Impact Minerals (ASX:IPT): Interview with the MD

Impact Minerals (ASX:IPT)

We talked with Dr. Mike Jones, Managing Director of Impact Minerals (ASX: IPT) about the company’s recently acquired Lake Hope High Purity Alumina project in Western Australia. Lake Hope is expected to be mined and processed at low cost via an acid leaching process. The jurisdiction is Tier 1, and the demand for HPA product is high.

Full transcription below.

 

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Transcription

 

Stuart: Hello and welcome to Stocks Down Under. My name is Stuart Roberts, and I’m one of the co-founders of our service. And joining me from Perth on the morning of Friday, the 4th of August, 2023 is Dr. Mike Jones, who’s the managing director of Impact Minerals, ASX:IPT. Mike, good morning?

Dr. Jones: Good morning, Stuart. Great to be with you.

Stuart: So, you and I were introduced back in February, and you had a big smile on your face at the time. And no surprises, you just arranged to get hold of the Lake Hope High Purity Alumina project in Western Australia, or at least I’m calling it the High Purity Alumina Project. Talk to us about how you landed on Lake Hope, and what you’re hoping to achieve there.

Dr. Jones: Yeah, Lake Hope, it’s certainly appropriately named, and we’re hoping that it is giving big hope to the Impact shareholders after many years of doing exploration. So, look, people who know us know that we’ve been looking for a world-class deposit for a long period of time, 16.5 years since we listed, and in that time, we’ve had a couple of near misses we like to call them, you know, some nice high grays, but really nothing ever grew to any particular size. But during that period, we’re always interested in looking at other projects to see what was out there, but most projects you come across in the space are normally, you know, they’ve been around the traps a few times. There’s normally some, you know, significant issues with them whether it’s metallurgy or whether it’s aboriginal heritage or in the wrong country, etc., etc.

Anyway, we came across the Lake Hope Project which is here in Western Australia. It was a geologist that I’d sort of known from afar, Roland Gotthard, for a while, and he’d been putting a few things out on LinkedIn about this pretty interesting project that he had and he was doing some home-baked metallurgy in his kitchen, and it’s a bit of a funny story really, but we ended up thinking we had something similar to what he had on our own ground, and cut a long story short, the responses that we were seeing and some of the geophysical data were from something completely different. But during that process, I came across, I got rolled into some of the information memorandum that he’d put together, and when I saw it, it was one of these sort of moments of, “Oh, no. I’m gonna have to do this project,” because the advantages of it were so significant compared to anything else that we had and would put us immediately on the road to development over the next few years that it was a case of, “Right, we have to do this,” and so we’ve jumped in boots and all if for those of us, for those of you who have followed the story so far.

Stuart: Right. So, let’s talk about those advantages, chief among them being in the state of Western Australia. So, jurisdictionally, yeah, it can’t get much better than that. You’ve got your heritage clearances, so you’re ready to roll in terms of building out this project.

Dr. Jones: It is. Everyone knows, of course, Western Australia tier one, and it is a great place to work. We did receive aboriginal heritage clearance basically for mining. We still need to come to a mining agreement with the Ngadju people. But they’re generally very pro the mining industry. They’ve worked with the industry for many years. We’ve done a few surveys with them on a couple of projects. This one went very well because it’s an active lake system or active salt lake system, there’s very little heritage in that particular area. It’s quite remote, and so yeah, we basically got the go ahead, and that’s actually under the new ACH or Aboriginal Cultural Heritage Act which passed the 1st of July or came into effect 1st of July this year, and that’s caused a lot of consternation through the industry. But look, for what we do, for where we are, there’s really not been much change under the ACH laws, and so we’re very happy to be in this position at such an early stage. So, yeah, it’s all guns blazing from here.

Stuart: All right. And let’s talk about the product. You mentioned before Gotthard doing the metallurgical test work in his kitchen. It turns out that if you transfer that over to a more conventional setting, you’ve potentially got a very low cost project if things pan out as they seem to be panning out so far.

Dr. Jones: Indeed, indeed. I’ll just, I might just take a step back, look at some of the geological advantages of the deposit. So, the material which is alumina, aluminum oxide, occurs in a number of minerals, and Roland’s blinding insight was to think about what minerals could occur that would be relatively easy to extract. And then he came up with a metallurgical process for that particular set of minerals and then went out and found the deposit. So, it was definitely, you know, upside down thinking compared to the normal convention. So, and…

Stuart: I mean, that’s just proof that metallurgists are a bit smarter than geologists, right?

