Uncovered: There’s more to a battery than Lithium, introducing HPA – Impact Minerals (ASX: IPT)

Bryce: [00:00:15] Welcome back to another episode of Uncovered by Equity Mates, a podcast where we shine a light on some of the smaller cap companies listed here on the ASX and globally. And as always, I'm joined by my buddy Ren. How are you? 

Alec: [00:00:26] I'm good, Bryce very excited for this interview. We're speaking to Dr. Mike Jones, who is the founder and managing director of Impact Minerals. The ASX ticker is IPT. We are going into the world of mining explorers and in particular the world of high purity alumina, not something we know a lot about. 

Bryce: [00:00:46] HPA, not something you know a lot about. But what I'm loving about this new content thread is that I'm learning about a lot of companies that are outside my circle of competence. 

Alec: [00:00:56] Well, to put some context on just how interested we are as we speak to these smaller companies and their CEOs and their founders. Bryce and I just had a 20 minute conversation with Mike after we finished recording about staking mining claims and pegging a tenement. A whole new world. 

Bryce: [00:01:14] A whole new world. Very interesting one.

Alec: [00:01:16] Yeah, yeah, yeah. Anyway, people want to pick up that conversation, hit us up on social media because let's not talk about it here. Instead, let's introduce Impact Minerals. They're mining explorers. They are their main project at the moment. But one of just 11 projects is a site 500 kilometres east of Perth in Western Australia, Lake Hope. And as we said, it's all about high Purity Alumina. We don't do much more description. Dr. Mike Jones can do that for us. But we should just remind everyone before we get into it whilst we are licensed, we're not aware of your personal financial circumstances. Any content is for education and entertainment purposes only. Any advice is general, but most importantly, this uncovered series is not a buy or sell recommendation. We are doing these interviews and we're talking about these companies because we love learning about these companies and hearing their stories in their own words. But don't take it as a buy or sell recommendation. 

Bryce: [00:02:12] Absolutely. Well, well, let's get stuck in. Mike, Welcome to Uncovered.

Mike: [00:02:18] Yeah, thanks, guys. And it's great to be here. 

Bryce: [00:02:20] So we'll start with a bit of an introduction into Impact Minerals. Can you help us understand the world of mining explorers, perhaps introduce us to them and then the business of impact minerals? 

Mike: [00:02:33] Certainly. Look, I think all of your listeners and watchers will be aware that there's a big energy transition going on right now, that the world is moving to electrification of its vehicles and that is passed globally and is probably not recognised as what it should be. But there's a significant amount of metal and is going to be required to help drive that energy transition. And so the world's mining business is really built currently to help fund and move towards shifting things away from oil, fossil fuels and replacing that with electrification. And as I said, that's going to require a lot of metals. So the business is really separated into two groups. There are the miners. Those are already in production and in companies like ourselves, Impact Metals who are explorers. So we're out there looking for the next generation of mines that are going to be required to provide all of this metal that's going to be needed, in particular things like nickel, copper and aluminium, which is our speciality. And those are two of the key ones. But there's also many others like cobalt and of course lithium. Lithium has been on everyone's lips this year and there's been some great returns in the market from that, from the lithium explorers and miners. So it's not an easy process trying to find a world class deposit. And that's really what impact was set up to do. We're looking for a giant big world class deposit that few and far between. It's not easy. And so it can take a long time. But there are great rewards there for shareholders as well as the general community. Should we find a major discovery. And as I mentioned, that's really what impact is all about. So that gives some background. 

Alec: [00:04:16] Yeah, it does. And there's a couple of projects that we really want to focus on today that you're working on at the moment. But I think before then it would be great to understand a bit of Impact's history and what sort of brought you to this point. Impact has been listed since 2006, so give us a bit of the backstory. What's the company's history in that time? 

