Early Speculative Analysis for Mt Hope Halloysite-Kaolin Project

DYOR. Not advice.
Analysis below is based on my own assumptions and calculations and is highly speculative.
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We have limited information available for Mt Hope however the company seems confident they will "upgrade" the historic 1974 resource estimate of 12.26 Mt of Kaolin.

From https://www.asx.com.au/asxpdf/20191128/pdf/44c22856d12fym.pdf



Based on this I decided to have a crack at some early speculative extrapolation analysis of the potential of the Mt Hope project, just based on the historic resource.

Extrapolation is a nice way to look at potential when limited information is available. This involves making assumptions to fill in missing information.

Interestingly the Mt Hope project was dropped because there was too much Halloysite in the resource!

https://www.asx.com.au/asxpdf/20181024/pdf/43zk374zk598z0.pdf



So making some assumptions I can start to get a feel for the bottom-end of NPV for a project at Mt Hope, assuming Halloysite grade or proportionality in the resource is the same as the Carey's Well deposit at Poochera.

We can assume the company is confident since they have put some priority on exploration at Mt Hope and they also have access to UK-based experts on Halloysite that have historic samples of material from various deposits in Australia. I don't think they would bother prioritising exploration drilling if they weren't confident of a good result.

From 1974 historic Kaolin resource total for Mt Hope ( 12.26 Mt [2] ) extrapolate potential NPV of project assuming same proportionality for Halloysite content and resource to reserve ratio as the Poochera Project.


This allows an indicative (albeit low-confidence) NPV for Mt Hope to be calculated assuming same proportionality of Halloysite content. 100% project ownership helps to offset smaller historic resource.

 It is reasonable to expect that resource size will be increased as it is rare for exploration campaigns to result in a smaller resource.

Sources for data used in analysis:
[1] 30 September 2019 - Scoping Study for Poochera
[2] 24 October 2018 - Exploration Application for Mount Hope Halloysite Kaolin
[3]12 February 2019 - Poochera Project Halloysite Kaolin Resource
[4] 30 September 2019 - my share price target for Poochera in Production

One thing in our favour is that Andromeda have 100% ownership of Mt Hope, whereas farm-in for Poochera is to a maximum of 75%. Assumption is also that once Poochera is in production Andromeda can get Mt Hope into production with no or very little further dilution.

So low-end potential for Mt Hope is $0.24 fully-diluted based on extrapolation analysis of the historic Kaolin resource ( although my estimate of Halloysite content is highly speculative ).



My thoughts are that they will improve on the 12.26 Mt resource (as noted above they say "upgrade" in the presentation ) so I think potential NPV at Mt Hope may go well beyond figure calculated above assuming proportionality of Halloysite in the Resource is similar to the Carey's Well Deposit at Poochera.