Perth-based, ASX-listed Altech Chemicals said in a market update this week it had submitted a manufacturing licence application to the Malaysian Investment Development Authority for a 4,500 tonne high purity alumina plant at the Tanjung Langsat Industrial Complex in Johor, Malaysia. The plant aims to produce high purity alumina from kaolin clay supplied from Altech’s 100%-owned kaolin deposit at Meckering, located about 130km from Fremantle in Western Australia.
Altech said it had also applied for the project to be given “pioneer status- high technology”, a Malaysian investment incentive classification which delivers tax exemption on statutory income for the first five years following the start of commercial production from the plant.
The company said if it is given pioneeer status, it would be able to carry forward any accumulated losses and unabsorbed capital depreciation into the post Pioneer Status income period.
The company said, ‘Altech has been liaising with MIDA about its proposed HPA project since 2015 and recently met with MIDA representatives in Kuala Lumpur, Malaysia to finalise the applications,’
The springboard for Altech to submit their licence application to MIDA was delivered late last year when it secured a remarkable German Government debt guarantee for US$170 million in project funding which shifted the venture into the development phase.
The German Government operate a curious debt guarantee scheme whereby they will guarantee large project debt if the proponents are prepared to use German engineering and product to build the project.
Altech have secured the services of massive German EPC contractor SMS Group who will also guarantee the quality and rate of high purity alumina throughput at the plant.
High purity alumina or “HPA” is used to manufacture synthetic sapphire wafers used in the manufacture of substrates for LED lights, semiconductors used in the electronics industry and scratch-resistant sapphire glass used for wristwatch faces, optical lenses and next generation smartphones. It is also an essential element in Lithium-ion batteries, used as a separator of the cathode and anode sheets.
Persistence Research has forecast that global HPA demand will soar from 25,315 tonnes in 2016 to 86,831 tonnes in 2024, representing a staggering annual compounded growth rate of nearly 17%.
HPA sells for a whopping US$24,000 a tonne and up to USD$40,000 in some spot markets. Altech Chemicals appear to have a significant advantage over other HPA producers given the incredibly high-purity levels of their kaolin deposit near Meckering. This alleviates the need to create a metal as a pre-cursor to the production of HPA which dramatically changes the economics.
The bankable feasibility study for the project revealed an operating cost of just US$9,070 per tonne, which compares favourably to competitor’s costs of between US$14,000 to US$17,000 per tonne according to Altech.
The feasibility study was based on a capital cost estimate of US$298m million with the project expected to produce an NPV of over half a billion US dollars.
Importantly, the company has negotiated an off-take agreement with Mitsubishi that covers the first 10-years of production which should help to produce an annual EBITDA of US$76m a year according to the feasibility study.
Altech Managing Director Iggy Tan says that at an annual throughput rate of 4500 tonnes, the company will have enough feedstock at Meckering to last 250 years.