Mike: [00:04:34] Most of my career has been in what we call Project Generation. So to simplify it, really drawing boxes of maps where we think there might be a deposit to be found. And I did that for a well-known mining company in Australia when I first started my career at Western Mining Corporation. That was eventually taken up by BHP and I did the same thing as a consultant also for many years before deciding, well, maybe I should start doing this myself rather than other people. And so that's why we listed Impact Minerals. But look, I've been around a long time and there's a lot of one or two mining companies on the ASX that are small producers and really the returns on those that might be great in the early days, but really to try and build a long lasting business, you need a world class mine. Most major mining companies started with the discovery of one major mine and as I mentioned previously, that's actually quite hard to do. So we set up impacts with the intention of only finding a world class quarry. And as we mentioned, that's that can be difficult. So we've been at it for 16 years, which is just quite a long time. But what I would say is that three of the recent major discoveries which qualify as world class, in my opinion, and people can take a look at the history of these companies of the grain mining with gold, this chalice resources with the nickel palladium deposit, and then recently, most recently, as you know, with the lithium discovery, all got market caps north of $1 billion based on just the exploration results. And in each of those three cases, those companies had been going, you know, 15 to 20 years in the case of the zero. So they come a long few and far between. And they're by far the best return on your investment in the long term. So that was what impact was all about. We've had a few small discoveries over the time looking at exceptional, unusual things. So most discoveries are made on the edge. So if you have a normal distribution of mineral deposits, we're sort of always looking through here. And if you three or four standard deviations from the mean, because we believe that's where the breakthroughs are made and these new discoveries like the chalice discovery that I mentioned, was only found 70 kilometres outside of Perth in something a lot of people that walked over and drilled a it drove past, you know, so many years, but it was left of field thinking and that's where the big discoveries are made and that's what we tried to do over the years. And we just haven't quite got the little bit of luck that we need to make that major discovery. But we're hopefully changing that with our Lake Hope project. 

Alec: [00:07:01] Yeah, well, let's get to Lake Hope because you mentioned the left of field thinking there and I think when we were learning about Lake Hope before this interview, it really was some left of field thinking that led to this. Very. So tell us about Lake Hope. And let's start by introducing the left field thinking that led to the discovery. 

Mike: [00:07:23] Yeah, well, there were two pieces of left field thinking, first by the guy that discovered it, which I'll talk about in a second. But I left the field thinking that we actually found this discovery, you know, on LinkedIn. So and so a geologist that I'd known from a thought, Roland Gotthard, had been posting on LinkedIn that he had this unusual deposit out about 500 kilometres east of Perth. And basically he was cooking up high purity alumina in his kitchen and was posting the results on LinkedIn. And it just looked unusual. And one of my geologists came to me one day and said, Oh, Roland's drilling for aluminium in sand dunes. Now as a geologist, that's a very unusual thing and it sort of piqued my attention. So we sort of investigated further and Roland sent me the information memorandum on the project and basically said, Oh my God, there's a world class opening, which is what impact was up to do, Let's get into it. So that was that left the field thinking, if you like. Roland left the field thinking this is that the high purity, luminous space? I mean, obviously we'll talk a little bit more about that. The incumbents, the players who were trying to get going were struggling with the processing of the particular minerals that they were trying to get called purity living models. And Roland sort of thought to himself, what are the minerals might aluminium or HPA occur in? Came up with the suite of minerals, designed a metallurgical process to extract the high pure alumina, got that to work and then went out and found a deposit that actually had those minerals in it. So it was classic back to front thinking. So most people go out and explore, they find something that how do we process this? And then they may or may not have difficulty with that. Whereas Roland was definitely back to front left field thinking. And that's, that's really how we came across the project. 

Bryce: [00:09:15] And so Lake Hope, just to be clear, for those listening, Lake Hope is a large deposit of this high purity alumina. 

Mike: [00:09:22] It's the raw form of alumina. Alumina is aluminium oxide as a formula alta O3 for the chemists out there, and it's used in a variety of high tech fields which we'll talk about. And so yeah, so there's a raw form of alumina in the top two metres of this. Like at home there's approximately 900,000 tonnes of alumina in the top two metres, and the average production rate that we're aiming for is only 10,000 tonnes a year. And so that gives you sort of nearly 90 years of supply if you want it. So it's a multi decade mine and that's the first tick in the box for any world class deposit. It's got to be able to provide material for decades, not just five or ten years. So that's a fantastic step right up front there. 

