Australia’s endowment of “critical minerals” grabs a lot of interest on the stock market, led by the likes of lithium, nickel, graphite, cobalt, vanadium and the 16 “rare-earth” metallic elements comprise neodymium, praseodymium, dysprosium, lanthanum, cerium, promethium, samarium, europium, gadolinium, terbium, holmium, erbium, thulium, ytterbium, lutetium and yttrium.
The critical minerals are considered essential components of the mooted clean energy future, being used in batteries, wind turbines, solar panels, parts for electric vehicles (EVs) and mobile phones, They also have plenty of applications in defence technology.
Australia has large reserves of many of the critical minerals, and the western nations – most particularly, the United States – are very highly motivated to reduce the market dominance of China, which has had a near-monopoly in the sector for many years.
Last year, high-purity alumina (HPA) was officially added to Australia’s critical minerals list. HPA – a white crystalline powder form of aluminium oxide – is used in lithium-ion batteries for EVs, micro-LED lighting and optical sensors, and semi-conductor manufacturing, solar battery storage and consumer electronics, and scratch-resistant synthetic sapphire, which is used in watches and smartphone camera glass. All of these are high-technology items with rising consumer demand, particularly in China, North America, and Europe.
HPA is also on the critical metals list for Europe and the US.
The ‘high-purity’ part of HPA starts at ‘smelter-grade,’ which is 95% pure, and increases through what is known as 3N HPA (99.9%–99.998%), 4N HPA (99.99%–99.998%), 5N HPA (99.999%) and 6N HPA (99.9999%). At smelter-grade, current prices are around US$4,000 a tonne; at 3N HPA, you’re talking US$5,000–US$15,000 a tonne; for 4N HPA, the price range is about US$15,000–US$25,000 a tonne; at 5N HPA, it’s more than US$25,000 a tonne; and at 6N HPA, prices are north of US$50,000 a tonne.
HPA is experiencing strong demand for use in lithium-ion (Li-ion) batteries, where it is used as a coating on the ceramic separators that keep the cathodes and anodes apart, which has been found to significantly improve safety by providing greater thermal stability and reducing the risk of batteries catching fire, as well as significantly improving power capability. It also improves battery life and lowers self-discharge.
The use of HPA as a separator material between the anode and cathode in high-performance batteries, in the EV and static energy storage markets, is viewed as a major longer-term driver for HPA, along with the growing preference towards LED bulbs, surging demand for electric vehicles and the development of ready-to-use medical bio-ceramics for orthopaedic and dental implants.
Largely from the clean-energy demand, the HPA market is expected to cross into a supply deficit by 2025 – and that’s where some of the ASX-listed HPA hopefuls come in.
There are quite a few of these companies, and a Google search makes for interesting reading; but here are three that I think are worth a closer look, with the first, Alpha HPA, probably the best ASX investment proposition in the HPA space – albeit an investment that must be considered speculative
1.Alpha HPA (A4N, $1.05)
Market capitalisation: $980 million
12-month total return: 11.7%
Three-year total return: 20.5% a year
Estimated FY24 dividend yield: no dividend expected
Analysts’ consensus valuation: $1.75 (Stock Doctor/Refinitiv, one analyst)
Alpha HPA has a proprietary solvent extraction and aluminium purification technology to produce HPA and is building a $500 million plant at Gladstone in Queensland. Stage one of this plant, the ‘precursor production facility,’ delivered its first production in November 2022, and Alpha is now commissioning additional process equipment to boost its capacity to produce its full range of Alpha’s HPA products, which include nano-HPA, high-purity alumina hydrates and high-purity aluminium sulphate, which it will make for global customers across the lithium-ion battery, LED, and semi-conductor industries. Alpha is close to finalising the definitive feasibility study (DFS) and financing arrangements for Stage Two of the “HPA First” project, which would represent the full commercial-scale implementation of its technology.
Analysts estimate that the project will cost in the order of $500 million; last month, Alpha announced that its First Project Stage 2 has received credit approval for $320 million in debt funding and $80 million in cost overrun facilities, jointly funded by the Northern Australia Infrastructure Facility (NAIF) and Export Finance Australia (EFA), through the Australian government’s $4 billion Critical Minerals Facility. The debt facilities are subject to Alpha securing offtake letters of intent (LOI) for production of 10,000 tonnes a year.
The company says the most promising areas of the market, where it is finding the best customer engagement, are coatings in the lithium-ion battery sector; the LED lighting sector, and the semi-conductor sector. Within the first of those, Alpha has developed a proprietary ultra-high purity aluminium nitrate-based coating called UltraCoat, for use on a range of surfaces within the lithium-ion battery cell environment. As well as chemically coating the anode and cathode active materials, Alpha has also had promising results testing UltraCoat on the battery cell casings and electrode sheets.
In particular, UltraCoat shows promise as a potential solution for one of the most concerning problems with the increasing use of lithium-ion batteries in EVs and other applications – their propensity to catch fire, in a manner that is very difficult to extinguish, in a “thermal runaway” phenomenon. This is the alarming “secret” of EVs.
In addition, this month, Alpha conducted its first production run of synthetic sapphire glass, which is a first for Australia; this business is a partnership with Austrian manufacturing group Ebner Fametec, in which Alpha Sapphire (a wholly owned subsidiary of Alpha HPA) is using the Austrian company’s sapphire growth technology and its own custom HPA tablets as feedstock. (This is a market opportunity bought about by the fact that a leading Russian synthetic sapphire glass supplier was sanctioned.)
