Altech flips switch on HPA plant development

ASX-listed high purity alumina player Altech Chemicals has reached the next construction milestone of its proposed US$280 million processing plant development at Johor Bahru in Malaysia as it works towards a production start-up target of 2023.

Engineering, procurement, construction and commissioning contractor, German engineering firm SMS, has now completed the remaining component of the Johor Bahru project’s stage two work – an electrical substation – at the Altech plant site.

Perth-based Altech described the electrical substation as a critical path item and says it will now proceed to make the substation available to the local electricity service provider for the installation of switchgear and the incorporation of the substation into the electricity grid.

Not surprisingly, construction was held up by the Malaysian Government’s coronavirus restrictions, which have since been eased allowing SMS to finish the substation.

Subject to securing the necessary financing, the company hopes to get the planned 4,500 tonnes per annum HPA processing plant up and running at Johor Bahru and first product out to customers by about 2023.

Bringing the project development to fruition, after construction began early last year, will help turn Altech into one of the world’s leading suppliers of high purity alumina, it says.

The company has so far managed to lock away debt finance through the German Government backed KfW IPEX-Bank as senior lender, which has approved a US$190 million loan, and is currently working on securing further funding.

HPA is a high-value, high margin, and in-demand product critical to the production of synthetic sapphire and increasingly in the manufacture of lithium-ion batteries.

Synthetic sapphire is used in the fabrication of LED lights, semiconductor wafers for the electronics industry, and scratch-resistant sapphire glass for wristwatch faces, optical windows, and smartphone components.

Lithium-ion battery manufacturers use HPA for the coating on the polymer anode/cathode separator sheets in batteries, improving performance, longevity, and safety.

According to Altech, global HPA demand is predicted to soar from about 19,000tpa in 2018 to a whopping 272,000tpa 10 years later, driven primarily by the rapidly expanding lithium-ion battery and LED manufacturing sectors.

Feedstock for the Johor Bahru plant will be sourced from the company’s 100 per cent owned kaolin deposit at Meckering in WA and shipped to Malaysia.

Definitive feasibility study modelling estimated the vertically integrated project has a net present value of $US505.6 million before tax based on a 30-year life, impressive annual average free cashflow of about US$76 million at full production before debt servicing and tax, and an attractive margin on HPA sales of about 63 per cent.

Altech has entered into an offtake sales agreement with Mitsubishi Corporation’s Australian subsidiary, Mitsubishi Australia, covering the first 10 years of HPA production from the project.

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