Alec: [00:10:14] Let's talk about high purity alumina or HPA, because it's a critical battery metal. It's used in lay days, batteries, as I said, in some semiconductors, but I don't reckon a lot of people will have heard of it, certainly not as well known as lithium or cobalt. Well, we're looking at the price of HPA, 99.99%. Purity gets you like 25000 to 35000 USD a ton. And then there's even more pure and 99.999% pure, which is even more expensive. So it's crazy just how pure some of those metals need to be when they're, you know, being used in these nanotechnologies and stuff like that. But for people who have never heard of HPA before, tell us about it. And critically, tell us how important it is for the energy transition that we're living through. 

Mike: [00:11:07] Yeah, there are two main uses for HPA, and the majority of it is for end or the 99.99. That's for nines, which we generally shortened to four ends of four and is used to main fields. One is it's the separator between the anode and the cathode in lithium ion batteries and other batteries. So if you recall a few years ago, the Samsung phones were exploding in people's hands and pockets, and that's because the separator really wasn't doing their job properly, putting a poor quality HPA. And so obviously, with the forecast increase in demand for lithium ion batteries, in particular with the electric vehicles that are coming on over the next decade, that's one of the big growth markets for HPA. It is also using other battery types and some of those are competitors to the lithium batteries. And the battery technology space is evolving very dramatically, almost on a daily basis and is being led by China, that they are a long way ahead in terms of battery technology compared to the rest of the world. And so it's a constant source of his angst, the right word. But research for us here is to find out what's going on in the battery space. So but big use for HPA. The second one is in LEDs, light emitting diodes, and there's probably three fields that you can look at for that. One is actually in light globes. And recently, most people might not be aware, but the USA has actually banned new incandescent light globes because they're not as energy efficient. And so LEDs are the only way to go in in the U.S. and that'll probably come in other places as well. And the second one is actually in Micro-led screens. So we've heard Apple thinking of shifting all of their screens to micro LEDs and Samsung and LG, etc.. They all make the screens now out of that with microwave leads in them. All of those have HPA as a substrate on each of the LEDs. So the big forecast increased there. And the third one is actually in substrates for microprocessors and chips. So not not as much volume in through there, but a significant growth market in there and also Sapphire glass. So all in all, the screen covers sapphire glass that people are made artificially out of, out of HPA. So all in all, two big fields, that's what's driving the market. I will just make one comment about five fine and and even six in that they are very profitable products if you can sell them. But there's no volume there. You can't build a major business around that. You have to build that business around the four end and even three. And so not quite as pure. And that's where the volume is in the market. And if you're going to be a significant producer, that's the space you have to focus on. And then the five end is really just the cream on the metal. So all very well for us, so that pays to come out. So yeah, we got five then. Well, that's great if you're going to sell two tons of it a year. So you really need to be in the 10,000, ten a year of product in order to make a business out of it. 

Bryce: [00:14:19] Mike, how does that compare to other deposits in Australia or globally?

Mike: [00:14:23] So HPA is similar. It'd be what we call a bulk commodity. So we can include other things like coal and silica sand, but even lithium and increasingly now rare earths rare earth elements have obviously been all the rage this year. Of those two groups, there is no shortage of any of those metals and any bonuses any different. It really does understand geology and they are very common metals around the world. And so when you enter the commodity space, a number of things have got to be true. And as a young geologist we were sort of encouraged not to get into some of the bulk commodities because it has to be the biggest, it's got to be the highest grade or you've got to be first to market. And like Pinnacle Minerals is a good example of that pillar minerals basically. First a market in the lithium space. And they have been. Over the past year. In all, you're the lowest cost producer. And if one of those four, preferably two or three of those aren't true, you won't make it through the cycle. And now we're already seeing, you know, the lithium market is now in a bit of surplus. The prices dropped off. And so some of these high cost producers are already looking a bit bit dodgy. So the great attractions Lake Hope is that we would tap very quickly is that it will be one of, if not the lowest cost producer globally of the HPA, and we stand a chance of being a dominant player in the space. So that's a critical component of the work that we're doing right now. 

