"Altech Chemicals - starting to gather momentum Altech (ATC) has been on our radar for a couple of years as a prospective producer of 99.99% (4N) high purity alumina (HPA), from its Meckering kaolin deposit in WA. It aims to use a hydrochloric (HCl) acid-based process rather than the traditional HPA process using aluminium metal as the feedstock, thereby placing it in the lowest cost quartile in the world. The processing plant will be at Johor, in Malaysia, where costs are expected to be 60% cheaper.
This disruptive technology is expected to enable ATC to produce HPA at half the cost of current competitors. HPA is an high value material needed for the production of synthetic sapphire, which is used as a substrate in the manufacturing of LEDs, semiconductors and other high tech applications.
Synthetic sapphire glass is used in the production of scratch-proof lenses and smartphone components, but a big growth curve promises to be its use in the manufacturing of lithium-ion batteries where it enhances the separator between the cathode and electrode.
Thus, ATC should be included in the list of battery input stocks. HPA demand is growing at about 17% pa. Capital costs for the project are estimated at around US$298m. The Company recently announced the approval by the German Government for US$185m of export credit debt financing.
The debt will be provide by KFW IPEX Bank (own by the German Government), at very low interest rates and long tenure. The Company’s share price has surged as a result, recording a 12 month high of 26.5¢.
The market capitalisation of ATC is close to $95m, having grown from $7m three years ago. ATC is also using a German EPC contractor, SMS Group GmbH, who will be providing a fixed price turn key contract as well as completion, throughput and process guarantees.
SMS is a German engineering firm with annual turnover of 3.3bn Euros. SMS builds turnkey solutions based on innovative plant technology. This effectively de-risks the execution phase of the project. In November, ATC announced that the SMS Group, will provide US$11m equity subject to the project achieving financial close. This follows on from an earlier A$17m placement, to which SMS contributed US$4m.
The latest modelling suggests that the project can earn a cash flow $76m p.a., giving a four year payback. Mitsubishi has agreed to a 10 year offtake agreement. The actual mining operation will be simple, with a two month mining campaign able to provide three years of plant feed.
The Kaolin will be shipped in containers at a rate of 45,000 tpa to Johore, in Malaysia. ATC is lead by managing director, Iggy Tan who has a track record as one of the early trail blazers of the lithium industry.
The Company is dual-listed on the Frankfurt Stock Exchange and is gathering retail support due to the strong German Government and KFW support of the project. There is still plenty of work to be done, and it will take time before the project can be financed, developed and commissioned, but we can see that it is now on track. There is reason to be optimistic."
