The Andromeda (ASX:ADN) share price is sliding 10% today. Here’s why

The resources company seemingly had a productive first quarter of financial year 2022. So, why the steep decline?

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The Andromeda Metals Ltd (ASX: ADN) share price is sliding today on the back of the company’s quarterly activities report.

Over the quarter ended 30 September 2021, the company worked to commercialise product from its Great White Kaolin Project, entered a new joint venture, and completed a $15 million share purchase plan.

However, the market has reacted poorly to Andromeda’s release. At the time of writing, the Andromeda share price is 18.8 cents, 10.71% lower than its previous close.

Let’s take a look at the quarter that’s been for the mineral exploration company.

Andromeda share price falls on quarterly report

The Andromeda share price has slipped despite the company releasing an outline of a seemingly productive quarter.

Great White Kaolin Project

The company’s 75%-owned Great White Kaolin Project is still pending approval, with its mining lease application under assessment by regulators.

Andromeda has been focusing on signing binding offtake agreements for the approximately 40,000 tonne per annum of product remaining from the phase 1 plant production capacity.

The additional product will go to the ceramic sector. The company has sent samples to potential customers and distributors for approval testing. The product received good results and negotiations are ongoing.

The project’s definitive feasibility study (DFS) is also continuing. The project’s trademarked PRM products, useful for making coatings, and CRM products, used in ceramics, are incorporated in the DFS.

Andromeda is continuing its studies to find other uses for Great White Kaolin products.

The company began a bulk sample drilling program at the Great White project. Once processed, the material from the program will provide around 1.5 tonne of high purity halloysite kaolin to Andromeda’s 50%-owned Natural Nanotech Ltd.

Natural Nanotech is partnering with the University of Newcastle’s Global Innovative Centre for Advanced Nanomaterials to research and develop new applications of halloysite nanotubes. Such applications could include carbon capture and storage, and energy storage.

The samples will also provide material for a cosmetics marketing exercise. Andromeda notes high-purity halloysite-kaolin is highly valued in the cosmetics industry. The product will also be tested to find if it can be used in the concrete industry.

The company’s kaolin is also undergoing testing that might see it used as a feedstock for high purity alumina.

Joint ventures

Additionally, Andromeda signed a binding heads of agreement with Peninsula Exploration Pty Ltd to form the Eyre Kaolin Project Joint Venture.

Peninsula holds four exploration licences covering around 2.8 square kilometres on South Australia’s Eyre Peninsula. The licences are near the Great White project and contain halloysite kaolin targets.

Andromeda could earn an 80% interest in the Eyre Kaolin tenements by spending $2.75 million at the project over 6 years.

Further, the company’s joint venture partner, Cobra Resources PLC, met an expenditure commitment and earned a 65% interest in Eyre Peninsula Gold Project tenements over the quarter. Cobra plans to spend another $1.25 million to earn a 75% interest in the project.

Capital raise

Andromeda also completed a $15 million share purchase plan during the quarter.

It followed on from a $30 million placement completed on 30 July.

The funds are set to go towards purchasing equipment and product development.

Andromeda share price snapshot

The Andromeda share price gained 6.6% over the first quarter of financial year 2022.

However, this year has taken its toll on the company’s stock. Right now, it’s trading for 32% less than it was at the start of 2021.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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