Altech Batteries Ltd Stock Market Press Releases and Company Profile
Altech - Positive Final Investment Decision Study
Altech - Positive Final Investment Decision Study

Perth, Oct 23, 2017 AEST (ABN Newswire) - Altech Chemicals Limited (Altech/the Company) (googlechartASX:ATC) (googlechartA3Y:FRA) is pleased to announce the positive results from a Final Investment Decision Study (FIDS) for the development of a 4,500tpa high purity alumina (HPA) plant at Johor, Malaysia and kaolin mine at Meckering, Western Australia (the Project).

Highlights

- Positive outcome from Final Investment Decision Study (FIDS) for 4,500tpa HPA project

- Study economics include:

o Pre-tax NPV7.5 US$ 505 million

o Internal Rate of Return (IRR) 22%

o Payback (full rate) 3.9 years

o EBITDA US$ 76 million p.a.

o Capital cost US$ 298 million

- Total target debt by KfW IPEX-Bank of US$ 185 million

- US$ 165 million export credit finance, US$ 20 million at commercial terms

- Target date for export credit cover approval remains 14 December 2017

The FIDS incorporates up-to-date project assumptions including the final capital cost estimate. The estimate includes: a fixed-price lump-sum engineering, procurement and construction (EPC) contract value for the construction of the Malaysian HPA plant by a consortium led by German engineering firm SMS group GmbH (SMS); and a fixed-price lump-sum EPC contract value for construction of the Meckering kaolin container loading facility by Perth based Simulus Engineering Pty Ltd. In addition the capital cost estimate includes owner costs during HPA plant commissioning and the initial kaolin mining campaign. HPA plant capacity is now 4,500tpa (was 4,000tpa) and assumptions for operating costs, HPA selling price, HPA plant production ramp-up, exchange rates, total envisaged debt, and the expected German government export credit finance amount have been updated in the FIDS to reflect current conditions and outlooks.

The Company is extremely pleased with the achievement of this significant milestone of project development. Altech's management team have successfully progressed the Project through the extensive lender due diligence process, with an extremely positive outcome. Whilst the due diligence process has taken longer than expected and has resulted in additional capital cost, the Project has been significantly de-risked as a result. The transition to SMS as EPC contractor has been seamless. The final fixed-price lump-sum EPC contract that includes completion guarantee, throughput and process/quality guarantees is an exceptional outcome.

The financial metrics from the FIDS are extremely robust. Project Net Present Value (NPV) is US$ 505.6 million at a discount rate of 7.5%, payback (at full rate) is 3.9 years and annual EBITDA is US$ 75.7 million at full production. The internal rate of return (IRR) is 21.9% with a gross margin on sales of 63%. The Company's weighted cost of capital (WACC) has been recalculated taking into account the higher planned debt and assumed interest, debt mix, and total project costs; it is reflected as the discount rate of 7.5% used in the 30- year discounted cash flow model for the FIDS. The beta used in the calculation is 0.83. A summary of the key financial metrics and key assumptions of the FIDS is set out in Table 1 (see link below). The full executive summary of the FIDS is attached as Appendix 1 (see link below).

The HPA price assumption used in the FIDS is based on an independently supplied forward HPA price curve from Persistence Market Research (Persistence). The HPA price used in the Project financial model is US$ 33.72/kg in year 1, reducing to US$ 26.18/kg in year 9 and maintained at this level until year 30. This results in a weighted average HPA price of US$26.90/kg over the 30-year project life. In its market report Persistence noted that the current market price of HPA in Japan is ~US$ 40/kg; in this context the 30-year average HPA price of US$ 26.90/kg from the FIDS financial model is conservative. If a HPA price of US$ 40/kg was applied to the FIDS financial model (High Case), the Project financial metrics are: NPV of ~US$ 1.09 billion, payback (at full rate) of 2.2 years, annual EBITDA of ~US$ 133 million at full production and an internal rate of return of 33%.

FIDS Operating Costs

The technical advisor to German government owned KfW IPEX-Bank has reviewed the capital cost and the operating costs assumed in the FIDS and has stated that it considers both reasonable. The FIDS Project operating costs include updated firm quotations from key services and consumables suppliers where appropriate. This includes quotations for; contract mining at Meckering; land transport and shipping of containerised kaolin from Meckering to Johor; HPA plant consumables such as electricity, natural gas, hydrogen chloride, limestone, and other materials. A detailed manning schedule has also been fully costed using local Malaysian and expatriate labour rates. Operating costs are forecast at US$ 44.6 million p.a. at full production with a cost of goods sold of US$ 9.90 /kg.

