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Altech Chemicals (ATC) 18.5c
Far from the realms of Warren Buffett, things are changing in the diamond industry. Just as diamonds are compacted carbon, sapphires are derived from alumina subject to immense heat, and like diamonds they can also be grown artificially.
The blue tinge of sapphires — the part that makes them so alluring — is the result of impurities. “Just buy your wife Altech shares instead,” counsels Altech chief Iggy Tan.
Tan may well have a superior notion of value as Altech seeks to become a provider of the key ingredient for synthetic sapphires: alumina of 99.99 per cent purity.
The allure of high purity alumina lies not with jewellery, but in the emerging market for unscratchable and unbreakable mobile and watch sapphire screens.
To hammer the point home — literally — Tan’s presentation to the recent Australian Microcap Investment Conference was accompanied by vision of an Apple Watch screen being attacked with sandpaper, a mallet and then a drill.
(The screen emerged intact, but don’t try this one at home.)
Sapphires are also used in LED lighting and to replace the plastic separators in lithium ion batteries that are prone to catch fire.
Tan contends the Altech manufacturing process is half the cost of conventional producers such as Nippon and Sumitomo, who have to buy the aluminium metal derived from bauxite in an energy-intensive process.
On his equation, a product that costs $US9000 per tonne to make sells for $US27,000/t. The global market is not big — 25,000 tonnes — but is forecast to grow at 17 per cent per annum.
Put another way, the world will need four of Altech’s proposed plants to satisfy just the battery demand by 2026.
Altech has the support of Mitsubishi, which has signed a  10-year offtake agreement.
The hairy bit is raising $70m of debt, but the company hopes to secure the support of German export credit finance house KFW Finance (a Teutonic supplier will build some of the plant).
Expect a capital raising as well.
Tim Boreham edits The New Criterion
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