Altech Chemicals Ltd (ASX:ATC) has executed a 10 year off take sales agreement with Mitsubishi Australia Ltd for 100% of the high purity alumina (HPA) production from the company’s proposed Malaysian HPA plant.
The agreement appoints Mitsubishi as the exclusive buyer of the full 4,000 tonnes per annum production capacity.
The contracted sale quantities will mirror Altech’s proposed HPA plants’ production ramp up and account for 100% of planned production.
Altech managing director, Mr Iggy Tan said that securing the off take arrangement with Mitsubishi for all of the production from the company’s proposed HPA plant is an integral step towards securing project financing.
“The 10 year off take arrangement for the sale of 100% of Altech’s HPA production is a significant milestone and a strong vote of confidence in the Company, the HPA project and the team working to bring it to fruition."
“Altech’s 4,000tpa HPA plant will position the Company not only as one of the world’s largest producers of HPA, but also as one of the world’s lowest cost producers.”
Altech is aiming to become one of the world's leading suppliers of 99.99% HPA.
HPA is a high-value, high margin and highly demanded product as it is the critical ingredient required for the production of artificial sapphire.
Artificial sapphire is used in the manufacture of substrates for LED lights, semiconductor wafers used in the electronics industry, and scratch-resistant artificial sapphire glass used for wristwatch faces, optical windows and smartphone components.
There is no substitute for HPA in the manufacture of artificial sapphire.
Global HPA market
In 2014, global HPA demand was approximately 19,040 tonnes per annum and demand is growing at an annual rate of 28%, primarily driven by the growth in worldwide adoption of LEDs.
As an energy efficient, longer lasting and lower operating cost form of lighting, LED lighting is replacing the traditional incandescent bulbs.
HPA demand is expected to at least double over the coming decade.
The signing of this off-take agreement is a massive milestone for Altech in its current plans to secure project financing for the proposed project financing. The share price is expected to surge on the news.
The share price has appreciated circa 90% over the past 12 months as Altech continues to deliver on its aim to become one of the world's leading suppliers of HPA.
Altech has an influential cornerstone investor in Melewar IIC Limited, a diversified Malaysia industrial firm with steel, energy and engineering businesses, and is the second largest shareholder of the company.
Altech recently successfully raised a total of circa $2.0 million to fund the company through to the completion of project financing.
Achieving project financing for the proposed plant will be a key catalyst for the company.
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