WA Kaolin to list on ASX tomorrow after reeling in $22 million in strongly supported IPO

WA Kaolin Limited (ASX:WAK) will list on the ASX tomorrow after an initial public offering (IPO) attracted strong investor demand and was fully subscribed, raising $22 million at an offer price of 20 cents per share. The company will begin trading under the ticker code ASX:WAK at 8:30am AWST/11:30am AEST with a market cap of around $56.56 million. Funds raised in the PO will be used in a staged ramp-up of the company’s Wickepin Kaolin Project in WA, which is already producing 150 tonnes of product weekly and has solid offtake agreements in place. “Poised to capitalise on demand” WA Kaolin chief executive officer Andrew Sorenson said: "Thursday will be a tremendously momentous day in WA Kaolin's history. “The founders of WA Kaolin have already done the hard yards and sunk in over $40 million of their own funds to significantly de-risk the project and prove up our kaolin product to start supplying the market. “With the successful $22 million IPO, the company is now perfectly positioned to capitalise on meeting the significant and increasing demand for Kaolin in the global market. “WA Kaolin has a simple vision to be a globally significant kaolin producer by building a multigenerational industrial minerals business and the listing of the company on the ASX will only accelerate our ability to deliver sustainable value to our customers, partners and shareholders." Unique dry processing WA Kaolin co-founders and owners have invested in extensive R&D of the product and processes to optimise its proprietary dry processing method. Sorenson said: “The dry process is unique because it's tailored to the resource which is high purity - in fact some of the lowest levels of impurities you’ll find anywhere in the world – and because of that we can operate a very low cost process. Typically, kaolin producers mine secondary resources which have high levels of impurities and operate chemical treatment, magnetic separation and generally wet process to produce a quality product for the market. Sorenson said: “The K99 process has no chemicals, there’s no magnetic separation, there’s no tailings dams, and it’s a very environmentally friendly low-cost production process which we’re very proud of. “We’ve been bringing product to market using that process for several years now.” WA Kaolin Project location and road access. Offtake agreements in place The project currently produces around 5 tonnes per hour out of the company’s Kwinana plant, which operates five days a week, resulting in shipment of around 150 tonnes of product to customers each week. Sorenson said: “Those customers are in Asia, mostly China, Japan, Vietnam and Thailand and we’re serving customers in all the target market verticals that we want to be in as well such as ceramics, fibreglass, paint and coatings, and cosmetics. “We’ve successfully negotiated offtakes with a number of customers, the first of which was with a company called Stanco, they’re based in Taiwan and sell into the fibreglass industry in China. “They’ve written an offtake agreement over six years of 432 million tonnes and when you add that together with LOIs from other customers we’ve got 83% of the production for the first three years at Wickepin spoken for in those agreements.” Fully-funded for Stage 1 WA Kaolin is targeting a sequential ramp-up of production over the coming years to become a multi-generational industrial minerals business and a leading global supplier of kaolin. The company is now funded to commence Stage 1 of its ramp-up to 200,000 tonnes per annum of kaolin from Wickepin, from which Stage 2 ramp up to 400,000 tonnes per annum will follow. Sorenson said: “We’ve been about de-risking this process and we’ve done that by securing offtake agreements - and now these customers are wanting more than we can produce so we really need to press the button on this project. “That’s why we’ve come to the market, so we can do the capex to build this plant out at Wickepin. The capex is $18 million project, which will be funded out of the proceeds of the IPO and that will deliver the first stage of production at Wickepin. De-risking ramp up Sorenson said: “We’ve got a staged ramp-up - which is part of our strategy to de-risk the project - so we’re going to do the first 200,000 tonnes out of the IPO proceeds and then we’re going to follow that up in three years with another stage. “[The second stage] bolts on another identical module which adds on another 200,000 tonnes taking us to a total of 400,000 tonnes per annum capacity. “We’ll fund that out of cash flow and we’ll be able to track the demand of the market and implement it at the same time, so by having this modular scale-up we reduce the risk because we can implement this production increases according to our cashflow and according to the market.” Dividends by year three Sorenson also said that the company would be well-placed to pay dividends by the third year of operations. He said: “That’s another unique thing about our project, because the capital requirements for these expansions are quite modest (only $14 million per module), we can afford to pay a dividend and still fund the growth of the business out of cashflow. “The directors have put together a policy of paying 66% of NPAT as a dividend as of the third year of production going forward. “So that is going to provide a very strong dividend flow to investors.”