Alec: [00:15:49] It is. It's fascinating and we should be clear about where you are in that process. So Roland, did his work, tested the initial samples? You guys partnered with Roland and acquired a controlling interest in the project. And now Impact is doing your own feasibility studies. Is that where I guess, project life is or projects? Yeah. 

Mike: [00:16:14] Yeah, that's correct. So Roland had done a huge amount of work on his own over a couple of years, as I said, basically cooking things up in his kitchen. And then he took it to one of the laboratories in Perth just to prove from a bench scale test work that we could get through to for an HPA. And he did that and that's when we came across the chemicals to the project. So we're doing what's called a pre-feasibility study study or preliminary feasibility study, which is really just to prove the economics of the project, to say plus or -10 to 15% and that work is in progress, and should be completed by the middle of next year. And a key component of that is actually replicating the relevance process where these companies could play well in the player one Sulphite process. At the laboratory scale, we already know that it works, but what we're doing is optimising it in the laboratory to work out what's the best temperature, the best pressure, the best reagents to use in order to optimise things to help design a plant to produce HPA on masse. So that's the key part of the of the feasibility study. We've basically completed a precursor to that called a scoping study, which is the same type of work that carried out to say plus and -35% accuracy. And that study will be out within the next couple of weeks and people will then be able to see the economics of the project. So the metallurgical test work is the key component of the work we're doing now. But in the background we're also doing geotechnical work to see how the light will undergo mining, which should be very straightforward. That's only two metres deep and also then going through the process required to lodge a mining lease application. We have a first meeting with the Department of Mines next week and very shortly after that and we'll be in a position to lodge and monitor this application. We've got environmental baseline studies starting next week, so basically we're gearing up to push towards small scale production over the next 2 to 3 years, provided everything goes in order. 

Alec: [00:18:15] It's a long process. You got your scoping study, then your pre-feasibility study, I assume a feasibility study. At some point after that I was writing as we were preparing for this interview, you have plans to reach a ten tonne mini pilot plant next year and then that will scale into a thousand tonne pilot plant by 2026. It is a long process. I guess. Let's assume that things go really well and you know, everyone sees the opportunity at Lake Hope as I guess, you know, impact is categorised as a mining explorer. I'm not sure if that's how you guys think about yourselves. What do you think about the long term ambitions for this project? Is this something that you would want to prove that it's a, you know, the top quality deposit and then sell to a major miner? Do you want to get into the mining game yourself? What's how do you and the executive team think about the long term here? 

Mike: [00:19:10] Look, I think with any discovery and this is a significant discovery, you basically go along the route towards production until someone taps you on the shoulder. You know, our intention was always to build a company with a $1,000,000,000 market cap. And we've seen, as I mentioned, Grey Chalice and and as you, you know, have all hit those targets. So there's a standout in this space. There's only one company that's currently very successful in the ice space based on the Australian market, and that's a company called Alpha HPA, A4N is their code a bit like us? Five years ago they were a junior explorer that came up with a new processing method. It actually works on the chemical feedstock, which we talk about as interest, but over the last 4 to 5 years, they are now into small scale production and their market cap hit $2 billion just recently. So the definitely the scale is there. I suspect they will be taken out by the player at some point, but you just go along the route maximising value for shareholders until you either get into production and make a business pay dividends or somebody tax you on the shoulder. And then takes you outside. 

Bryce: [00:20:16] So, Mike, we have only spoken about the one project Lake Hope, but it's not the only one in your portfolio. You've got a number of other projects in development and recently you were selected for BHP Explore program. So can you tell us what that means and what it could mean for Impact Minerals? 