Synthetic sapphire glass is the pure crystalline form of HPA, grown under controlled conditions in a single crystal; it has unique physical properties (related to its purity, crystal matrix and hardness) that make it a crucial and high-value input into LED lighting substrates and various optical applications including consumer electronics, medical applications, and defence. There is no substitute material for HPA in the manufacture of synthetic sapphire.
The full-scale sapphire plant is scheduled to be commercially operating by the end of 2024, supplying offtake agreements signed with Orica Australia and pre-commercial orders from a major European maker of sapphire glass.
The company is talking to potential customers in both the LED and sapphire optics markets. Alpha believes synthetic sapphire to be a robust business opportunity that will add value to shareholders – a high-value downstream sapphire capacity to supply key high technology markets from a secure jurisdiction and fed with Alpha’s own low-carbon HPA feedstock. To top off the attraction, Alpha is negotiating with power suppliers to make its power supply wholly renewable. The company has also received $30 million of project funding from the QIC Critical Minerals and Battery Technology Fund (QCMBTF) for the Alpha Sapphire project.
Alpha has some high-calibre shareholders on the register, including AustralianSuper and the company’s chemical counterparty, Orica, which owns 5%. Broking firm Bell Potter assumes the HPA First Project Stage 2 is developed over 2024-25, for first production in 2026. Bell Potter has a price target on the stock of $1.75.
2. Impact Minerals (IPT, 2.2 cents)
Market capitalisation: $63 million
12-month total return: 69.2%
Three-year total return: 10.1% a year
Estimated FY24 dividend yield: no dividend expected
Analysts’ consensus valuation: n/a
Impact Minerals is an exploration company that is involved in a range of metals, but its major focus has become its Lake Hope project in Western Australia, where it appears to be sitting on a deposit that could become one of the lowest-cost producers of HPA in the world.
Lake Hope could be a multi-decade HPA mine, producing 10,000 tonnes a year over a 50-year mine-life. That’s based on a mineral resource of 3.5 million tonnes at 25.1% alumina content.
Last November, Impact’s scoping study estimated an operating cost of US$3,264 a tonne (net of a fertiliser and chemical by-products, courtesy of the refining process) to produce 10,000 tonnes of 4N HPA a year, over an initial 25-year mine life.
The scoping study was based on sulphate process designed and developed in-house, using sulphuric acid to extract HPA from fine-grained minerals hosted in the clay. On that basis, Impact told shareholders that Lake Hope could be the lowest-cost producer of HPA globally, at around half the cost of its peers.
Subsequently, Impact announced it had identified a new proprietary metallurgical process for producing HPA, the low-temperature leach (LTL) process, which involves different reagents to those used in the original sulphate process. The company has used the LTL process to produce HPA of more than 99.99% purity from the raw lake clay in only a few months. This is one of the fastest times to produce HPA from raw materials that has been achieved. The LTL process is a direct low-temperature leaching process that does not require for sulphuric acid roasting, reducing the number of steps to produce HPA from five stages to four – and potentially lowering both capital spending operating costs even further than the original sulphate process.
Impact is still working through the LTL process to arrive at an optimised version that could run at scale. This work – and evaluation of a third possible process route – is being done as part of preparing the preliminary feasibility study (PFS), which is due for completion in late 2024. From that, Impact will make a final choice of the best process route for commercial production of HPA.
After the PFS, the company will work on a preliminary feasibility study (PFS), which would come in 2025; the next step is envisaged as a pilot plant, producing 1,000 tonnes of HPA a year, and offtake agreements with end-customers. And, says the company, “delivering into a high-margin, high-growth market with significant upside potential.”
3.Altech Batteries (ATC, 6.2 cents)
Market capitalisation: $103 million
12-month total return: –41.5%
Three-year total return: 1% a year
Estimated FY24 dividend yield: no dividend expected
Analysts’ consensus valuation: n/a
Altech Batteries is a specialty battery technology company that has a developed a HPA coating technology that goes into what Altech has trademarked as Silumina Anodes, an alumina-coated composite silicon/graphite lithium-ion battery anode material.
Based on Altech’s test work, the Silumina Anodes product is expected to deliver a lithium-ion battery that has higher energy retention capacity by volume and weight, compared to a battery using the incumbent graphite-only battery anode. The key differentiation point of Silumina Anodes is that it will be a composite material of silicon and graphite particles that have been coated with alumina using Altech’s proprietary alumina coating technology.
Altech has licensed the technology to its 75%-owned subsidiary Altech Industries Germany GmbH (AIG), which is finalising a definitive feasibility study (DFS) for the development of a 10,000-tonnes-a-year silicon/graphite alumina coating plant in the German state of Saxony, to supply the Silumina Anodes product to European EV manufacturers.
Also in Germany, Altech has a joint venture agreement with world-leading Germany battery institute Fraunhofer to commercialise the revolutionary Cerenergy sodium-alumina solid-state battery. The company says Cerenergy batteries are a game-changing alternative to lithium-ion batteries that are fire- and explosion-proof, have a lifespan of more than 15 years and operate in extreme cold and desert climates. The battery technology uses table salt and is lithium-free, cobalt-free, graphite-free, and copper-free.
The company plans to build a 100 megawatt-hour (MWh) production facility at its site in Saxony, producing Cerenergy battery modules to provide grid storage solutions to
the market.
Altech says its batteries run at less than half the cost per kilowatt hour over the life of the battery than a lithium-ion battery, and last twice the life of the latter. It says the Cerenergy battery is totally fireproof and operates in a very wide temperature range. And because the Cerenergy batter does not use the major critical minerals, like lithium, cobalt, graphite, copper, and manganese, Altech will not be affected by the price volatility that can hit those markets.
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