ADN (ASX) General comments/chat

Originally posted by Scarpa ↑

High Purity Alumina

I thought I would look at HPA demand more generally as it relates to lithium ion batteries in this post.

Giventhe demand projections for passenger EVs there will be a need for significant increase in HPA new supply to come onstream IMO in the next few years.In any event I won’t get into too much detail on forecasts of EV vehicles here because I did this in another stock (been a lithium stock) I own where I deal with EV demand, refer this post for some figures if interested on the details themselves Post #: 37817451 and this one Post #: 37866312.

From the above, in 2017, 1 million passenger vehicles EVs were produced (note the word passenger) increasing to 2 million in 2018 and forecasts range up to 15 million to 22 million passenger EVs produced in 2025, obviously meaning increased HPA demand (as well as lithium and graphite demand as well other things that makeup a EV).For avoidance of doubt these estimates exclude other EV types like buses

DataI have been able to find of the net indicates that for a 40kWh lithium ion battery you need roughly 1.6kg of HPA in total – page 15 https://www.altechchemicals.com/sites/altechchemicals.com/files/asx-announcements/6886409.pdf

and

do not advertise external links.au/companies/news/215870/altech-chemicals-sees-increase-in-demand-for-hpa-from-lithium-battery-manufacturers-215870.html

Given average passenger vehicle EV battery size is roughly 50 kWh then in effect, I guess ad my assumption only, saying 2kg of HPA per battery (or roughly 0.04 kg per kWh). As a matter of interest EV buses with 160 kWh batteries are stated to require in total 6.4kgof HPA – same page in the above link

Just looking at passenger EVs, HPA need for that sector alone is estimated by me at30,000 – 44,000 tonnes IMO in 2025, before putting forward any estimates around HPA demand in other EV types like buses, plus the more traditional uses of HPA such as the existing LED and glass sapphire markets (the latter been your screens for your iPhones and smart phones). For batteries, specifically, HPA is an additive to ceramic separators in the batteries, which lie between the anodes and cathodes in a lithium ion battery.

The key though is how much of the HPA will come from a naturally occurring kaolin/ halloysite natural resource type like ADN’s that can be worked on, which potentially has low levels of sodium, iron and other impurities and potentially therefore lower levels of processing costs IMO than the more traditional methods for producing HPA.

Traditionally,deriving HPA comes from highly processed feedstock like aluminium metal oraluminium sulphate, and applying several re-processing methods such as hydrolysis of aluminium; choline hydrolysis of aluminium; thermal decompression of ammonium aluminium sulphate; or thermal decomposition of ammonium aluminium carbonate hydroxide. Or to sum up methods, when combined with stricter environmental control in how HPA is produced from feedstock of this type in certain countries, the commentators – see below - are stating these traditional methods are seeing higher operating costs because of the need to remove, in part, higher levels of sodium and iron which fundamentally impact processing costs, noting HPA in lithium batteries needs to average 99.99% purity, i.e. 4N, as well as meeting the more stricter environmental standards coming into various countries like China itself..

5NHPA grades 99.999% purity, or in effect impurities account for 10 PPM or 0.001%.

In terms of the above these links might be useful:
http://www.fyiresources.com.au/projects/about-hpa

https://www.alliedmarketresearch.com/high-purity-alumina-market

Taking stock on the above ADN is claiming it can possibly produce HPA at half the costoftraditional manufacturing processes – refer page 7 of this link:
http://www.andromet.com.au/images/uploads/reports/20181003_Investor_Presentation_Oct_2018_v2.pdf

Obviously,if ADN’s claim actually happens then there is a lot to look forward to here, hence the high risk/high reward equation available here. I had a look at the Anns around resource and I could see in them the comments/data around low iron in the deposit but couldn't find data around the sodium levels albeit the Anns have provided initial test work around HPA as well - but what I would note is the preliminary testwork got HPA to 99.9855%, 0.0045% short of 99.99%, which is pretty good as a first pass over the target (as retweaking the process, I suspect, should IMO lead to that target been achieved in the next set of tests but obviously needing to achieve 99.99% is still required here). Page 5 and the Ann itself is an interesting read - Post #: 37406037The above commentary, can be summarised by this picture below – just substitute Alltech below with ADN

The focus of would-be producers, like ADN, is on the 99.99 percent purity, referred by posters here as 4N or essentially meaning 100 ppm is impurities – 0.01%, which is most suited to lithium ion batteries.

In this link -published 24 April 2019, they are forecasting HPA overall demand (i.e. includes everything) from 40,000 tonnes in 2018, growing to 120,000t in 2025 almost entirely on the back of the battery market.
https://www.*********.com.au/2019/04/24/is-high-purity-alumina-the-next-battery-gold-rush/

The above forecasts are similar to that by Altech Chemicals, but slightly lower albeit the Altech forecasts appeared to have occurred back in June 2018 and EV demand figures keep changing daily LOL – page 11, https://www.altechchemicals.com/sites/altechchemicals.com/files/asx-announcements/6886409.pdf

The forecasts therefore suggest significant scope for new entrants into the HPA market, especially those with low cost, and low level of sodium and iron, in converting this naturally occurring kaolin resource to HPA.Obviously, if the market cannot be served by naturally occurring resource, then the more traditional approaches for producing HPA from aluminium through a complex chemical process would need to continue. If we look at Altech Chemicals for example its proposed Malaysian HPA plant is stated will produce 4,500 tpa, so there is a lot of scope for new entrants into the market given the HPA forecasts above.

ADNas a development project

Obviouslya risk reward equation here, but needing to be mindful that HPA is an end goalfor ADN, in terms of the longer term strategy, not its immediate focus in getting to production.ADN’s proposed path to development is best explained in its latest ANN: Post #: 38590042

The shorter term strategy as I understand it is about building cash flow through DSO sales initially (short term- been in the now I suspect - 2019/20) before moving to the medium term (say 2020/21, just a guess by me btw) strategy, been processing the kaolin/halloysite deposit into a higher valued product for use by downstream buyers in, for example, the ceramics markets.And then comes HPA and Nanotechnology (been the longer term strategy which I suspect means from/after 2022/23 and again just a guess)

Byway of background, in the link below, the kaolin market is expected to grow by80% for the period 2018 to 2025 (or 8.8% annual rate of growth for 7 years).These figures exclude possibilities of kaolin been used in HPA, so the article below basically talks about the catalyst been rising demand in the traditional uses of kaolin, been for ceramic products in housing and construction industry coupled with increasing use of fiberglass in automobile (not related to EV batteries btw as this is not talking HPA applications here) and aerospace applications.
https://www.grandviewresearch.com/industry-analysis/kaolin-market
https://www.grandviewresearch.com/press-release/global-kaolin-market

This link suggests lower growth but still favourable growth – roughly 25% from 2017to 2022 (or 4.6% annual rate of growth for 5 years, albeit it is a slightly earlier article than the above).
https://www.prnewswire.com/news-releases/kaolin-market---global-forecast-to-2022-300625603.html

Obviously the demand/supply imbalance is a key to providing ADN to enter the market with its short term and medium strategy before moving to its longer term strategy.

VBs drunk.Time for bed.

AllI MO IMO

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Great post scarpa, I couldn’t produce that sober. Well done!
Thanks also to wombat and prolifix for constantly providing such sensible, informative posts.
Adn is one of the few threads I enjoy reading.
Exciting times ahead!!
Cheers
Bev

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