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Independent Research

Altech Chemicals Limited (ASX: ATC, FRA: A3Y)

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MALAYSIAN SITE VISIT HIGHLIGHTS PROGRESS
As confirmed by our April, 2019 site visit to Johor Bahru in Malaysia, Altech Chemicals Limited
(“Altech” or “the Company”) has made considerable progress on the 100% owned 4,500 tpa
HPA Project (“the Project”), which is planned to become a low cost provider of 99.99% (“4N”)
High Purity Alumina (“HPA”) into global markets.
Demand for HPA is forecast to grow by at least 16% CAGR over the next 5 to 10 years, on the
back of the growing LED lighting market and growth in demand for HPA coated separators
(“HPACS”) for the lithium-ion battery markets - the growth of the latter is due to the increasing
energy density, and hence heat generation of the batteries, with the HPACS being able to
withstand significantly hotter operating temperatures than the traditional polymer separators -
this also provides improved safety, battery life and efficiency.
Altech, in association with others, has developed a patented acid leach process to produce 4N
HPA from high purity clays, with the planned feedstock to come from the Company’s Meckering
deposit located near Perth in Western Australia. It is planned to ship the clay to a purpose built
HPA production facility in the Tanjung Langsat Industrial Complex, located 40 km from Johor
Bahru, across the Straits of Johor from Singapore - construction has now commenced on the
HPA facility, with photos included in the appendix to this report.
Altech’s process caught the attention of the major German engineering group, SMS group
Gmbh (“SMS group”), which, in addition to signing up for a fixed price, guaranteed EPC
contract for the HPA plant in Malaysia, has agreed to take a US$15 million equity position in
the Company.
The involvement of SMS group has also enabled Altech to source German Export Credit
Agency (“ECA”) backed funds through the German government owned KfW IPEX-Bank - a
US$190 million facility has been finalised, with this comprising US$170 million of ECA finance
under favourable terms, and US$20 million of finance under standard commercial terms.
The Company has also signed an indicative term sheet for up to US$90 million of mezzanine
finance with Macquarie Bank.
Altech is now looking to finalise the equity portion of the expected remaining US$380 million
finance requirements (which includes an allowance of US$100 million for working capital, debt
service etc in addition to the estimated US$280 million remaining project capital costs) - this
may include a sale of an equity stake at the Project level. Market headwinds over the past 12
months have led to a fall in the share price, effectively precluding raising the required equity
from shareholders due to what would be substantial dilution.
The closing of finance will trigger the main two year construction period, which, with all going
well could lead to first production in 2022, with 100% of the first 10 years of production subject
to an offtake agreement with the Mitsubishi Corporation.
KEY POINTS
�� Key partners in place: With EPC, offtake and the majority of the debt partners in place,
Altech is well positioned to progress once the equity finance is finalised.
�� Key cornerstones: Altech has a strong register, with key German and Malaysian groups
on board - this includes SMS group, which gives a vote of confidence in Altech and the
planned operation.
�� Disruptive technology: Altech’s HPA process has the potential to be a low cost (US$8.55/
kg HPA), disruptive technology in the 4N HPA sector - the involvement of SMS group
(including the due diligence for the ECA finance) gives confidence that the process will be
successful.
�� Fully permitted: Both sites, Meckering and Tanjung Langsat are fully permitted and
licenced for the planned operations.
�� Proven, low cost industrial destination: Malaysia is a low cost destination for industrial
operations (including chemicals), with the Company estimating that the operating costs for
the HPA plant will be ~60% lower than they would be in Australia.
�� Infrastructure rich: The strong development of the industrial and port estates in southern
Johor State has included the development of the infrastructure and supporting industries
required for the planned operations; in addition, Meckering is adjacent to quality transport
infrastructure, and is just ~153 km from the port at Fremantle.
�� Strong management and committed personnel: Company personnel have extensive
relevant experience as well as shareholdings in the Company, thus aligning their interests
with other shareholders.
Underlying
Altech Chemical

Altech Chemicals Ltd. Altech Chemicals Limited is engaged in the research and development activities for the commercialization of its aluminous clay (kaolin) deposit at Meckering, Western Australia. The Company is also engaged in the development of high purity alumina (HPA) manufacturing and mineral exploration. The Company's projects include HPA Project. The Company is a supplier of approximately 99.99% (4N) HPA (Aluminum oxide (Al2O3)). The Company also has 100%-owned kaolin deposit in Meckering, Western Australia, located approximately 130 kilometers from Perth. It employs a conventional hydrochloric acid (HCl)-based technology to produce HPA from kaolin clay. The Company's HPA process is an acid-based HCl process with crystallization and acid recovery. The Company's subsidiaries include Altech Chemicals Sdn Bhd, Altech Meckering Pty Ltd, Yilgarn Iron Pty Ltd, Canning Coal Pty Ltd, Australia Mineral Sands Pty Ltd, Musselbrook Iron Pty Ltd and Altech Chemicals Australia Pty Ltd.

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