Altech Chemicals (ASX:ATC) is moving to secure the required equity and debt funding to advance its High Purity Alumina (HPA) project towards final design and development after completing the Bankable Feasibility Study three months ahead of schedule.
The project, which includes a 4,000 tonne per annum HPA processing plant at Tanjung Langsat in Johor, Malaysia, and an associated kaolin beneficiation plant at Meckering, provides an alternative to the largest eight producers that supply 50% of the global HPA market.
The project has potential to deliver high margins, strong cash flows, and rapid payback period.
Key metrics from the BFS included:
- Capital cost estimate US$76.9 million (A$98.6million);
- Payback period 3.8 years;
- Estimated pre-tax NPV of US$326.1 million (A$362.4 million) (at 10% discount);
- IRR of 30.3%;
- Long-term sale price forecast of US$23,000/tonne (A$25,560/tonne) for 99.99% (4N) product;
- Cost of goods sold US$8,140/tonne (A$9,050/tonne); and
- EBITDA of US$59.4 million (A$66.0 million) per annum.
Altech will now proceed to secure the required funding and continue with detailed design, permitting and approvals, and subject to funding, commence the ordering of long-lead items, initiate site clearances and then commence construction.
Earlier this month, it signed a Memorandum of Understanding with SGL Group as its partner for the supply and installation of the Hydrochloric Acid (HCl) gas generation, absorption, recovery and scrubbing plants.
The recovery, regeneration and concentration of hydrochloric acid are important steps in numerous processes in the company’s HPA plant.
Iggy Tan, managing director, said:
“The BFS was completed three months ahead of schedule, which is testament to the hard work and commitment from our BFS team.
“The results from the BFS have confirmed the company’s belief that the unique qualities of its Meckering kaolin deposit, combined with HCl processing to produce high purity alumina, is a technically viable and commercially attractive business case – a potential ‘company maker’.
“Subject to successful funding, the development schedule will see campaign mining commence at Meckering around Q4-2016.”
HPA Project
Altech’s project seeks to produce alumina or aluminium oxide from kaolin
The company’s wholly-owned aluminous clay (‘kaolin’) deposit is located close to the town of Meckering, Western Australia, and is approximately 130 kilometres by road from Perth and about 153 kilometres from the port of Fremantle.
Its land position covers 587 square kilometres and contains a JORC Indicated and Inferred Resource of 65 million tonnes, which is capable of satisfying low cost feedstock for the plant’s requirements well beyond the 30-year timeframe of this BFS.
A mining area has been identified, an open pit designed and a mine plan for an initial 30-year mine life developed.
Approximately 1.3 million tonnes of the 65Mt kaolin mineral resource will be mined over 30 years, in 10 discrete mining campaigns. A mining contractor will conduct the mining campaigns at three-yearly intervals and the mine will be a simple quarry-style operation.
The proposed Malaysian HPA plant is a single train continuous processing plant, which will provide economies of scale in terms of operating costs and will position Altech as the largest producer of HPA in the world, surpassing Sumitomo Chemicals that currently states its annual HPA production capacity at 3,200 tonnes.
In optimising the design of its HPA plant, the company has specifically focused on minimising technological risk by selecting proven “off-the-shelf” plant and equipment.
Its location at Tanjung Langsat was chosen based on significant economic and developmental benefits associated with this dedicated industrial park, which includes the ready availability of hydrochloric acid, power and natural gas – all at highly competitive prices, and for its proximity to international container ports and international airports (Johor Bahru and Singapore).
Project Schedule
Subject to successful funding, the project schedule sees campaign mining at Meckering commence in Q4 2016.
Site works at both development locations (Meckering and Tanjung Langsat) are scheduled to commence during the first quarter 2016 and the overall construction period at Meckering is estimated to be approximately 15 months, and at Tanjung Langsat approximately 18 months.
Commissioning of the Meckering beneficiation plant is scheduled to commence in Q1 2017, which will provide sufficient time to build an inventory of beneficiated kaolin and make initial shipments of the kaolin to Malaysia.
Six months of plant commission has been allowed for the HPA plant, which is scheduled to commence during Q2-2017, with the first saleable production of HPA in Q4-2017.
During commissioning, start up and an anticipated qualification period for Altech’s HPA, the BFS has assumed a gradual increase in annual production from a starting-point of 2,000tpa in year 1, and has also assumed that during production years 1 to 3, there will be a proportion of finished product sales that are not HPA, but either 99.9% (3N) alumina or SGA.
Project Funding
Based on a capital cost estimation of about US$77 million, the company is aiming to secure a debt component of approximately US$50 million to US$55 million, and has been in discussion with various banks and other potential investors in respect to debt financing and other funding options.
The company is open to less conventional financing arrangements, which could include structured financing, and/or bonds from European markets and/or joint venturing.
Finalisation of financing is anticipated to take two or three quarters and that during this time the company intends to proceed to detailed design and continue with permitting and approvals activities for the Project, subject to funding.
Analysis
The Bankable Feasibility Study is highly value accretive for Altech, demonstrating the company’s HPA project offers a real alternative to current Chinese and Japanese producers.
Altech anticipates the proposed HPA plant will be in the bottom quartile of the production cost curve for the world’s HPA producers, benefitting from the use of kaolin as a cheaper feedstock than that used by other producers.
The company’s shares have risen 45% from early June and the BFS could deliver further growth.
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