Altech Chemicals (ASX:ATC) HPA project update


by Rachael Jones

Altech Chemicals Limited (ASX:ATC) Engineering Manager, Mark Griffiths discusses progress with the company's HPA (High Purity Alumina) plant in Malaysia, demand projections, project financing and economics.

Rachael Jones: Hello, I'm Rachael Jones for the Finance News Network. Joining me today from Altech Chemicals (ASX:ATC) is Engineering Manager Mark Griffiths. Mark, welcome to the network.

Mark Griffiths: Thanks for having me.

Rachael Jones: Now Altech Chemicals (ASX:ATC) is developing a high purity alumina plant in Johor, Malaysia. How's progress there?

Mark Griffiths: Yeah, progress is very positive. We have a kaolin deposit based in Meckering, which is ready for development. And as you say, we have a planned HPA plant in Johor, Malaysia. The lump sum turnkey contract for that plant is now in place for the SMS group. We have an off take agreement in place with Mitsubishi Corporation to take all four and a half thousand tonnes of our annual production and we're really focused on completing the project financing phase so that we can move forward with the full plant construction in earnest.

Rachael Jones: Thanks Mark.And can you remind us about the market for HPA, particularly as auto makers ramp up their production for electric vehicles?

Mark Griffiths: There's really two major markets for high purity alumina currently in the world. As you say, the first is in electric vehicles and the manufacture of lithium ion batteries. And we've really seen a significant interest in growth in that area in the last couple of years.The other area of use for high purity alumina is in production of sapphire wafers for use in the LED industry. And CIU completed a market research report earlier this year and they predicted that global demand would grow from approximately 30,000 tonnes per annum to over 270,000 tonnes by 2028. So we see a significant growth in the next 10 years and that's being driven by growth in demand from both sectors.

Rachael Jones: Excellent.Now let's talk about your plant in Malaysia. You turned the first sod in August, 2018. What can you tell us about progress there and capacity at stage one and stage two?

Mark Griffiths: Yeah, so we started some preliminary construction work on site under the stage one agreement earlier this year. The reason for that was to complete a lot of the initial permitting requirements and to also de-risk some of the construction activities that could risk the overall project schedule. So that involved a bulk earthworks, retaining walls, storm water capture tanks, and also the main maintenance workshop. And all of that construction work has now been completed and we completed a site handover inspection earlier in September.

The second stage is the completion of the electrical substation on site. Work is underway on that part of the project and we expect that will be complete in the first half of next year.

Rachael Jones: Great, and what can you tell me about the nameplate capacity?

Mark Griffiths: So the nameplate capacity of our plant will be four and a half thousand tons per annum. The global supply deficit by 2022 is predicted to be about 20,000 tonnes. So we see our plant fitting in nicely to that expected supply deficit.

Rachael Jones: And can you tell me about the project financing and economics?

Mark Griffiths: So our plant capex is in the range of 300 million US, and that gives us an NPV of approximately half a billion US dollars with an EBITDA of $76 million per annum.

Rachael Jones: And Mark, you mentioned the growth for EVs in Europe. Can you tell me about your plans for Europe?

Mark Griffiths: Yes, so we have really two main activities going on planned in Europe. The first is on the investment side. Altech Chemicals (ASX:ATC) has acquired a stake in a German listed company, which has since been renamed Altech Advanced Materials and that company's listed on the Frankfurt Stock Exchange. We've sold the company in auction to acquire 49 per cent stake in our Malaysian plant for an investment of $100 million US. And work on that aspect of investment is continuing.

The second phase of work relating to the developments in Germany and Europe is an invitation we received from the Saxony government to consider building a second HPA plant in Germany. And this has really being driven by the interest of German automakers in securing raw materials for lithium battery production.

Rachael Jones: And to the last question now Mark, where would you like to see Altech Chemicals (ASX:ATC) this time next year?

Mark Griffiths: Well ultimately we'll have completed the project financing phase and be well into construction of the plant in Malaysia. We will have purchased some of the major and key pieces of processing equipment and we'll have commenced construction on the main plant buildings on site.

Rachael Jones: Mark Griffiths, thank you so much for the update.

Mark Griffiths: Thanks very much for having me.


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