Dr. Jones: Well, actually Roland’s a bit of a jack of all trades and a master of a few too, I will say, and he is a very clever guy. So, the Lake Hope deposit is these aluminum bearing minerals occurs in the top two meters of a salt lake that’s fairly remote, and the material is naturally extremely fine grain. I mean, most of it is like less than 500 nanometers in size. So, that’s extremely small and a lot of it is almost amorphous. So, that gives us a number of advantages because it doesn’t need crushing, it doesn’t need grafting. It’s basically very high grade ore. We put the resource out recently, it’s 25% alumina, so it’s free digging and it’s almost, I wouldn’t call it direct shipping or per se, but what it allows us to do is to take the material offsite and then build our processing plant in an industrial yard which will be much easier to process.

So on site, we won’t need access to significant water, we won’t need access to power because we can do it all on renewables. It’s, you know, basically a digger and some trucks to move the material off site. So, from an environmental point of view, this project has the…it’ll be one of the lowest environmental footprints of any mine and certainly in terms of the dollar return that we’re gonna get on the material that we take out of the lake. As I like to say, it’s gonna be the world’s shallowest highest grade open pit anywhere. So, there’s a huge number of natural advantages which lead to very cheap mining, and we can talk about the processing perhaps as we go along, but at the front end, the OpEx for running the mining is gonna be literally about 5% of the overall OpEx. And for those of you who know financial models, that’s an extremely low number, so that’s a vast…

Stuart: I’m tempted to write the check now. I can buy the whole thing for $45 million. Come and work for me, Mike. I promise to be a very nice boss.

Dr. Jones: Absolutely. So, we’re hoping to be worth a whole lot more than that, Stuart, so you better have a bigger checkbook by the time we’re ready to sell.

Stuart: Right. Okay. So, off the charts in terms of the cost off the charts in a positive way, and obviously, you’re gonna have to raise some capital to do this. What do we need to do in terms of environmental approvals to move forward from here?

Dr. Jones: So, the initial advice we’ve had from our environmental consultants is that because of the nature of the project and this sort of free dig in the base of the lake and it really not requiring much clearing at all, is that we’re likely to be able to sort of move forward possibly even with our EPA, you know, like an EPA approval, because you normally only go to the EPA if the environmental disturbance is gonna be significant.

So, we will start the baseline studies, we’ll start in October this year, so both flora and fauna. There are no documented, you know, rare species of either of those that have been found to date in the area, so that’s a big plus to start off with. You never know what you might find once you get in there and do the detailed work. But as I say, initial indications are that the environmental approval should not be an issue, and we will hope that that will be the case as we go forward.

Stuart: Okay. So, we all know the market opportunity for HPA is outsized. Plenty of 21st century applications require this, but you’re gonna have to negotiate off, take it one stage. What’s your plans there?

Dr. Jones: That’s correct. Look, that is the area that we need to build out, and we’ve said that from the start. We don’t have those sort of capabilities as yet. We’ve made some strides into looking to find people, starting to establish relationships with potential consumers or people that can lead to those consumers, and so in the bulk commodity space like this, and it’s the same for silica sands, it’s the same for kaolin, you know, you need these off-take agreements to really be certain of generating the revenue, and that can be a process that can take a couple of years because you need to provide product to them upfront to the consumer so that they can do all the test work that’s required and that takes as I say, a couple of years to get that going before you’ve been able to get to that offtake agreement. So look, we are very aware from a strategic point of view that that’s our main focus of activity right now.

Stuart: Right. Now, what’s great about what you’re doing is that there’s at least one success story out there in ASX to be able to say, “We are the next xxx.” In this case, it’s A4N Alpha HPA now capped something like a billion dollars with the success of their projects. Talk to us about what those guys have done right, and how you can potentially follow in their footsteps.

Dr. Jones: Yeah. But look, five or six years ago, Alpha HPA was, I think it was called Kohlrabi nickel, and they had a laterite project in, I think it was in New South Wales for nickel cobalt. And they came across a solvent extraction process, which also indicated that they could possibly extract alumina, high pure alumina out of the clay in that laterite in that weather profile there. Anyway, it wasn’t too long before then but they discovered that they could actually, that the solvent extraction process would work on a chemical feed stock which they could basically purchase and do a deal with Orica, and the explosives and fertilizer company adding Queensland. So, they’re basically not mining, so they switched really into an industrial chemical company, and they’re using this chemical feed stock. So, but the significance of that is this, is that the high purity alumina space, up until recently until Alpha made their breakthrough, the incumbents were producing the HPA predominantly from the refining of aluminum metal. So, that gets mined from [crosstalk 00:10:32.456]

Stuart: That’s an expensive way to get it.

Dr. Jones: It’s an expensive way to get it and it’s also a dirty way to get it, obviously with all the red mud, it’s very energy intensive, etc., etc., and there’s a lot of focus on that part of the industry right now in terms of it’s environmental footprint. So, part of the process of trying to improve that process if you like, a number of companies came up with hydrometallurgical approaches, and so Alpha was the first, and we also have FYI resources in the space, and they’re looking at a hydrochloric acid leaching of kaolin. And the significance of the hydrometallurgical processes is that they are significantly cheaper in terms of their, again, their OpEx, operating costs to produce, and possibly as much as sort of 30, 40% cheaper, possibly more than the incumbents.

