Our Wise-Owl critical metals Investment, FYI Resources (ASX:FYI) is progressing an innovative high purity alumina (HPA) project that could transform the industry, making it much cleaner and cheaper to produce.

The company continues to progress its joint venture with leading global aluminium player Alcoa for mass production of HPA, with the partners now working on engineering details for a demonstration plant to be based in WA.

On the application and marketing side, FYI and graphite company Ecograf (ASX:EGR) are working together on an anode coatings development program - essentially determining if their activities combined can further enhance performance of lithium ion batteries through ‘doping’ Ecograf’s spherical graphite with FYI’s 4N (ie 99.99% pure) HPA. Earlier today, the companies reported further positive results from the program, with the electrochemical performance in lithium-ion coin cells in excess of 110 continuous cycles achieving near theoretical irreversible capacity and outperformed standard industry materials. In addition, more encouraging results from the application FYI HPA being applied to the polyolefin separators showed a further improvement of 7.94 mAh/g reversible capacity.

This is interesting as polyolefin separators composed of polyethylene and polypropylene are the separators of choice in commercial lithium-ion batteries - being able to provide superior separators could open further markets and deliver higher margins for both FYI and Ecograf.

Up next for FYI, we’re keen to see an update on how the Alcoa joint venture is progressing, with Stage 2 funding decision looming in December.

Readers who follow our Investment Portfolios will know that we have been making strategic Investments in commodities that have made critical minerals lists for the EU, USA, Japan, India and Australia.

These minerals are considered critical to the digitisation and decarbonisation macro thematic and include lithium, graphite, cobalt, nickel and PGE’s, to name a few.

Over the weekend, the following speech from the president of the European Commission, Ursula von der Leyen, gave a speech announcing that the EU would look to pass a “European Critical Minerals Act”.

The aim is to avoid the position Europe finds itself in with oil and gas, where it relies on a single trading partner like Russia.

The act would see the EU put in place:

1. Agreements with partners like Chile, New Zealand, Mexico, India and Australia for the supply of critical minerals.
2. Identification of strategic projects across all along the supply chain from mine sites to processing/refining projects.
3. The act would also see the setting up of strategic reserves of these critical minerals.

All of this bodes well for our Investments across commodities identified as “critical minerals” giving these projects strategic importance on the world stage.

To see a list of all the critical minerals in the Australian Critical Minerals strategy document, check out the following link.

Here is a snippet from that speech:

Our Wise-Owl critical metals Investment, FYI Resources (ASX:FYI) is progressing an innovative high purity alumina (HPA) project that could revolutionise the industry.

FYI has partnered with the Australian subsidiary of the leading global aluminium producer, the +$10B capped Alcoa, to develop the HPA project via a joint venture (65% Alcoa : 35% FYI).

The project aims to produce HPA that is purer and substantially cheaper than the current predominant process, and leaves a much smaller environmental footprint.

The JV is currently developing a demonstration plant in WA which will produce up to 240 tpa HPA.

Earlier today, FYI announced that Hatch Engineering was awarded the engineering services contract to support work for the demonstration plant.

With over 70 offices around the world, Hatch is a leading, global multidisciplinary management, engineering and development consultancy with extensive experience in critical minerals.

The Hatch appointment fits in with the main objective we’d like to see FYI deliver in 2022 — commissioning the demonstration plant. The key catalyst for this will come in December with the $50M funding decision by Alcoa.

While we are not privy to Alcoa’s internal discussions regarding its funding decision, there are positive indications of its continued commitment to the project. We note that Alcoa did mention the HPA project in its latest quarterly presentation and commentary.

We also take confidence in seeing FYI management increase their own holdings — managing director Roland Hill recently acquired $190k of shares at a premium through an off-market transaction.

For more on our analysis on FYI Resources, here is a link to our FYI Investment memo.

Yesterday we saw some direct buying off market from FYI’s Managing Director Roland Hill.

The purchase was for $190k at an average price of 19c per share, a premium to the current market price for FYI.

FYI’s share price is down ~50% from where it was earlier in the year at ~40c per share.