Mike: [00:20:33] Yes, as I mentioned, you know, our impact has always been out there looking for the big the big find, and that requires big, bold ideas. And we've looked at various things over the years. We sort of in Botswana had to be ground in there for uranium of it by Fukushima and a few other bits and pieces. So all of our projects always had the potential, I believe, to be a world class host of world class discovery. And I think that was reflected those ideas were reflected in the fact we were selected for the BHP Explore program and I was the first the first time it's been run. The second cohort is being interviewed as we speak. And so that started the start of this year. The export program is basically a six month accelerator in which BHP will give you 500,000 USD to accelerate your exploration on the key project that you present to them. In our case it was we were looking for or are looking for copper in Broken Hill. And look, it was a fabulous experience, obviously the ideas that we came up with. But you know, good enough to BHP put us in there. There are only seven companies selected globally out of 250 applicants in the first ever cohort, and I'm very proud to be one of them. So that was sort of validation, if you like, of the work and effort we put in over the years. And and so it was a thoroughly enjoyable experience. The applications are closed now, but it was one of the most rewarding things I've done in my career. It was just a very well thought out program and urge anyone to get involved. So that philosophy flows through to all of our projects and whilst we do have a number of projects, we are a project generator. The key one that we're focussed on to add to the Hope Project is our Battery Metals project is again is here in Western Australia, one of the best places to work in the world and it's only 150 kilometres outside Perth and we've already generated some very interesting targets for nickel, for copper, for lithium and for rare earths. The, the whole, the whole quadrant as we like to call it. And, and so it's an early stage project, but we're generating starting to generate now as we've moved into that area over the last couple of years, a very significant number of early stage geochemical anomalies that surface, all of which are going to be requiring drilling. And so we've got major drill programs planned for 2024 on that project. And putting out pre-feasibility test work results is not the sexiest thing in the marketplace, to say the least. And so we definitely need the exploration results to go through it. And just heading back to hope because of the unique nature of the deposit, it's only two metres deep and the actual amount of cost in terms of doing the pre-feasibility is only in the say 2 million mark and we'll probably get 43% of that back in terms of R&D. And so unlike if we just had a 10 million ounce development deposit, which is what this is equivalent to, you know, it's tens of millions and men 5 to 7 years to get it into production. You know, it's a couple of million dollars and 2 to 3 years to get it in production. And that gives us the flexibility to still explore on our other projects. And who knows, we may yet come up with a world class discovery on some of our own ground as well. So keep watching that project.

Alec: [00:23:46] It is fascinating. I just this this whole world and I'm just trying to put myself in your shoes. You know, the number of projects that you would have looked at over 16 years. And then you come across this project on LinkedIn. It's just funny how these things sort of just pop out of left field. And I'm sure I mean, I'm sure you and the whole team must be pretty excited that what this could be. 

Mike: [00:24:11] One of my early mentors, a guy called Doug Haynes, and he's discovered probably three or four world class bodies, including Olympic Dam. And they had some strange mannerisms about it. They used to say that this is serendipity, Mike. Serendipity. You just need a little bit of luck to go with all the other things that you do to, you know, to deliver the big result. And I think it was well, we're just curious people and we were just curious about what Roland was doing on LinkedIn. And we are now on the development route. 

Alec: [00:24:39] So I guess, you know, we've really spoken about the upside and what this could be, but, you know, you're still going through the process. So we should just be clear that you still are going through the process and doing the feasibility studies and all of that. What I guess, what are some of the big milestones that you'll be watching and that way investors can be watching as you go through this process and you sort of build confidence that this is what you think it might be.

