Altech locks in “guaranteed” US$170m debt for HPA project
ASX-listed Altech Chemicals has finalised a US$170 million loan guaranteed by the German government on very favourable terms for its exciting high purity alumina project based on its kaolin deposit near Meckering in W.A.
The loan is a major coup for the Perth-based company and follows at least 12 months of jumping through hoops to derisk the US$298 million project to the satisfaction of the German export credit agency.
The project, which Altech plans to build in Malaysia, is eligible for funding assistance by way of a German Government guarantee because it relies heavily on German equipment, technology and engineering. Altech has secured the services of giant German EPC contractor SMS Group to build the project, who have since become a cornerstone investor in the ASX listed junior.
Altech announced it had executed a total debt package of US$190 million with the German government-owned KfW IPEX-Bank, of which US$170 million is guaranteed by the German Government export credit agency.
The company said the terms of the US$170 million component were “extremely attractive” compared to a typical project finance loan given that it is Government guaranteed . The balance of US$20 million is a 7-year loan, including a 2-year construction period on normal commercial terms.
Leading Perth stockbroker, DJ Carmichaels, previously said the interest rate with a German government guarantee could be as low as Libor plus 2-3%. The USD Libor rate, a benchmark for interbank lending, generally hovers between 1-2%.
The final major step for Altech before it can drawdown the loan is to secure equity finance for the balance of the project’s costs. The company said it had already begun the equity funding process, which could include subordinated mezzanine finance and/or project level equity participation.
Altech appears to have no shortage of options, saying a number of equity funders had come forwarded and presented options since the German government signed on in December.
High purity alumina is a key ingredient in the manufacture of LEDs, scratch-resistant mobile phone glass and lithium ion battery anodes. Demand is projected to rise strongly as the world switches to renewable energy.
The high-value product is conventionally produced by dissolving aluminium metal, however the exceptional quality of the Meckering deposit means Altech can produce high-purity alumina directly from mined material at a much lower cost.
Meanwhile, Altech is getting its licences into place to fast track development of a 4,500 tonne per annum plant in Malaysia. The company last month applied to the Malaysian government for a manufacturing licence and is seeking “pioneer status – high technology” which would allow tax breaks for the first five years.
The German Government guarantee is an extraordinary shot in the arm for Altech that has allowed the company to jump over the debt hurdle that is more often than not the stopper for many projects.
The provision of well priced debt will make a massive difference to the project and will ultimately assist in raising the equity portion for the project- after that, its on to production. With a kaolin deposit that is expected to last for 230 years, the clearing of the debt hurdle is clearly a significant event for Altech shareholders who are now locked in for the ride to production.