Suvo Strategic Minerals Limited

Arrowhead is updating its coverage on Suvo Strategic Minerals Limited (Suvo, SUV, or the Company) with a fair value bracket of AUD 0.12 per share to AUD 0.19 per share (share price on June 05, 2024: AUD 0.052) based on a Sum of Parts (SOP) methodology.

• Suvo generated AUD 3.1 mn in revenue in Q3 2024 with sales of 5,321 tons, resulting
  in an average selling price of AUD 588 per ton. During Q3, SUV received purchase orders from five new customers totaling 730 tons, generating an additional AUD 0.63 mn in annual turnover.
• Suvo finalized a sales agreement with Fagron, a European pharma company, to supply 300 metric tonnes of hydrous kaolin over 3 years for a sum of AUD 588k; the deal will enable Suvo to command premium pricing and expand its sales into the European pharma market
• Suvo signed a non-binding MoU with PERMAcast and Dowsing to develop low-carbon concretes for deployment in various end-use markets serviced by these companies
• Suvo executed a non-binding term sheet with PERMAcast to enter into a joint development agreement (JDA) and incorporate a joint venture to develop and commercialize low carbon geopolymer concrete (GPC) products
• In late April 2024, Suvo successfully completed trial pours of Colliecrete, facilitated by
  Dowsing at Peel Resources facility (a waste management company in Western Australia); this demonstrated scalability and application of Suvo’s low-carbon geopolymer concrete; (7) SUV ppointed Dr. Anda and Mr. Snowsill on a part-time yet formal arrangement to accelerate the commercialization of its geopolymer concrete; Moreover, Mr. Aaron Banks was appointed as the executive chairman to advance the development of its geopolymer IP; (8) Suvo raised a total of AUD 4.5 mn through placement and SPP to support the ramp-up of Pittong operations and to advance its geopolymer initiatives.

News Release:

• Suvo Strategic Minerals is pleased to announce that it has executed a non-binding term sheet with Polvine Pty Ltd (PERMAcast). The term sheet provides a 30-day exclusivity period whereby Suvo and PERMAcast will negotiate and execute a binding Joint Development Agreement (JDA) for the delivery of low carbon geopolymer concrete (GPC) products and projects.
• Suvo and PERMAcast propose to deliver low carbon GPC products and projects and otherwise commercialize the IP created under the JDA through the SPV Entity, in which Suvo and PERMAcast will each hold 50% of the shares issued.
• The proposed JDA terms stipulate that PERMAcast will provide all the necessary capital funding required. whilst leveraging their expertise to fast-track Suvo’s the commercialization process and industry validation, while both retain their existing intellectual property rights.

Video Highlights:

• Suvo Strategic Minerals interim CEO Bojan Bogunovic and non-executive chairman Aaron Banks joined Proactive’s Stephen Gunnion with a rundown of the company’s quarterly activities report, highlighting revenue of AUD3.1 million for the quarter ended 31 March, 2024, from the sale of 5,321 tonnes of hydrous kaolin.

Report Highlights:

• During the quarter, Suvo generated AUD 3.1 million in sales, up 15% compared to FY23 quarterly average. New purchase orders for hydrous kaolin from the Pittong operation weighing 730 tonnes generated an additional AUD 0.63 million in annual turnover.
• Five new customers buying at AUD 863/tonne and over 20 potential end users throughout Asia Pacific continuing to test the product samples of Suvo’s hydrous kaolin indicates market expansion as projected.
• Suvo successfully completed a Placement and Share Purchase Plan (Capital Raise), raising AUD 4.5 million to commercialize its low carbon geopolymer concrete formulation, “Colliecrete”, which achieves a 50% reduction in GHG compared to Ordinary Portland Cement (OPC).

Release Highlights:

• Suvo successfully completes a series of 5 x 2m3 trial pours of Colliecrete, a low carbon geopolymer concrete, in preparation for the Bunbury Outer Ring Road Project (BORR).
• Colliecrete achieves a GHG emissions reduction of approximately 50% compared to Ordinary Portland Cement (OPC), the single largest source of global emissions, equivalent to the entire global car fleet.
• The trial pours demonstrate scalability and application (moving from lab scale trials to a series of 5 x 2m3 pours) of low carbon geopolymer concrete to Dowsing and PERMAcast.

Release Highlights:

• Agreement with Dowsing Group to demonstrate Colliecrete pouring on the Bunbury Outer Ring Road Project (BORR).
• Dowsing is one of Australia’s leading civil contractors specializing in slipform concrete pavements, barriers, kerbing, footpaths, hardscapes and civil services.
• Peel Resource Recovery, a waste management company located in Kemerton, Western Australia, roughly 20 kilometers from the BORR, to provide land and services for trial pours of Colliecrete planned prior to the demonstration pour on the BORR.
  

• Non-binding Memorandum of Understanding (“MOU”) executed with Dowsing Group (“Dowsing”).
• Dowsing is one of Australia’s leading civil contractors specialising in slipform concrete pavements, barriers, kerbing, footpaths, hardscapes and civil services.
• Notable projects Dowsing have been a part of in Western Australia include the Bunbury Outer Ring Road, Onslow Iron Project, Kwinana Freeway Widenings, Metronet, Mitchel Freeway H2H, Leach Highway Upgrade, Armadale Road Upgrade.
• Dowsing is also known for its innovation and outside the box thinking, providing various unique solutions such as slipforming conveyor footings for large scale overland conveyors at Rio Tinto’s Silvergrass East iron ore mine.
• The purpose of the MOU is to collaborate in good faith in progressing and negotiating a strategic partnership agreement to exploit Suvo’s licensed intellectual property, a low carbon geopolymer concrete plant and formulations.
• The intention of the agreement is for Suvo and Dowsing to work together to develop a low carbon concrete for deployment in various end use applications.
• The MOU with Dowsing follows the recently announced MOU with Polvine Pty Ltd (“PERMAcast”), Western Australia’s leading supplier of precast and prestressed concrete products.

