Altech Chemicals Ltd (ASX:ATC) is on-time and on-budget with construction at the high-purity alumina (HPA) plant site in Johor, Malaysia, and remains on track for completion of the plant in 24 months with first HPA output anticipated in late 2021.
The 4-hectare site has been cleared, levelled and compacted with the maintenance workshop, perimeter and internal retaining walls, and a system of on-site water detention tanks completed.
Work on an electrical sub-station at the site is also underway.
Seeking SPP support
In a letter to shareholders seeking support for a share purchase plan, managing director Iggy Tan said, "With your support, combined with funds raised from the recently announced $1.8 million share placement, your company will be able to continue to progress its project funding strategy and continue construction activities at our Johor HPA plant site."
Existing shareholders can apply for up to $30,000 of new Altech shares at the same price as the placement participants, which is 9.75 cents per share.
This represents a 15% discount to the price of the company’s shares as traded on the ASX at the close of trade on Monday, December 2, 2019, and the 5-day VWAP.
Based on the positive response from the last SPP the company offered in August 2018, up to an additional $4 million could be raised from this SPP.
Funding strategy
The funding strategy has seen Altech secure senior project debt finance of US$190 million from German government-owned KfW IPEX-Bank as senior lender and has mandated Macquarie Bank as preferred mezzanine lender.
This indicative and non-binding mezzanine debt term sheet, which is progressing through due diligence, is for a facility amount of up to US$90 million.
Throughout 2019 the company has focused on managing the due diligence process.
Macquarie appointed an independent technical advisor, Worley, formerly known as WorleyParsons, to conduct the project technical review which was completed over a 6-month period and concluded with a positive report on the project and processing flowsheet.
Following this review, Macquarie appointed London commodities research house CRU to conduct a HPA market review., which took three months and the results showed significant growth expected for HPA demand and a near-term supply deficit.
Macquarie initiated its legal due diligence, which is ongoing, only after the completion of the technical and market reviews.
Equity arrangements
Tan said that on the equity side, the company had been in discussion with various potential joint venture partners to acquire a 49% direct interest in the project for a value of US$100 million as a way of securing the balance of the project equity.
While Altech continues to work with potential investors, as an alternative to a JV partner the company is pursuing the sale of the 49% project interest for US$100 million to a separate German listed company – Altech Advanced Materials AG (AAM).
In August 2019 the company sold an option to AAM for it to acquire up to a 49% direct project interest for US$100 million.
AAM is in the process of fundraising, which Altech understands will occur mainly in the first half of 2020.