GLOB Extra: Altech Chemicals / Altech Advanced Materials High-tech factory takes financing hurdle
Altech Chemicals (5 years in AUD)
Exchange turnover per day
Very few of our readers are likely to know what high-purity aluminum oxide is used for - especially for lithium-ion batteries (electric car!) And LEDs. There is a traditional process developed by Bayer that produces 99.99% pure aluminum oxide in several stages of bauxite production. However, this approach is relatively cumbersome and expensive. Altech Chemicals Ltd. (WKN A12E90) discovered that as early as 1900 there was a procedure to win this relatively expensive material from the kaolin clay known from porcelain production today at USD 40 / kg. It has been forgotten because for 99.99% pure aluminum (HPA) it has not been used in the last 100 years. Iggy Tan, an Australian with roots in Singapore, found in Australia a decaying porcelain earth deposit. In the last five years, the company secured the patents required for production. What the CEO of Altech Chemicals lacked, however, was the capital to build a factory that processes kaolin into high purity aluminum oxide.
I remember well how Iggy Tan talked about his plans two years ago at a dinner in Munich after the International Precious Metals and Commodities Fair. I thought that was interesting, but I could not quite imagine how an Australian micro-cap (below $ 100 million in stock market value!) Should raise the $ 400 million required to build and operate this factory. Two weeks ago I met with him and Altech Supervisory Board Uwe Ahrens in Frankfurt. They presented success stories:
+ The construction of the factory in Malaysia has already started, financed with funds from a capital increase in Australia (see photo of the symbolic groundbreaking ceremony!),
+ The SMS Group, a renowned plant manufacturer from Germany, is responsible for the construction.
+ There is a loan of over 190 million USD from KfW on very favorable terms.
+ Australian Macquarie Bank provides mezzanine financing of over $ 90 million.
+ Mitsubishi's trading division has an exclusive ten-year contract to buy 4,500 tons of annual output.
+ And there are serious negotiations with the state government of Saxony for the construction of a second factory in Germany
Investors from Germany
Why Iggy Tan and Uwe Ahrens are currently in Germany on roadshow, was soon clear. In order to receive the KfW loan, additional equity is needed from Germany.
The conditions are promising: Deutsche Balaton AG, which was part of Altech Chemicals, contributed the bankrupt Youbisheng Green Paper AG (WKN A2BPG1) as a corporate shell for the newly founded Altech Advanced Materials AG. In December there is a capital increase of 1:40 to 1,10 €. Since not all existing shareholders will subscribe, one share should be sufficient for small shareholders to obtain as many new shares as they wish. For large investors, there are Blocktrades € 1.20 per share. The plan is to raise $ 100 million to buy a 49% interest in the plant in Malaysia. A good start: The value of the entire factory - if it is produced from 2021 - is estimated at USD 500 million or even higher.
Altech Advanced Materials board member Uwe Ahrens answers skeptical demand that he is very sure to procure the missing capital from German investors; some well-to-do families and also institutional investors are interested in the entry. If everything goes as planned, the invested capital should double or even triple within a few years. The numbers speak for themselves: Return on investment (IRR): 22%, Payback 3.9 years, EBITDA 76 million USD at the rather conservative estimate of the KfW selling price of 26.90 USD / kg, gross margin 68%.
The fact that the well-known plant builder SMS Group and the state bank KfW are there speaks for the solidity of this project. A big unknown remains in my view the future price for high-purity aluminum. It has recently risen from $ 35 / kg to $ 40 / kg, stronger than analysts expected. From 2020 onwards, one expects a supply deficit, the consumption is due to increase production of electric cars by 2028 by 30% per year.
Conclusion: It is amazing that a company with just € 60 million market value can lift such a large project (thumbs up!). But one thing should also be clear: The entry is only recommended to risk-seeking investors. Rainer Kromarek
