Eco Investor September 2016

Pre-Profit Securities

Clean TeQ Shares Soar

In five months Clean TeQ Holdings' share price has soared 443 per cent or 51 cents from 11.5 cent in March to an eight year high of 62.5 cents in August.

The latest good news is its Chinese joint venture company signing its first water treatment deal. In June Clean TeQ and Jinzhong Hoyo Municipal Urban Investment & Construction Co., Ltd (Hoyo) formed a joint venture company to win water treatment contracts in Shanxi Province. At the time, in-principle agreement had been reached to build, own and operate a Clean TeQ Continuous Ionic Filtration (CIF) water treatment plant at an existing wastewater treatment facility owned by Qixian Hoyo Waste Water Treatment Co.

All government approvals for the establishment of the joint venture company, Shanxi HOYO Clean TeQ Environmental Company Ltd, have now been received; and a binding agreement for the joint venture company to deliver the initial project has now been signed.

The Clean TeQ CIF water treatment plant will treat up to 13,000 tonnes of effluent per day for 20 years.

Peter Voigt, executive director of Clean TeQ, said "This will be the first commercial scale plant built in the world using Continuous Ionic Filtration (CIF) to upgrade treated effluent to surface water discharge quality. The plant will serve as a demonstration site to showcase the technology and its application to resolving some of the world's most pressing water problems."

Another piece of good news for Clean TeQ was an upgraded resource estimate for its Syerston mine in NSW that demonstrates its potential to become a leading global supplier of cathode raw materials to the lithium-ion battery industry.

The upgrade makes Syerston one of Australia's largest undeveloped nickel/ cobalt resources, while the cobalt grades mean Syerston could be one of the largest global suppliers of cobalt outside of Africa.

The Syerston Scandium Project Feasibility Study has just been released based on a $100 million processing plant with designed capacity of 64,000 tonnes per annum of ore feed over an initial 20 year mine life. This shows a post tax net present value of $273 million and a 33 per cent post tax internal rate of return based on a long term scandium oxide price of US$1,500 per kilogram.

The current global supply of scandium oxide is about 10 to 15 tonnes per annum with prices ranging from US$2,000-3,000 per kilogram, it says.

A Nickel/ Cobalt Project Prefeasibility Study will soon be released. This will assess the potential for a 1.5-2.5 million tonne per annum mine to produce high purity nickel sulphate and cobalt sulphate products for the lithium-ion battery industry.

The project has the potential to generate significant scandium as a by-product, opening options for a step change reduction in scandium oxide production costs, said the company.

Clean TeQ says cobalt and nickel are critical raw materials in the production of cathodes for the lithium-ion battery (LiB) market. They are used in the production of precursor materials, which are converted to cathode active material for use in the batteries. Nickel and cobalt need to be supplied in specific chemical form - as hydrated metal sulphates - for the production of precursor material.

The cathode is important to the performance and cost-competitiveness of a lithium-ion cell. Raw materials can represent 50 to 70 per cent of a cell's manufacturing cost, depending on the chemistry used, so nickel and cobalt can represent up to 80 per cent of the metal cost in the cathode or about 20 per cent of the total cell cost.

While there is a large market for nickel in the global steel sector, almost all cobalt is produced as a by-product from nickel and copper mines. Thus cobalt is one of the few industrial metals that has almost no source of primary supply. In 2015, global refined production was around 90,000 tonnes. "To meet the demands of the growing LiB market, there will need to be a significant increase in global supply of cobalt," says Clean TeQ.

"Syerston's high cobalt grades, combined with Clean TeQ's proprietary ion exchange technology to produce the specific cobalt and nickel sulphates required by lithium-ion cell manufacturers, positions the company to benefit from strong forecast growth in demand for LiBs," it said.

The developments mean Clean TeQ is aiming to supply three large markets - scandium for light weight alloys in the transport sector, nickel and cobalt for the lithium-ion battery market, and treating wastewater in China. (ASX: CLQ)

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