Altech Chemicals Limited (ASX:ATC) CFO, Shane Volk, provides an update on funding and approvals for the company's High Purity Alumina (HPA) plant in Malaysia.
Kathy Skantzos: Hello Kathy Skantzos for the Finance News Network. Joining me from Altech Chemicals Limited (ASX:ATC) is CFO, Shane Volk. Shane welcome to Finance News Network.
Shane Volk: Thank you Kathy.
Kathy Skantzos: First of all, can you give me an introduction to the company?
Shane Volk: Altech Chemicals is an ASX listed company, we’re based in Perth Western Australia and our project is a high purity alumina plant we’re going to construct in Malaysia. Taking feedstock from our kaolin deposit at Meckering, transporting it up to Malaysia for the production of high purity alumina.
Kathy Skantzos:Altech recently completed a capital raising. Can you provide a comment on that and what it means for the HPA project?
Shane Volk: On Monday we announced the raising of $17.2 million in a share placement. And what was significant about that placement was really the support of SMS Group GmbH, a German firm, which is the appointed contractor to construct the high purity alumina plant, in Malaysia. And as well as them our long-term shareholder Malaysian group, Melewar International Investment Company, supported with $3 million in the placement. So between Melewar $3 million, SMS Group $US4 million or $AUD5 million, $8 million of that $17 million was from them. On top of that, we had great support from our existing shareholder base as well, that contributed the balance of the placement.
Kathy Skantzos: Now to your FY17 results. What were the highlights?
Shane Volk: FY17 was really about completing the due diligence for the project, and that was conducted by various consultants appointed by the banks. So that was successfully completed towards the end of 2017 and no fatal flaws in the project. Not a real surprise for us, but it was fantastic for the project, for our shareholders, to have that independent look at the project and confirm that it stood up to the scrutiny of the consultants.
Kathy Skantzos: Now to your high purity alumina plant and kaolin feedstock mine. Could you provide an update?
Shane Volk: Our high purity alumina plant, we secured a four-hectare site in an industrial park in Johor, Malaysia, which is just across the straits from Singapore. And the mine for the kaolin is in Meckering, about 130 kilometres east of Perth. So the plan is we’ll be mining around 40,000 tonnes of carbon a year, transporting it up to Malaysia by ship into our plant at Tanjung Langsat, which is the industrial complex.
Kathy Skantzos: What about funding for these projects?
Shane Volk: Funding for the project is quite exciting. We’ve been working with German Government owned bank, KFW IPEX for over two years now. And we’re going for application of $165 million of what’s called export credit finance, from Germany. Around 50 per cent of the plant in Malaysia is German content, and the appointed contractor for the construction of the plant is a German construction firm.So on that basis, we think we’ll be able to secure $165 million of export credit finance and in addition to that, there’ll be $20 million of normal debt at normal commercial terms. So in total, $US185 million of debt and capital costs of the project is just shy of $300 million. So there’ll be an equity component that we do need to raise, a little further down the track.
Kathy Skantzos: Could you give me an update on approvals?
Shane Volk: Approvals are quite advanced. We’ve been working with the WA authorities for a year now and we’ve managed to seek, obtain both the works approval and the mining approval for Meckering. In Malaysia, we’ve had a complete assessment of the site by the local authorities in Johor and they’ve approved the construction of the HPA plant there. We now just need to proceed with the normal registrations as we go through the construction phase, in Malaysia. So essentially the plant, save for a few minor details, is fully permitted.
Kathy Skantzos: What’s the demand supply situation for high purity alumina?
Shane Volk: The demand for high purity alumina again is very exciting. The current demand is 25,000 tonnes a year approximately, which is fairly modest, but why we’re in this business is demand is growing by around 17 per cent a year. So the size of the market is expected to be almost 80,000 tonnes in 2024/25, which is a three times growth. So plenty of room for our Malaysian plant, which will produce around 4,500 tonnes.
Kathy Skantzos: Last question Shane. What’s the long-term ambition for the company?
Shane Volk:Of course the medium to long-term goal is to build this 4,500 tonne plant in Malaysia and successfully start exporting, and delivering our product to the consumers. It will be nice to think that after that, we could have a second or third plant perhaps, but let’s get the first one out of the way first and then see what comes after that.
Kathy Skantzos: Shane Volk, thanks so much for the update.
Shane Volk: You’re welcome.