• Share purchase plan (SPP) closed significantly oversubscribed with AUD 2.663M of applications.
• In recognition of the strong level of shareholder support, the Suvo board of directors (Board) have exercised their discretion to increase the SPP offer to AUD 2M (before costs), resulting in a scale back of AUD 0.663M.
• The SPP follows the successful completion of a AUD 2.5M placement, bringing total new capital raised to AUD 4.5M (before costs).
• Funding from the placement and SPP will support the ramp up of production at Pittong and accelerate the commercialisation of Suvo’s IP for a low carbon geopolymer concrete.

Arrowhead is initiating coverage on Suvo Strategic Minerals Limited (Suvo or SUV or the company) with a fair value bracket of AUD 0.10 to AUD 0.18 per share (share price on February 23, 2024: AUD 0.036) derived using a Sum of Parts (SOP) methodology.

Report Highlights:

• Suvo is Australia’s only hydrous kaolin producer, with operations based in Pittong, Victoria. The company is also engaged in exploring near-term kaolin and high-purity silica assets with wholly owned Gabbin (kaolin), Eneabba and Muchea (silica sands) projects located in Western Australia. 
• The company’s core operations are located at its Pittong facility. In January 2021, Suvo acquired the Pittong processing plant from the French multinational, Imerys S.A for AUD 3 mn. The Pittong deposit also holds a mineral resource base of 3.74 metric tons (Mt) of indicated and 1.97 Mt of inferred resources, located only 2km from the processing plant.
• In February 2023, SUV completed the upgrade and modernization of the Pittong plant by investing AUD 5 mn in restoring its name-plate processing capacity of 60,000 tonnes per annum (tpa). Following the upgrade, the plant was run continuously over five days, achieving a production output of over 1,000 tonnes. This validates the company’s ability to ramp up its annual sales to 50-60kt based on demand for the output.
• Suvo produced ~18kt of hydrous kaolin in FY 2023, generating a revenue of AUD 11mn. It aims to operate the plant at its full capacity by FY 2026.
• In H2 2023, Suvo appointed three key sales and distribution personnel in South-East Asia to boost the sales of its kaolin output. These personnel bring on board more than 60 years in the kaolin space and have worked for large companies and clients in industries such as paints, ink, rubber, plastics and paper. Further, the company has appointed several established global chemical distribution companies throughout Asia to provide expertise and distribution networks, ensuring efficient product delivery and local stock availability.
• In February 2024, Suvo raised AUD 2.5 mn from the issue of 83.33 mn shares in a placement and up to AUD 1 mn (33.33 mn shares) under a share purchase plan (on the same terms as the placement) to ramp up Pittong production and to support research and development (R&D) activities to advance geopolymer concrete.
• The company has received purchase orders from four new customers with an annual demand of ~630 tonnes, generating additional revenue of AUD 0.43 mn.
• Suvo owns the Trawalla kaolin deposit (MIN 5365), which is located only 23 km from the Pittong processing facilities. MIN 5365 has a total indicated and inferred JORC-compliant mineral resource estimate (MRE) of 12.7 Mt of kaolinized granite, yielding 3.5 Mt (saleable) of <45µm bright white kaolin with bleached ISO brightness of 83.7. The company holds all permits and licenses but has yet to start mining activities at this greenfield mine site.
• The company also owns two projects that are currently in the exploration stage:
  • Gabbin Kaolin Project: The project, located 15km northeast of Perth, Western Australia, is at the pre-feasibility study stage with a total MRE (indicated & inferred) of 72.5 Mt of kaolinized granite.
  • Eneabba Silica Sands Project: The project, located 300km north of Perth, Western Australia, is at scoping study level with further drilling required to extend and increase the resource base of 216Mt.
• In October 2023, the company signed an intellectual property (IP) agreement with Murdoch University for a geopolymer concrete batching plant and low-carbon concrete formulation ‘colliecrete’. In January 2024, Suvo was invited by the Sustainability Waste Alliance (SWA) to complete the demonstration pour of colliecrete on a section of the Bunbury Outer Ring Road Project, the largest road infrastructure project in the history of the South-West of Western Australia. If the demonstration is successful, it can present the opportunity to use colliecrete on other government infrastructure projects.
• The company signed a non-binding memorandum of understanding (MoU) with PERMAcast to further develop end-user applications for its licensed intellectual property (IP), low-carbon concrete.
• In November 2023, SUV hired German thermal processing specialists IBU-tec Advanced Materials AG (IBU-tec) for lab-scale testing for its hydrous kaolin to produce calcined kaolin, which is generally sold at a 20-40% premium to kaolin.
• Suvo also commenced lab-scale trials for blending 10%, 20% and 30% ground calcium carbonate (GCC) with Pittong’s hydrous kaolin to increase the production of saleable products beyond the current capacity of 60k tpa.
• The company is listed on the Australian Securities Exchange (ASX) under the ticker SUV.