Transcription of Finance News Network Interview with Altech Chemicals Limited (ASX:ATC) Managing Director, Iggy Tan
Natalie MacDonald: Altech Chemicals Limited (ASX:ATC) is aiming to become one of the world’s leading suppliers of high purity alumina from its Meckering deposit in Western Australia.
Hello I’m Natalie MacDonald for the Finance News Network. Joining me now at the RIU Resources Round-up in Melbourne is Altech Chemicals Managing Director, Iggy Tan. Iggy, welcome to FNN.
Iggy Tan: Thank you.
Natalie MacDonald: For those perhaps unfamiliar with Altech Chemicals, can you please firstly introduce the company?
Iggy Tan: Altech Chemicals is an Australian company, it’s listed on the ASX. And our vision is to be the largest producer of high purity alumina in the world.
Natalie MacDonald: I understand sapphire gemstone is nearly as hard as diamond. What’s your company’s association with this gemstone?
Iggy Tan: Well interestingly sapphire is nearly as hard as diamond, its number nine on the Mohs scale, which is a hardness scale. Diamond is actually perfect 10. So it’s very hard and the applications are really scratchproof applications, like your watches, your iPhones and so on. But what’s interesting also, is artificial sapphire is used in LED production.
LEDs are light emitting diodes that you have and you see that everywhere now. General lighting, its used in vehicles, its used in traffic lights and so on.
And the reason they’re so popular is because it’s very energy efficient. Some of the studies have shown that it’ll save about 85 per cent energy consumption, by using LED lighting.
Natalie MacDonald: Who are the current high purity alumina producers, and what’s your competitive advantage?
Iggy Tan: The current producers in the world are big companies like Sumitomo Chemical Co Limited (TYO:4005), or Sasol Limited (JSE:SOL) out of South Africa. And the way they produce high purity alumina is they actually have to buy a very expensive feedstock, like aluminium metal. Aluminium metal costs about $2,000 a tonne, it’s very expensive and they use that to meet these specifications of high purity alumina.
Our competitive advantage is that we use a very low cost feedstock, like kaolin. We actually own a deposit in Western Australia and we’re taking that kaolin to produce high purity alumina, in one single step. And the only reason we can do that is because the kaolin deposit that we have, is very low in impurities.
So our competitive advantage is that we use a very low cheap feedstock. Our chemical process happens to be in Malaysia, or we’re proposing to have it in Malaysia. And due to the low operating costs, we believe that we’ll be the lowest cost producer in the world today.
Natalie MacDonald: You recently conducted a bankable feasibility study. What were the results?
Iggy Tan: The company recently completed a bankable feasibility study and the results are very exciting. It shows a return of investment of about 30 per cent, which is a very high and attractive return. The capital cost is about $US80 million, including the plant in Australia and Malaysia. The net present value or the NPV, is about $326 million and the payback is around 3.8 years. So what that means is that it’s a very exciting project, it’s got high returns and is a high margin project. And the company is very excited to have completed that.
We’re now in a phase where we’re looking for debt funding, we’re looking for off-take partners. And recently, we just signed with Mitsubishi Corp (TYO:8058) of Japan. Mitsubishi will look after all our sales in Japan. So generally about 21 per cent of high purity alumina in the world, is used in Japan and we’re very excited to have Mitsubishi on board.
Natalie MacDonald: It sounds like pretty exciting economics. What’s the next phase then to your project?
Iggy Tan: The next phase is actually the detailed design phase, project finance and securing off-take partners. With the financing of the project, we’re talking to various banks; financial institutions and we’re also even looking at export credit finance, out of Europe. There’s a lot of interest for the project and we’re pretty confident that we will secure about $50 million to $55 million of debt, for the project. And that will take the next nine months to secure that.
The off-take, we are looking at various off-take options and recently we announced Mitsubishi, as our major partner in Japan. They will look after all sales in Japan and as we go along, we will secure more and more off-take.
Natalie MacDonald: Last question then. Where would you like to see the company 12 months from now?
Iggy Tan: Well the company has grown very quickly in the last period of time. Our market cap used to be $7 million and we’ve grown to $15 million, in such a short period of time. So as we go into the next 12 months and we develop the project, we expect our value to increase over that period. So we’re looking forward to a very exciting phase, and we’re looking forward to supplying a material that will drive the electronics sector.
Natalie MacDonald: Iggy Tan, many thanks for the update.
Iggy Tan: Thanks very much and it’s been a pleasure.
