ASX listed Altech Chemicals has pushed the button to start construction of its 4,500 tonne per annum high purity alumina plant in Johor, at the southern tip of mainland Malaysia.
The plant will take super-high purity kaolin product sourced from the company’s massive deposit near Meckering, east of Perth for processing into a low contaminant high purity alumina stream with a myriad of lucrative industrial uses.
Demand for high purity alumina or “HPA” is experiencing rapid growth and is expected to more than double to nearly 76,000 tpa in the next 5 years, according to Altech.
In a market update this week, the Subiaco-based company said it had executed the Stage 1 construction works agreement with German engineering, procurement and construction contractor and Altech shareholder SMS group.
The works, which Altech is equity funding, will be carried out in parallel with project financing in order to ensure a fast tracked route to market for the aspiring HPA producer.
Stage 1 works include bulk earthworks; extensive foundation piling; the construction of retaining walls; underground storm water/process discharge tanks; construction of the site electrical sub-station structure and construction of a maintenance workshop.
The maintenance workshop will also be used as the construction site offices during Stage 2 of the HPA plant construction.
Engineering works incorporated in the stage 1 construction program include the finalisation of layout drawings and the construction permitting process from local authorities.
The Stage 1 agreement covers the first 6-7 months of the proposed two year construction period. The value of the works is about $10 million, the majority of which will be credited against the USD$280 million lump-sum fixed-price HPA plant EPC contract awarded to SMS which will commence following finance closure.
Last month, Altech executed a USD$60m stream finance term sheet with a US-based global investment group to assist with the development, construction and working capital requirements of the HPA plant.
Should this facility be acceptable to the senior debt provider, German Government-owned KfW IPEX-Bank, who has already committed USD$190m for project financing, it will take the company across the line to meet the USD$298m CAPEX requirements for the plant.
Altech also has an indicative term sheet for mezzanine debt financing from a global merchant bank equal to USD$90m.
The company’s studies show a payback on the project of just under 4 years, based on a long-term sale prices of USD$26,900 per tonne of HPA.
Projected pre-tax NPV is USD$505m with an IRR of 22% and the project will churn out an EBITDA of about USD$76m a year.
These numbers could turn out to be decidedly conservative too given that the price of HPA has reached up to USD$40,000 per tonne in Japan recently.
Further upside could come from an expected increase in the use of HPA coated battery separators by lithium-ion battery manufacturers.
A recent research report from Petra Capital in Sydney, forecasts that the lithium-ion battery manufacturing sector alone would most likely consume about 23,000 tonnes of HPA a year, with a more bullish scenario pushing this up to 37,500 tonnes per annum by 2025.
With site works now underway, Altech has ticked another box, and a major one at that, on its road towards HPA production in Malaysia.
By Matt Birney
