[MEDIA] Altech Chemicals (ASX:ATC) is at an advanced stage of...

Altech Chemicals (ASX:ATC) is at an advanced stage of development for their High Purity Alumina (HPA) Project, which upon construction will be the first fully integrated HPA processing operation globally.  Altech recently provided an update regarding the project’s development.  Highlights include: 

• Target date for a decision by the German government Inter-Ministerial Committee (IMC) for German ECA cover – 14 December 2017;
• Lender’s due diligence - final stage;
• Successful due diligence with no fatal flaws;
• Expert Opinion report for Euler Hermes nearing completion; and
• Finalisation of EPC contract. 

Analyst Comment:  Whilst the progress of debt financing has been slower than originally anticipated, it appears these negotiations are now drawing towards a positive conclusion.  The major reason for the delay was due to a change in EPC contractor earlier this year (SMS Group). 

In the long run it appears the change in contractor may have been a blessing in disguise, given SMS Group’s long standing relationship with the German debt providers and the export credit agency, as well as their vast experience in building facilities similar to Altech’s planned HPA project.   

Catalysts: The company has highlighted a number of short term milestones that investors should be aware of in the coming months.  These include:

• Mid October – All due diligence consultants to submit final reports to the expert opinion consultant; 
• Mid October - finalise the EPC contract price;
• 9 November - expert opinion report submitted; and
• 14 December - decision on the offer for export credit project finance cover.

The information in this email should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions. 

Valuation:  We maintained our valuation at $0.55 / share (SP $0.17 / share).  We kept all assumptions in-line with previous guidance despite the company flagging capital costs will increase due to a change in the processing facility specifications, as well as a deterioration of the Euro/USD exchange rate. 

It is likely that any increase in capital expenditure will potentially be matched by an increase in the size of the debt facility.  This should result in only a minor change on a valuation per share basis, given future dilution will remain similar and the likely favorable terms that will be offered by the credit agency (low interest rate, long term repayment profile).  We will review these assumptions once debt terms are offered.  

In addition, our current valuation assumes an additional 40% discount to account for project development and financing risk.  Once financing has been finalised this discount will be reduced.  

The information is general information only. Any advice is general advice only. Neither your personal objectives, financial situation or needs have not been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice. Adam Kiley (AR No. 458224) is an authorised representative of Intelligent Financial Markets Pty Ltd (AFSL No. 426359).

TSI Capital Pty Ltd (TSI Capital) will only initiate coverage of a company that passes our internal investment checklist. Once a company has passed this checklist will we initiation coverage of the company as well as follow up with ongoing updates and commentary on that company’s activities.

TSI Capital does and seeks to do business with companies featured in videos on this website. As a result, investors should be aware that TSI Capital may have a conflict of interest that could affect the objectivity of our analysis. Investors should consider the information and commentary within this website as only a single factor in making any investment decision. The publishers of this video also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this video.