Mike: [00:25:09] To simplify the whole process. For us now is to produce the HPA from the unique process and the unique deposit in sufficient quantities that we can then get it in front of the customers in the battery market and the market. The thing about HPA and similar with coal and silica sands, various other and other bulk commodities, including iron ore. It's all about the quality of the product that you produce and that performs in the end market. So in the case of iron ore, you know, high quality iron ore, 65, 70% gets the premium in the final because the final steel is much better. It's the same with HPA. The latest HPA gets the goods at the end. So it's all about getting that material into qualification, as we call it, and that can take six months to a couple of years to basically crack the client and provide the material that they want. So in the second quarter next year, that's a big aim is to start getting that in front of people. The other things in the background are obviously lodging of the mining lease, going through the environmental studies, etc. and the pre-feasibility work and the pre-feasibility, just to remind everyone. It gives us an indication of how economic, whether it is even economic at sort of a 10 to 15% margin, and we should have that completed by the middle of next year. And that's a big trigger point for obviously moving forward into building the pot plant the one time of year one and then up to a thousand tonnes per year. So so those are the key milestones and obviously drill results from the middle project again in the first and second quarter of next year. So it'll be action packed to 2024.. 

Bryce: [00:26:56] Beyond Lake Hope, Mike is there, what are the pipeline, what's in the pipeline for new projects and are there any parts of Australia or around the world that you're sitting there itching to get your hands on in terms of rights to explore? 

Mike: [00:27:10] I think if if we came up with another another project somewhere else in the world, people would accuse me of having a project Attention Deficit disorder. We're always on the lookout for great projects, and whilst we do have a lot of land, you know, we've got the potential spin out happening of some copper gold ground that we have in New South Wales. The sea capital has been raised for that and that's they're looking to list that group that's buying 75% of that project, looking to list in March of next year. Broken Hill obviously part of the Explore program. We've got other parties now interested in that. So we try to in the project generate a multiplier we have. You're trying to monetise the things. I'm not interested in getting joint venture partners as a key part of the process, but always retaining some equity or royalty on the on the projects. Look, the real focus is, is Lake Hope and trying to find a world class. It it's great to have majors involved, but we really came to do it ourselves, you know, like so we have over the years that the opportunities and great targets. Well should we get a joint venture partner in know we came to do this ourselves and give our shareholders the maximum reward. I mean, that's what the exploration game is all about. That's what we're in it for. That's what passion about it is. Trying to find out will possibly and and so in a toss up, do we drill this hole ourselves, Look at the pond, not always drill a hole in a lot of okay because that that says you fail every time we've tried it so far in terms of it in terms of a major deposit but like as I say, it took it took the other players, you know, channels to grow, etc., you know, 20 years, 17, 18, 20 years to, you know, to get there. But it eventually paid off. 

Alec: [00:28:52] It needs to work once. 

Mike: [00:28:53] It only needs to work once. So yeah, So to cut a long story short, we are looking to rationalise a portfolio that does allow us to perhaps bring in something else. But as I say, it's all about focus. And the focus right now is this Lake Hope, we need to drive that forward. It's a world class deposit, it's got world class economics as well. So in the scoping study shortly and you know, we really need to get that into production as fast as we can.

Alec: [00:29:21] Well, Mike, we want to say a massive thanks for joining us today. We've touched on this a little bit throughout the interview, but we always do like to finish with this question. If you think about Impact Minerals in the long term. Ten, maybe 20 years from now, what does success look like for you?

Mike: [00:29:40] I think 20 years from now, I'm going to be I'm going to be 80. I'm hopefully going to be finally on my yacht somewhere in the Mediterranean, which was exciting, in fact, in the first place. Look, I think certainly over the over the next ten years, we stand an excellent chance of being the dominant player in the space space. And when you're in a small market, in any commodity, any any business that you want to be in, you're better off being a big player in a small market than a small player in a big market. You've got pricing power, you've got all sorts of strengths and you make it through the cycle. So yeah, that's I think that's a fantastic aim for us and we're looking forward to getting on the journey, as we say. And despite all the ups and downs you always got to remember this and you know, keep calm as you're going through the process. 

Bryce: [00:30:31] Nice, Mike. Well, that does bring us to the end today, there's no doubt about your passion for finding good quality sites and good luck with it. And it's an exciting time for Impact Minerals and I hope that the equity markets community listening got value out of this conversation because we certainly did. So. Thank you very much.