With the share price down so much, we always like it when the company directors step up and start to buy shares on or off market. Director buying signals to us that the people closest to the company clearly see some value in topping up their shareholdings.

To see all of the key objectives we want to see FYI achieve in 2022, the reasons why we continue to hold FYI in our portfolio and the key risks to our Investment thesis, check out our 2022 FYI Investment Memo here.

Spanning three days on the pristine Sunshine Coast of Queensland, the Noosa Mining Investor Conference kicked off its 12th year on Wednesday. Attracting a diverse and large spread of corporates, brokers, retail and institutional investors, this year’s event featured over 60 companies presenting and over 1,000 people in attendance, all hosted within the coastal town's Peppers Resort.

At the event, we caught up with a number of executives from our Investment companies (including AKN, AOU, BPM and PFE) as well as companies of interest, either as potential additions to one of our Portfolios, or to gain expert insight to macro and regional headwinds impacting the markets.

The conference is held in the ideal location to mix work with pleasure, and meet a host of CEOs of ASX juniors. Each day ends with a short ‘business at the bar’ session that quickly morphs into talking tactics about where to eat and drink. On Thursday and Friday nights, many head to the Noosa Surf Club for its networking sessions, enjoying its glassed indoor area and open deck to the beach.

We look forward to providing updates on companies we met with down the road.

China plans to make up to US$1.1 trillion in financing available for infrastructure spending, which we think will increase commodity demand. Read the following Bloomberg article for details.

Read the full article here.

Below are our key takeaways:

• China is making 7.2 trillion yuan ($1.1 trillion) in funds available for infrastructure spending.
• According to Citigroup, infrastructure investment in 2022 is likely to rise by 7.7% versus 2021.
• President Xi Jinping has called for an “all out” effort to increase infrastructure spending this year to fuel economic growth and meet a GDP growth target of around 5.5%.

The Bloomberg article touches on the impacts of China’s COVID induced lockdowns on the domestic economy.

With economic growth tipped to slow, the Chinese government is getting ready to lean on fiscal stimulus through infrastructure investment to spur economic growth.

We think this type of fiscal stimulus is likely to become a common theme in China and the West, with macro themes like decarbonisation requiring massive CAPEX.

This infrastructure spending forms part of our “commodities supercycle” investment thesis, where we see increased fiscal stimulus and CAPEX investment spurring higher demand for commodities already facing supply shortages.

The following Bloomberg article highlights China’s plan to spend up to US$220 billion to spur economic growth through infrastructure spending.

All of this new infrastructure will require more commodities.

Read the full article here.

Below are our key takeaways:

• China’s Ministry of Finance is considering US$220 billion of infrastructure funding aimed at shoring up the country’s beleaguered economy.
  
  
• The funding is to be brought forward from next year’s quota, marking the first time the issuance has been brought forward due to concerns around the dire state of the world’s second largest economy.
  
  
• The funding would primarily be used on infrastructure spending to boost an economy hit by Covid lockdowns and a housing downturn.
  
  
• Commodities rallied in European trading hours following the news, with copper moving 3.6% higher on the London Metal Exchange.

For over two years, we have been writing about an upcoming commodities supercycle brought about by infrastructure spending, following decades of underinvestment in the “real economy”.

All this investment in the “real economy” requires raw materials, which is why we think the macro backdrop for commodities over the next decade is strong.

The Bloomberg article highlights the readiness of the Chinese government to lean on fiscal stimulus to spur economic growth at a time when the Chinese economy is slowing down.

Generally, governments would try to respond to slowdowns in economic growth by cutting interest rates. With this tool exhausted after the COVID pandemic, we think infrastructure spending will become the new policy of choice for governments worldwide.

Again, this infrastructure spending will increase demand for commodities which we expect will take commodity prices higher.

The following Bloomberg article showcases the moves major carmaker Volkswagen is making in the batteries industry.

Read the full article here.

