Toondoon acquisition, a compelling deal

Theacquisition of the Toondoon kaolin project via the purchase of Kalotech Pty Ltdis extremely value accretive for ZEOTECH.

Here’s why. TheRAW ORE (ie unprocessed ore) is being used by the University of Queensland toproduce high grade molecular sieve synthetic zeolite using ZEOs proprietarytechnology. The cost of production is fractional against world best practice. As i have previously outlined.

So thecompany has its own feedstock source. The project has a JORC resource andcovers 28,000 ha and includes a granted mining licence (80126). So its ‘shovelready’ as they say.

The qualityof the Toondoon kaolin is unsurpassed in Australia (and quite possibly theworld)

As acomparison..take for example the kaolin from producer WA Kaolin (ASX:WAK)

To obtain asample equivalent to Toondoon raw ore, WAK needs to wet screen (or sieve) theirraw ore at -45micron to obtain a product with a similar Al203 (alumina) gradeas Toondoon. In doing so they loose 48% of each tonne of ore (because its above45micron). That means their ’yield’ on each tonne of raw ore is 52%.

The yield onToondoon ore is 100%, grading ~37% Al203. That’s raw ore straight out of theground, unprocessed. Every other kaolin project in Australia that I know ofneeds to wet process their ore (at considerable expense) to obtain similargrades.

The GeorgiaClays (Georgia USA) are widely regarded as the best kaolin in the world….seebelow a comparison between Toondoon kaolin and the Georgia kaolin

So at a purchase price of 37mill shares (~$2mil) and with the independent valuation coming in with a preferred valuation of $32mill (top valuation $55mill) i would call it a compelling deal. The Ukraine has traditionally been responsible for ~8% of global kaolin export (now ceased) and high grade Asian kaolin deposits are seriously depleted so it is little wonder end users are knocking on ZEOs door.