Altech Chemicals Ltd (ASX:ATC) has secured commitments to raise $17.2 million via the placement of shares at $0.14 each, to continue the development of its high purity alumina (HPA) project in Malaysia.
The placement was corner-stoned by German engineering firm SMS group GmbH, which is the EPC contractor for the HPA project, with a US$4 million ($5.1 million) commitment.
Altech also received a $3 million commitment from Melewar Group, an entity associated with non-executive director Tunku Yaacob Khyra.
Malaysian HPA project
Altech is currently in the process of securing project financing with the aim of commencing the HPA project development in 2018.
The company has completed a final investment decision study (FIDS) for the construction and operation of a 4,500 tonnes per annum HPA plant in Johor, Malaysia.
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The FIDS economics confirm a pre-tax net present value (NPV) of US$505 million which incorporates a capital cost of US$298 million.
German government-owned KfW IPEX-Bank has proposed a total debt package of US$185 million and is targeting to obtain approval as the sole debt provider.
The target date of 14 December 2017 remains unchanged as the date for the final decision by the German government for the export credit agency (ECA) cover.
Use of new funds
Altech’ Malaysian plant will produce HPA directly from kaolin clay, which will be sourced from the company’s 100%-owned kaolin deposit at Meckering, Western Australia.
The proceeds from the placement will be used for payments for land at Meckering and Malaysia, detailed engineering design, working capital and general corporate purposes.
Iggy Tan, managing director, commented: “The company very much welcomes the direct investment by SMS in Altech; it strongly demonstrates their commitment and confidence as EPC contractor to the project.
“The placement leaves us well capitalised to complete the optimal funding arrangements for the HPA project in 2018”.
Worldwide adoption of LEDs driving HPA demand
HPA is a high-value, high margin and highly demanded product as it is the critical ingredient required for the production of synthetic sapphire.
Synthetic sapphire is used in the manufacture of substrates for LED lights, semiconductor wafers, and scratch-resistant sapphire glass used for wristwatch faces and smartphone components.
There is no substitute for HPA in the manufacture of synthetic sapphire.
Global HPA demand was circa 25,315 tonnes per annum in 2016 with the demand expected to grow at a CAGR of 16.7% between 2016 and 2024, primarily driven by the growth in worldwide adoption of LEDs.