Altech Chemicals (ASX:ATC) has signed a milestone agreement appointing Mitsubishi Corporation (TYO:8058) as the exclusive seller and distributor of its final high purity alumina (HPA) product to the Japanese market.
Mitsubishi is Japan's largest general trading company with a market cap of 3.38 trillion yen (A$40 billion) and more than 200 bases of operations in about 90 countries worldwide.
It has been engaged in long-term business with customers from around the world in virtually every industry, including energy, metals, machinery, chemicals, food and general merchandise.
Japan accounted for 21% of global HPA demand in 2014, making it an important market for the company.
The agreement with Mitsubishi provides the required marketing and distribution experience for its HPA in this market.
Iggy Tan, Altech managing director, commented:
“We are delighted to partner with one of Japan’s largest companies and a very reputable name worldwide.
“Altech’s 4,000 tonne per annum HPA plant will position the company not only as one of the world’s largest producers of HPA, but also as one of the world’s lowest cost producers of HPA.”
High Purity Alumina Project
The High Purity Alumina Project consists of its proposed aluminous clay (kaolin) mining operation and beneficiation plant at Meckering, Western Australia, and the proposed Malaysian HPA plant.
Using kaolin provides a cheaper feedstock than that used by other producers while the 4,000tpa HPA plant 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).
The plant will apply a hydrochloric acid (HCl) leach process to produce HPA directly from kaolin clay sourced from Meckering.
In August, the company raised $1.13 million through a share placement to fund detailed design of the HPA project.
BFS for HPA project
Earlier in the year, Altech completed a Bankable Feasibility Study that highlighted the potential of its HPA project 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.
Analysis
The sales and distribution agreement with Mitsubishi Corporation subsidiary Mitsubishi Australia Ltd clearly highlights the trust in Altech Chemical’s HPA process, product and management team.
It also demonstrates the rapid progress the company is making in developing its High Purity Alumina Project.
Altech is also looking to sign similar agreements in other countries.
Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX emerging companies with distribution in Australia, UK, North America and Hong Kong / China.