- HPA project due diligence nearing completion
- No fatal flaws identified
- Detailed design progressing as planned
- Permitting for Malaysian HPA plant construction commenced
Since January 2016, Altech has been working exclusively with German government owned KfW IPEX-Bank on project finance structuring. The Company is currently targeting US$70 million of project debt, US$60 million of which is aimed to be subject to German export credit cover (ECA), typically offered at attractive interest rates and terms. The remaining US$10 million will be on normal commercial loan terms.
On 10 August 2016, due diligence consultants were appointed by Altech and KfW IPEX-Bank to undertake a definitive technical, market, and legal review of the Project, with an independent "expert opinion" presented at the conclusion of the review. The appointments followed the positive pre-assessment of the Project by the German government inter-ministerial committee and the German export credit agency Euler Hermes Aktiengesellschaft (Euler Hermes) (announced on 3 August 2016).
On 24 August 2016, the Company announced that it had received indicative loan terms and conditions from KfWIPEX Bank for a US$70 million facility, confirming the banks intention to provide the entire project debt amount. The facility terms and conditions are being discussed, are not binding on either party and remain subject to the approval of KfW IPEX-Bank and Euler Hermes.
Due Diligence Work
The appointed due diligence consultants completed site visits to Meckering, Fremantle and Perth, Western Australia and to Johor, Malaysia in early August 2016. Due diligence work included detailed and extensive reviews of the Company's Bankable Feasibility Study (BFS) and the supporting technical, market and legal reports and data. The various consultants have now submitted their respective draft reports - none of which have identified any fatal flaws in the Project.
Due diligence work is now focussed on addressing outstanding items and finalising draft reports in preparation for submission to KfW IPEX-Bank and Euler Hermes.
Representatives from Altech, KfW IPEX-Bank and Euler Hermes will meet executives of Mitsubishi Corporation in Japan in early November 2016 for detailed discussions on the 10 year HPA off-take arrangement between the Company and Mitsubishi Australia Ltd.
In parallel with project financing activities, the Company appointed German engineering firm M+W Group as the engineering, procurement and construction (EPC) contractor for the proposed Malaysian HPA plant. Detailed design and engineering work commenced in June 2016 and as announced on 21 September 2016 is advancing as planned.
In order to finalise loan term sheets, a final capital cost amount for the Project (EPC contract values) is required. M+W Group is progressing this work for the HPA plant utilising its German and Singapore divisions, which is expected to continue until mid-2017. In Western Australia, Perth-based Simulus Engineering is finalising EPC contract values for the Meckering container loading facility, which will be completed during the current quarter.
In preparation for the commencement of mining at its Meckering kaolin deposit (Meckering), Altech announced a maiden Ore Reserve estimate at 1.2 million tonnes @ 30% Al2O3 (alumina)1 on 11 October 2016. The Ore Reserve at Meckering is more than sufficient to support the proposed HPA processing operation (ore delivery rate of 41,000tpa) for the initial stage 1 mine-life of 30 years.
In conjunction with the Ore Reserve, the Company reported a Mineral Resource estimated at 12.7 million tonnes @ 29.5% Al2O3 (alumina). The Mineral Resources estimation at Meckering is potentially sufficient to support its proposed HPA production for over 250 years.
In Malaysia, the Company and M+W Group appointed local permitting consultants WKL & Associates (WKL) to prepare the required development order and construction permit applications. WKL will also assist the Company with utility supply applications for electricity, natural gas and water. Altech is also arranging supply contracts for key HPA plant consumables such as hydrochloric acid and lime.
Altech managing director Mr Iggy Tan commented, "The Company is pleased with the progress of debt financing due diligence. The due diligence work commissioned by KfW IPEX-Bank and Euler Hermes is comprehensive and very detailed and it is reassuring that no fatal flaws in the Project were identified.
"As expected and as is always the case, there are some items that the Company will progress in the coming months, but at this stage this is not expected to materially affect the financing timeline. In parallel with the due diligence process, the Company has been very busy progressing detailed design with M+W Group in preparation for ordering long lead time items for the plant. We are extremely pleased with M+W Group's project team and its progress", he concluded.
 Minus 300 micron (µm) kaolin fraction with a cut-off grade of 25% Al2O3
About Altech Chemicals Ltd
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 used in the electronics industry, and scratch-resistant sapphire glass used for wristwatch faces, optical windows and smartphone components. There is no substitute for HPA in the manufacture of synthetic sapphire.
Global HPA demand is approximately 25,315tpa (2016) and demand is growing at a compound annual growth rate (CAGR) of 16.7% (2016-2024), primarily driven by the growth in worldwide adoption of LEDs. As an energy efficient, longer lasting and lower operating cost form of lighting, LED lighting is replacing the traditional incandescent bulbs.
Altech Chemicals Ltd