Below are our key takeaways:

• VW is pressing forward with investments along its battery supply chain, commencing construction at a new cell factory in Salzgitter, Germany, one of five facilities in Europe under the carmaker’s PowerCo subsidiary.
  
• Salzgitter is home to VW’s main motor factory, and it is where the company last year opened an $80 million facility to research, develop and test EV batteries.
  
• Roughly $2 billion will be invested in the new cell factory, where production is scheduled to begin in 2025.
  
• VW expects its battery business to generate €20 billion in revenue by the end of this decade.
  
• VW CEO Herbert Diess said, “We are invested in some startups and we are looking forward to a joint venture together with Bosch for the machine tools and equipment for those plants, so we’re really gearing up to become one of the bigger battery cell producers”.

The news is just another sign that downstream investment in battery supply chains is showing no signs of slowing down.

VW is one of the world's largest carmakers and is heavily investing in downstream production capacity. It expects this part of its business to generate over €20 billion in revenues by the end of the decade.

This is a situation where investment in midstream/downstream (manufacturing/battery industry) is far ahead of upstream investment (mining), this leads to the supply/demand imbalances for the raw materials required to produce batteries only becoming worse.

The imbalance comes from the timing of these mega projects. Building a downstream / midstream facility could take 1-4 years whereas it takes around 7 years on average to bring a new resource discovery into the production stage.

As a result, we think that raw materials prices will remain high for at least the next decade whilst the mining industry catches up to demand.

Investment Memo: FYI 2022

Objective #1: Commission demonstration plant

Our Wise-Owl specialist batteries metal tech investment, FYI Resources (ASX:FYI) has announced the completion of the first of three development phases for its high purity alumina (HPA) project.

The HPA project is a joint venture with the Australian subsidiary of the +$10B capped Alcoa — a leading global aluminium producer (65% Alcoa : 35% FYI). The project aims to produce HPA that is purer and substantially cheaper than the current predominant process, and leaves a much smaller environmental footprint.

The JV now progresses to Phase 2, the development of a demonstration plant in WA which will produce up to 240 tpa HPA. Whilst this is less than the initial 1,000tpa production goal, the quantity isn’t the important aspect.

What matters is seeing FYI’s technology scale up from the pilot plant level. If that can be achieve, the JV will likely progress to the third and final phase — the development of a 9,000 tpa production facility.

HPA is drawing heightened attention as a key component for separators in electric vehicles batteries and demand for HPA is soaring as consumers switch from gas guzzlers to EVs, with the market expected to tip into a supply deficit from around 2024.

Today’s news fits in with the main objective we want to see FYI deliver in 2022 — to commission the demonstration plant. The key catalyst for this will be Alcoa signing off on the demonstration plant funding, which is expected in December 2022.

Yesterday the Australian federal government updated its “critical minerals strategy” documents and added two new minerals to the list - silica and high purity alumina.

The list of now 26 critical minerals are made up of those that are needed to manufacture high tech devices, military applications and, importantly, those needed to aid the transition towards a low carbon economy.

High purity alumina has several different industrial applications from glass to LED lights, more recently however it is starting to be considered a “critical” mineral due to its use in high energy density batteries such as those used in electric vehicles.

Our battery metals investment FYI is aiming to be the first to market to deliver high purity alumina using a new kaolin clay based process that is cleaner, purer, and much less expensive than traditional methods of alumina production. It is doing this via a partnership with US$14 billion global alumina giant, Alcoa.

With ESG considerations becoming more and more important and high purity alumina now recognised as a “critical mineral” we expect the market to become more interested in FYI’s tech.

On Thursday, our high purity alumina (HPA) investment FYI added an impressive industry veteran to their team.

Mr. Phil Thick has been appointed as a strategic advisor to FYI’s Board, having previously held senior positions at Tianqi Lithium, Shell Australia, Coogee Chemicals and Alcoa Australia. His impressive track record includes instrumental roles in several developments within battery and energy related industries, which certainly fit FYI’s downstream and value-add battery mineral business.

We like this addition to the team, and suspect that Phil’s previous role at Alcoa Australia can only benefit the FYI- Alcoa joint venture.