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Altech ticks boxes on path to production

As Altech Chemicals (ASX: ATC) progresses its high-purity alumina (HPA) development project, managing director Iggy Tan believes HPA has a similar thematic to lithium a decade ago.

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Altech ticks boxes on path to production Altech ticks boxes on path to production Altech ticks boxes on path to production Altech ticks boxes on path to production Altech ticks boxes on path to production

Altech’s board of directors, dignitaries and global partner representatives at the ground-breaking ceremony in Malaysia

Altech is aiming to become one of the world's leading suppliers of HPA and Tan, a lithium trailblazer, foresees a similar trajectory for HPA.

Over the past decade, market awareness and the lithium price have increased with lithium-ion batteries becoming commonplace and the shift towards electric vehicles gaining momentum.

"The thematic of HPA is very similar to lithium 10 years ago," Tan told RESOURCEStocks.

"It will be a critical ingredient for lithium batteries, in high demand, with very limited supply coming on stream." 

Tan is keenly aware of lithium's early days, having been responsible for the capital raising, construction and start-up of Galaxy Resources' Mt Cattlin spodumene mine in Western Australia and Jiangsui lithium carbonate plant in China.

 ltech hemicals  ggy an Altech Chemicals MD Iggy Tan

He said there were two high-growth sectors driving demand for HPA, namely the LED and the lithium-ion battery industries.

HPA is a critical ingredient required for synthetic sapphire, used in LED lights, electronics and scratch-resistant glass in smartphones.

The demand for LED units alone has been forecast to increase from 0.8 billion units in 2015 to 4.1 billion units by 2025, as part of an increasing shift from incandescent to more environmentally-friendly lighting.

There is no substitute for HPA in the manufacture of synthetic sapphire, Altech emphasised.

In lithium-ion batteries, HPA is an important coating in separators as well as anodes and cathodes to prevent shrinkage, combustibility and improved battery safety and life.

Global HPA demand was growing at an annual rate of 16.7%, the company said.

"HPA is a critical ingredient in supporting the renewable energy sector," Altech said.

The company is currently determining the final stages of project finance that will see it mine kaolin from its Meckering project, east of Perth in WA, and ship it to a 4,500 tonne per annum HPA processing plant in Johor, Malaysia.

The project economics for the high-margin, high value proposition outline a pre-tax NPV (7.5% discount) of US$1.1 billion, IRR of 33% and a payback period of 2.2 years.

A ground-breaking ceremony attended by international dignitaries was held at Johor in August and the fully-funded A$10 million (US$7 million) stage one construction work for the plant is now underway.

 ltech chairman uke tkins right with key stakeholders at the groundbreaking ceremony Altech chairman Luke Atkins (right) with key stakeholders at the ground-breaking ceremony

Altech expects to produce 4N (99.99%) HPA, that attracts a price of US$27,000-$40,000 per tonne, for total operating costs of $10,500/t, considerably lower than established HPA players.

The make-up of Meckering's aluminous clay means Altech can bypass the typical refinery steps from bauxite to smelter grade alumina to aluminium to HPA, producing 99.99% HPA in using a single "off-the-shelf" hydrochloric acid-based process.

The company has further highlighted its "green" credentials after recently being contacted by a green investment fund prompting it to conduct a mine-to-gate study.

Altech concluded its project will realise a 46% reduction of greenhouse gases per tonne of HPA compared with the standard alkoxide process and a 41% reduction of energy consumption per tonne of HPA.

Altech has secured a 10-year offtake sales arrangement with Mitsubishi Australia as the exclusive buyer.

The company has also executed fixed price, lump sum engineering, procurement and construction contracts for both the Malaysian plant, and the container loading and storage facility at Meckering.

The Meckering contract with Simulus Engineering is valued at $2.5 million and facility will be designed to load about 840t of kaolin a week for shipping.

The $280 million contract for the Johor plant is with Germany's privately-owned SMS group, which recently completed a smelter EPC contract in Malaysia and has prior experience with the processing technique Altech will use.

As to project funding, Altech is moving to close a mezzanine debt arrangement that will determine the remaining amount of equity finance required.

The company has secured senior project debt finance of $190 million with Germany's KfW IPEX-Bank, the bulk of it through low-interest Export Credit Agency cover.

It also received a non-binding term sheet for a $90 million mezzanine debt facility with a global investment bank in May.

The potential lender's technical advisor concluded a positive report on the project's technical aspects and flowsheet about a month ago, with the proposed lender reviewing the report at the time of writing.

"Our first priority is closing the mezzanine debt of US$90 million," Tan said.

"The lender has completed the technical due diligence and is moving to the internal approval process.

"On the equity side, there are several parties in the data room and we aim to finalise the equity structure when mezzanine debt is closed.

"We are looking for investors at the parent company level and/or at the project level -as a JV partner."

The discussions mark another development in Altech's rapid rate of progress.

As Tan pointed out at the Johor ground-breaking ceremony, in less than four years Altech had completed a definitive feasibility study and made a final investment decision, secured the sites and development approvals for its plant and mine, executed an off-take agreement, negotiated fixed-price EPC contracts and arranged the bulk of project finance.

"Many projects struggle to be funded and few projects achieve this kind of developmental success in such a short time frame," he said.

"None of this would have been possible without the dedication and focus of the team consisting of board members, management, staff, shareholders and all stakeholders." 

 ustralian igh ommissioner to alaysia ndrew oledzinowski at ltechs groundbreaking ceremony Australian High Commissioner to Malaysia, Andrew Goledzinowski, at Altech's ground-breaking ceremony

Germany's ambassador to Malaysia Nikolaus Graf Lambsdorff and Australian High Commissioner to Malaysia Andrew Goledzinowski attended the ceremony.

Tan said this month initial work at Johor was progressing well, with site establishment completed.

"The stage one work will include bulk site works, retaining walls, underground tanks, foundation piling, workshop and substation buildings," he said.

In the coming months, he said shareholders should expect to see progress of both construction and the mezzanine debt.

The company has lodged numerous patent applications for its kaolin to HPA production process to protect its intellectual property rights.

Altech's project might be less understood by the market than a gold project but Tan said HPA was an advanced material and the project was set to be high margin and high return, with strong demand forecast.

"The project at its full rate generates US$133 million EBITDA per annum," he continued.

"The demand growth of HPA is very similar to lithium materials for the lithium battery industry."

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HEAD OFFICE:

DIRECTORS:

  • Luke Atkins
  • Iggy Tan
  • Dan Tenardi
  • Peter Bailey
  • Tunku Yaacob Khyra
  • Uwe Ahrens

QUOTED SHARES ON ISSUE:

  • 572.6 million

MARKET CAP (at February 15, 2019):

  • A$71.6 million

MAJOR SHAREHOLDERS:

  • SMS Investments 6.81%
  • MAA Group Berhad 5.77%
  • HSBC Custody Nominees (Australia) 5.68%
  • JP Morgan Nominees Australia 3.93%
  • Lake McLeod Gypsum 3.62%

category-img

HEAD OFFICE:

DIRECTORS:

  • Luke Atkins
  • Iggy Tan
  • Dan Tenardi
  • Peter Bailey
  • Tunku Yaacob Khyra
  • Uwe Ahrens

QUOTED SHARES ON ISSUE:

  • 572.6 million

MARKET CAP (at February 15, 2019):

  • A$71.6 million

MAJOR SHAREHOLDERS:

  • SMS Investments 6.81%
  • MAA Group Berhad 5.77%
  • HSBC Custody Nominees (Australia) 5.68%
  • JP Morgan Nominees Australia 3.93%
  • Lake McLeod Gypsum 3.62%