Project Finance

German government-owned KfW IPEX-Bank has proposed a revised total target debt package of US$ 185 million and is targeting to obtain debt approval as sole debt provider. This is subject to the sourcing split and eligibility for German government export credit cover (ECA cover) of up to US$ 165 million. The ECA cover loan is targeted as long tenure and on attractive terms. The balance of US$ 20 million will be a 5-year tenure loan at customary lending terms. By comparison to typical project finance the proposed debt is extremely attractive, which is why the Company persisted with the longer than expected due diligence and approvals process. The target date of 14 December 2017 (as per ASX announcement 15 Sep 2017) remains unchanged as the date for the final decision by German government inter-ministerial committee (IMC) for the ECA cover. At the same time KfW IPEX-Bank is targeting to gain its credit approval by the competent bodies of the bank.

A positive decision from the IMC will result in a legally binding offer of cover by the Federal Republic of Germany to KfW IPEX-Bank and permit KfW IPEX-Bank to finance the Project debt package of in total US$ 185 million, consisting of the up to US$ 165 million covered debt and US$ the 20 million commercial debt. An offer of cover coupled with a separate bank commitment letter based on a pre-negotiated debt term sheet package provided by KfW IPEX-Bank will position Altech to then proceed to secure project equity.

HPA Plant Throughput and Process/Quality guarantees

The SMS fixed-price lump-sum EPC contract now includes a completion guarantee with liquidated damages provisions; it also includes throughput and process/quality guarantees supported by a substantial performance bond. All plant and equipment will be accompanied with warranty guarantees supported by a significant warranty bond. Obtaining these extensive guarantees for a chemical processing plant is an exceptional outcome that significantly de-risks the Project. These guarantees were one of the instrumental factors in bringing the technical project due diligence process to a satisfactory conclusion.

HPA Plant Capacity and Enhanced Impurity Management

The scope of work for the Malaysian HPA plant has changed substantially under the fixed-price lump-sum turnkey EPC contract proposed by SMS. Plant capacity has been upgraded to 4,500 tonnes per annum and the plant design now incorporates a flexible finished product line capable of producing HPA for both the synthetic sapphire industry (up to 4,500tpa of high density pellets) and HPA for the lithium-ion battery industry (up to 1,500tpa of powder at sub-micron particle size). Total plant output is designed at 4,500tpa HPA with the flexibility to balance the finished product mix.

Superior lining materials have been incorporated into selected equipment proposed for the back-end of the HPA plant (after roasting) to minimise finished product contamination risk. Whilst the materials are significantly more expensive than the original design, the incorporation further de-risks the Project by ensuring the plant's capability to achieve the required 99.99% finished product purity standard. Also, plant emissions targets are now significantly more stringent compared to local requirements due to incorporating international requirements (Equator Principles and OECD Common Approaches). The technical due diligence consultants have positively opined on the Company's revised process design assumptions, impurity management changes and additional test work results from the due diligence program.

In compiling the final EPC price, SMS has now detailed the majority of the previously "factored" construction costs by requesting firm quotations from vendors and service providers. Previously "factored" costs include freight, mobilisation and demobilisation, temporary facilities, final engineering, insulation and commissioning. Overall quotations were substantially higher than was originally factored. The final capital costs include the land purchase cost for Johor and Meckering; owner costs during commissioning; a first mining campaign costs, first fills; insurance; and other establishment costs.

Based on the FIDS results, the Altech Board has decided that the Project proceed to the next stage, the ECA application process. Assuming that the ECA debt component is approved in December 2017, the Company will focus on finalising the equity component of funding in the first half of 2018.

Commenting on the FIDS, Altech's managing director Mr Iggy Tan said, "The FIDS has confirmed the financial and technical robustness of the Company's HPA project. The focus for Altech over the next two months is to continue to work closely with KfW IPEX-Bank and the appointed independent expert consultant to prepare for the German government inter-ministerial committee meeting on 14 December 2017. A positive outcome will mean we attain the US$165 million "offer of cover" for the majority of the Project debt and as the bank approvals process will run in parallel; the total target debt amount of US$ 185 million", he concluded.

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About Altech Batteries Ltd

Altech Chemical Ltd ASX:ATCAltech Batteries Limited (ASX:ATC) (FRA:A3Y) is a specialty battery technology company that has a joint venture agreement with world leading German battery institute Fraunhofer IKTS ("Fraunhofer") to commercialise the revolutionary CERENERGY(R) Sodium Alumina Solid State (SAS) Battery. CERENERGY(R) batteries are the game-changing alternative to lithium-ion batteries. CERENERGY(R) batteries are fire and explosion-proof; have a life span of more than 15 years and operate in extreme cold and desert climates. The battery technology uses table salt and is lithium-free; cobalt-free; graphite-free; and copper-free, eliminating exposure to critical metal price rises and supply chain concerns. 

The joint venture is commercialising its CERENERGY(R) battery, with plans to construct a 100MWh production facility on Altech's land in Saxony, Germany. The facility intends to produce CERENERGY(R) battery modules to provide grid storage solutions to the market.

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Contact

Corporate
Iggy Tan
Managing Director
Altech Batteries Limited
Tel: +61-8-6168-1555
Email: info@altechgroup.com

Martin Stein
Chief Financial Officer
Altech Batteries Limited
Tel: +61-8-6168-1555
Email: info@altechgroup.com



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