So, this is one of the reasons that people are pretty interested in this space if the hydromet processes work. We also have a hydromet process, but as is a sulfuric acid leach, it is proprietary. We’d have it patented at the moment, and that’s under confidentiality for 12 months, and we believe that our operating costs will also be significantly lower than the incumbents and certainly cost competitive I think with Alpha. But Alpha showed that, you know, they’re the first company to get this right in the space. They were like us, as I say, small, junior explorer nobody was really interested in five or six years ago and then boom, here we are now, you know? Billion dollar market cap, and I’m pretty confident we can follow in their footsteps.

Stuart: Right. So, let’s talk about what comes over the next 12 months for you. We talked about environmental baseline studies a little while ago. What else will you be working on?

Dr. Jones: So, the principal thing is the metallurgical test work and getting product that we can put in front of customers. So, we’re hoping that by the fourth quarter of this year, we’ll have sufficient quantity. One of the advantages of our metallurgical approaches that we can produce material in bulk relatively cheaply, and so that will be a great advantage for us. So once we’ve got that material, it’ll be into meeting with the customers, getting stuff into test work and pushing that forward, and that’ll be, I’ll say not just 12 months but a 12, 24 months process.

The other thing we’re doing is the various mining studies. So, we’re planning to lodge our mining lease application later this quarter by the end of September. The heritage clearance was the big one. We put out our maiden resource last month, and so those two things were critical to lodging the mining lease.

So, that lease, that application will go in, and so there’s a whole lot of mining studies that will need to go on there. We’re doing logistics studies in terms of where the best place to build the plant is, currently that’s looking like Kalgoorlie, and there’s a big industrial yard that’s been designated on the south side of town there, and miners are building there big processing plant there at the moment for rare earths. So, we strongly think that that’s gonna be probably the best-case scenario at the moment, but we’re doing all the economic modeling to see where that is.

Stuart: All right. So, you could have for instance in Kwinana if the economics work.

Dr. Jones: That’s correct, yeah. We understand Battery Alley is getting fairly busy [inaudible 00:13:47.553] place there is down there now. So, but that’s certainly one thing that we’re looking at. Yeah, there’s pluses and minuses either way. So there’s the, one of the things is what grants might be available in order to be able to build the plant and, you know, Kalgoorlie is probably a better place in order to, you know, to get some development money to help build the plant should we decide that that’s where it’s gonna be.

Stuart: Right. Now, many investors won’t necessarily know you, Mike. That accent tells me you’re not from around here. I understand your PhD was from Imperial College London. Tell us about yourself and what led up to this point.

Dr. Jones: So, I did my first degree in mining and exploration geology at the Royal School of Mines, Imperial College, and then did a PhD afterwards in gold mineralization in South Africa, and the rocks there were greenstone belts, which is what we have here in Western Australia. Obviously very big on gold and nickel, and so I was lucky enough to be offered a job and a visa back in 1988 by Western Mining, WMC resources…

Stuart: The company that’s created half of all the new companies on the ASX in terms of the talent. Everyone who is anyone got trained there.

Dr. Jones: Yeah, it is incredible and when Roy Woodall who was the director of exploration and world-renowned for the success that Western Mining had, there was a eulogy for him at Diggers and Dealers a couple years ago. My friend Mark Bennett read it out and he read a list of all the people who’d worked for Western Mining, not just in geology, but across mining engineer…

Stuart: It would’ve taken a heck of a long time.

Dr. Jones: It just went on and on and on. It was quite incredible. So, they certainly created something special and I was very fortunate to have worked for them, you know, for six years there in their project generation team, and I used those skills and I worked for a variety of consultancies, set up my own consultancy with a business partner and we ran that for a few years. I’m just trying to remember now. It started that long ago.

But eventually we decided, “Look, surely we can run an exploration company as well as some of our clients,” and so we listed in November, 2006, and of course, it’s been an emotional rollercoaster since then. You know, the GFC, we’re in the uranium space over Fukushima. There was the downturn four or five years of that, and we’re coming outta that, then we had COVID.

So, you know, we’ve done pretty well to keep the company going. We’ve always remained active. We’ve always put money in the ground and I think people know that we, you know? We’re known for our good ideas and our good geology. We’ve just been a bit unlucky in terms of finding the big discovery, but Lake Hope is it? We found it on LinkedIn rather than by traditional exploration methods, but I’ll take it whichever way.

Stuart: Right. Dr. Mike Jones, well done on picking up Lake Hope and good luck in the next 12 to 18 months as you build up this project, and keep up the good work.

Dr. Jones: That’s great, Stuart. Thanks very much and look forward to an update.