, page-8

As you can see from below, I made a profit when I skipped out of FYI, but this was pure happenstance, rather than shrewd trading, because my intention was to buy and hold. I changed my mind, and decided to back a pure kaolin play, so I diverted the funds to punt on WAK, because I had a better feel for WAK's potential market in kaolin, than I had for its future in the ultra HPA (better than 99.99% alumina) play.

My FYI dabble .................... Price .. Brokerage .. Incl brkrge
02/08/21 .. Buy ... 10000 .. $0.585 .. $19.95 .... -$5,869.95
18/08/21 .. Buy ... 26000 .. $0.800 .. $22.88 .. -$20,822.88
30/08/21 .. Sell .. -36000 .. $0.820 .. $32.47 .... $29,487.53
Profit.................................................................... $2,794.70

My initial 130,000 WAK shares were bought at 23c, plus I got 166,667 more for $30,000 via the CR. I thus hold 296,667 shares for $59,900.00 (average 20.2c). Each one cent SP move is worth about $3K, so for me WAK is now worth careful watching.

Clayton's bet on HPA

WAK is a Clayton's bet on ultra-pure HPA – it has nothing to lose, and a chance to win if hard-to-eliminate contaminants relevant to the 4N+ (99.99+%) and 5N+ (99.999+) HPA required for battery separators, LEDs and synthetic crystal glass applications remain difficult to remove, but less so for WAK's kaolin. If things transpire to be thus, then the giants in the game like Sumitomo, Imrys et alii would come knocking at WAK's door. WAK's initial focus on traditional markets like ceramics, and paint and rubber fillers, allows it to wait for that knock on the door, should circumstances make HPA 4N and 5N a no-brainer.

The nasty contaminants for alumina above 99.5% purity are iron and sodium, and it costs a fortune to go up by the tiniest sub-percentage. Bauxite has heaps of iron in it, so to beneficiate it to be better than commercial grade HPA of 99.5% is commercially problematic. Sodium is introduced by the caustic soda used to beneficiate bauxite to alumina via the Bayer Process, which makes it even more difficult to take commercial grade HPA to higher levels of purity required by battery separators and other demanding HPA applications. This is why I have my doubts about the commercial viability of A4N in the ultra-high-purity alumina game. If these problems are resolved, the price of HPA 4N+ and 5N+ will reduce far below what the HPA players have set for their business cases, so things will be less rosy than they hope, IMO. All kaolin has less iron than bauxite, and some have very little iron, and as there is no need to use caustic soda to beneficiate it, low-iron kaolin could be worth a great deal, especially if the deposit is large, like WAK's is.

The HPA play

The HPA 4N and 5N play has two paths, bauxite and kaolin. The former is very difficult, because of iron and sodium contaminants, which is why Alcan, RIO and other alumina companies have not got into the game. If the problem can be solved, then the little guys are going to be pushed out of the play, unless like FFY, they hold onto the coat tails of the ilk of Alcoa (majority owned by Alcan). This is why, rightly or wrongly, I think A4N's non-kaolin HPA play may never get past the nice story stage. A4N's performance metrics and its share tally growth are:

..........FY12 - FY13 - FY14 - FY15 - FY16 - FY17 - FY18 - FY19 - FY20 – FY21
EPS .. -5.6 .... -0.5 .... -1.0 .... -0.2 .... -0.3 .... -0.7 .... -0.4 .... -1.8 .... -1.5 ... -2.3
Shrs 177.2.. 205.3.. 315.8 .. 315.8 .. 315.8.. 435.8.. 508.3.. 567.1.. 680.4.. 790.3

FYI is in the kaolin-HPA game. Its past metrics are not significant, because of the significance of its Alcoa JV. Alcoa (a proxy for Alcan) could be generous, and let FYI have a place in the HPA sun, but in my view, Alcan does not need FYI, and if the JV goes nowhere, that leaves FYI with a kaolin deposit, but far behind WAK's ability to exploit its deposit that is not as large as WAK's deposit.

On ATC, I think it floated in 2009 on the basis of the HPA-from-kaolin story. Ignatius Tan has been MD since August 2014. All I can ever recall reading about ATC were mellifluous words to the effect that ATC is going to be a global Colossus in the ultra-high-purity alumina game, but after a dozen years, ATC has yet to make a meaningful profit (insignificant recorded profit for FY21 followed by a loss in H1FY22). The share tally has increased dramatically. Its not my kind of investment.

…....FY12 - FY13 - FY14 - FY15 - FY16 - FY17 - FY18 - FY19 - FY20 - FY21
EPS .. -0.7 .... -1.2 .... -3.2 ..... -1.2 .. -0.8 ..... -1.4 .... -1.3 ... -1.0 .... -0.3 .... 0.3
Shrs 104.3.. 111.1.. 111.3.. 115.7.. 185.7.. 307.1.. 440.5.. 745.8.. 898.9.. 1,286.5

My knowledge of other kaolin stocks is minimal, but I am unaware of any one of them that has got past the good-story stage. I had initially short-listed Andromeda (ADN), but as I only wanted to invest in one kaolin stock, I did not pursue the ADN story, which I think is substantially about halloysite, and in the more distant future than the WAK story.

Halloysite is kaolin with a tubular crystalline structure. Apart from being useful like any other type of kaolin for ceramics, et cetera, the nanotubular structure makes halloysite a superb filter, and in that vein, using it as a template to make carbon nanotubes.

There may be commercial potential in other (non-WAK) kaolin deposits, but because I only want one such stock, I have not pursued the less developed story stocks, and I suspect that many of the stories are fairy stories. Suvo (SUV) has the only operating kaolin mine in Australia, which it acquired from Imerys, a huge French firm that specialises in non-metal minerals like kaolin. Google “Imerys Kaolin” if you want to get a picture of its global activities. The fact that Imerys sold the deposit suggests that there could be problems there, and I think SUV has performed badly in recent times.

This post may fool some folk to think that I know a thing or two, but this is not true – I am a retired codger with an IT background who knows how to use Google, and with time on my hands to write long HC posts for amusement.