Altech Chemicals (ASX:ATC) update on its Malaysian HPA plant


by Carolyn Herbert

Altech Chemicals Limited (ASX:ATC) Managing Director Iggy Tan provides an update on the company’s High Purity Alumina Plant and demand.

Altech Chemicals (ASX:ATC) is an Australian company and we’re listed on the ASX. Our vision is to build a 4,000 tonne per annum High Purity Alumina project, based in Western Australia as well as in Johor, Malaysia. Now as you know, High Purity Alumina is the feedstock for the LED industry as well as the lithium battery industry – very exciting growth sectors that we are potentially supplying.

We’ve been advancing the project on all fronts. We have been in due diligence with a bank called KfW IPEX-Bank, which is a German bank and we’re at the debt funding stage. So in the last six months, we’ve been doing a lot of work with pilot plant trials and so on, for the due diligence process. So that’s progressing very well.

In the meantime, we’ve also advanced the detail design of the High Purity Alumina plant, through a German EPC contractor, called M+W Group. They have offices in Germany as well as Malaysia and Singapore. So a lot of work’s been done there. On both fronts in Meckering and Johor, we’ve been advancing the permitting process for both of those projects. So a lot of very exciting work that has been done.

In conjunction with that, last year we signed an offtake agreement with Mitsubishi Corp (TYO:8058). They have a ten-year offtake agreement with us, where all our product is basically sold to Mitsubishi. We’re progressing very well. Last year we raised $10 million to support the development on the project. We look like we should get a result on the debt side, by the end of Quarter Two this year. And if that is successful, then hopefully we’re looking at a groundbreaking ceremony around Quarter Three to Quarter Four, this year. Assuming that we can also get the project equity side of the funding.

Last year, we finished the bankable feasibility study and the economics are very attractive. The net present value of the project, or NPV is around $US357 million. The capital cost in the study is about $US80 million, the internal rate of return is very attractive – at about 33 per cent. And the project is expected to throw off about $55 million EBITDA, every year at its full production rate. So very high margin, a high return project and the operating cost is also nearly half the conventional operating cost. So it’s about $9,000 a tonne. And this material, the High Purity Alumina at 99.99 per cent, sells for about $US23,000 a tonne. So it’s a very high value chemical.

High Purity Alumina at 99.99 per cent is used mainly in the LED industry. So sapphire wafers are created from High Purity Alumina. Now the sapphire is exactly the same gemstones that you wear on your ring. So in Mother Nature, sapphire is created by alumina under intense pressure and temperature. So nearly 2,000 degrees alumina melts and it creates sapphire gemstone. Now today, mankind has the technology to make artificial sapphire, or synthetic sapphire and it’s exactly the same sapphire. The only reason natural sapphire has the colour of blue, is because of impurities in the alumina that creates the colour.

So when you’re making synthetic sapphire for your watch face or the camera lense on your iPhone, you don’t want a blue tinge. So therefore, you need to start with a very High Purity Alumina feedstock. And that’s the material that we intend to produce for the LED industry. Now the LED industry is growing at about 70 per cent, year-on-year, and you can see that all around you. So all our traffic lights, vehicles, domestic lighting, billboards have all gone to LEDs, because the LED lighting is 90 per cent more efficient that the conventional lighting. So the world is moving towards the more efficient lighting of the LED industry.

The other area that’s plenty of growth is in the lithium battery sector. So High Purity Alumina is used in lithium batteries to prevent fires. They’re actually coating it to the separators that separate the cathode and the anode, and that actually makes them fire retardant. So that’s another exciting area of growth.


Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.