Emerging mineral processing technology firm Zeotech (ASX:ZEO) has locked in a five-year deal worth nearly $200 million with a China-based global trading house for kaolin supply.
The company inked a binding term sheet with Jiangsu Mineral Sources International Trading Co (MSI) – one of the world’s largest traders of kaolin – for 950,000 tonnes of direct shipping ore (DSO) kaolin products.
DSO describes minerals that can be dug up, transported to port and loaded straight onto a ship without the need for processing.
Zeotech says its Toondoon Kaolin Deposit is confirmed to be of “ultra-high purity”, with a kaolinite content of over 90% in the ore clays, making it ideal for kaolin DSO, cosmetic kaolin DSO and economic AusPozzTM production.
The AusPozzTM is a high-performance metakaolin for use in low-carbon concrete, producing 79% less carbon emissions than ordinary Portland cement.
Shares rallied over 25% to an intraday high of $0.074 following the news on Monday (11 August) and ended the session up over 15% at $0.068.
CEO James Marsh, who has been in the industry for nearly four decades, says it is the biggest offtake deal ever done for kaolin in Australia.
“It represents getting close to $200 million of revenue in the first five years alone. So very significant revenue for the company,” he says.
“We’re looking at a margin probably around about 30-35% based on our Prefeasibility numbers that we’ve published, and that will give us an EBITDA in the region of $10-12 million per year, starting from early next year.”
This is based on all-in sustaining costs outlined in the recent AusPozz Project Prefeasibility Study (PFS) of $105.30 per dry tonne.
The offtake term sheet establishes the key binding commercial terms agreed upon between the parties and provides the framework to advance to a binding offtake agreement, which is expected to be completed by early October.
The term sheet outlines the supply of 800,000 tonnes of kaolin DSO and 150,000 tonnes of cosmetic kaolin DSO over a five-year period.
The agreed price and committed minimum annual volumes for kaolin DSO products are within 5% of the weighted average sale price of $196 per wet tonne used in the PFS.
Marsh says Zeotech kept the supply agreement to one customer only, to simplify the process.
“Dealing with one customer with such a large amount is very unusual in the industry,” Marsh notes. “Normally, you have to have dozens or even hundreds of customers with individual contracts.
“This is very simple. One customer, DSO, and also FOB business, so free onboard business. So that means that all we do is get the material to the port, and then they deal with the rest.
“So we haven’t got any risk. It’s very significantly derisked right through the whole process here.”
Marsh says now that the agreement is legally binding, it is “all systems go”.
Zeotech has now engaged engineering firm GHD, which is already working on the road upgrade designs.
“They’ve identified some very interesting opportunities to save money as well and do the work much more quickly,” Marsh explains.
“According to this offtake we signed, we need to get all of our permits/permissions in place by end of Q1 next year.
“Our target is to get this done in advance of Q1 next year, and then we can move into supply shortly afterwards.”
Zeotech expects to start mining in the first half of 2026.
The early cashflow will support the development of the AusPozzTM Project.
Write to Angela East at Mining.com.au
Images: Zeotech
