A closer look at Altech Chemicals’ (ASX:ATC) HPA Johor plant

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A closer look at Altech Chemicals’ (ASX:ATC) HPA Johor plant

 A closer look at Altech Chemicals’ (ASX:ATC) HPA Johor plant
Image source: Company update, 18 November 2021

Highlights

  • Altech Chemicals received strong support for its initial bond offering ‘reach out’ phase.
  • ATC is planning to raise US$390 million through bonds, loans and equity for the construction of the HPA plant in Johor, Malaysia.
  • The Company will be mining the kaolin from its deposits in Australia and then shipping it to Malaysia for processing to 4N purity HPA.

Altech Chemicals Limited (ASX:ATC|FRA:A3Y) has recently updated the market on its plan to secure funds for its High Purity Alumina (HPA) plant in Johor, Malaysia. Altech is planning a 4,500tpa HPA plant in Malaysia, which will cater to the battery material coating, semiconductors, LED and glass industries.

Related read: Here’s why Altech Chemicals is making the headlines these days

So far, Altech has spent US$57 million towards initial engineering works and Stage 1 & Stage 2 construction of the HPA plant. Feedstock for the plant will be sourced from ATC’s 100%-owned kaolin deposits in Australia. Mining approvals and permits have been already secured. The Company owns large deposits of Kaolin with a life of mine (LOM) of 250 years.

Image source: Company update, 18 November 2021

Why Johor?

ATC has chosen Johor for its 4,500tpa HPA facility after a careful study of the market. The plant would be located close to the end market, with the Malaysian location providing as much as 60% lower operating costs than Australia. The plant location is also strategic. It is located in a chemical-zoned industrial park with an HCL plant close by. The plant has already been accredited ‘green’ by Norwegian independent agency CICERO.

Related read: Altech Chemicals (ASX:ATC) unveils pilot plant design for battery anode materials

Key financial figures

Altech requires US$390 million to construct a fully functional HPA facility in Malaysia. The Company has worked on plans to raise the funds through a combination of green bonds, debt and selling 49% of equity in the HPA project for US$100 million.

ATC is aiming to raise US$144 million through bonds, out of which US$100 million would be used for the construction of the facility. The balance of US$44 million will be used to service bond interest during the construction phase of the plant.

Another US$190 million has been committed by the German government-owned KfW IPEX Bank. The Company is open for strategic investors or JV partners to raise US$100 million for its 49% equity.

Related read: Altech Chemicals (ASX:ATC) partners with Germany’s Küttner for pilot plant development

The pre-tax and pre-financing equity model demonstrates strong financial returns from the HPA plant. The model estimates a payback period of just 3.9 years with an internal rate of return (IRR) of 22%. The EBIDTA calculation gives US$76 million annually. The pre-tax NPV7.5% is US$505 million.

Production costs for the HPA plant would be around US$8.55/kg, which would lead to a gross margin of over 68%.

Data source: Company update, 18 November 2021

Altech has signed an offtake agreement for 10 years with Mitsubishi for downstream products. The pricing will be at the prevailing market price and will ensure that the project generates cash from the first batch produced at the plant.

Related read: Altech Chemicals (ASX:ATC) advances green bond offering for HPA plant

ATC is trading at AU$0.089 a piece on the ASX today with a market cap of AU$121.07 million.

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