Electrical substation construction underway at the HPA plant site;
‘Mine to gate’ study shows low carbon production process compared to conventional competitors;
US$90 million mezzanine loan facility progressing with Macquarie Bank;
European financing strategy underway with AAM capital increase approved.
HPA plant construction
Altech Chemicals Ltd (ASX:ATC) is building a 4,500 tonnes per annum plant in Johor, Malaysia, where it will make 99.99% (4N) high purity alumina (HPA) from feedstock at the 100%-owned kaolin deposit at Meckering, Western Australia.
Altech picked Malaysia for processing because of the access to infrastructure and ports and recently received approval from the Malaysian government for no corporate profit tax on business income until year 10 of operations.
Construction of the electrical substation within the plant site is ahead of schedule and expected to be completed in April, with major structural works complete and the majority of external detailing of the building finished.
The EPC (engineering, procurement and construction) consortium comprising SMS group and Metix and sub-contractors have started internal finishing and architectural detailing, completing sewerage and drainage works, and finalising vehicle access requirements.
Altech has all the permitting in place for the project, has completed stage one of the HPA plant construction and is progressing with stage two of construction in the near-term.
Green production process
The company has undertaken a detailed ‘mine to gate’ study to compare the greenhouse gas emissions and energy consumption from the industry-standard HPA production process versus the company’s process, after requests from potential institutional investors and investment banks in Europe for a demonstration of Altech’s kaolin-alumina HPA production process.
The current industry standard is to reprocess high-grade aluminium metal feedstock by dissolving the metal in alcohol, hydrolysing, then calcining back to alumina.
This is a high energy-intensive process as the feedstock is produced via bauxite which is initially processed into smelter grade alumina which is then fed into an aluminium refinery to produce aluminium metal ingots or power.
In comparison, Altech’s process is direct; it involves the extraction of high purity alumina from a kaolin (alumina silicate) ore feedstock using a hydrochloric acid process, rather than from expensive aluminium metal.
Altech’s process is estimated at one third to half the cost of the conventional production process and because the company doesn’t produce aluminium metal it has a 46% less carbon dioxide footprint for one tonne of HPA and costs 41% less energy to make one tonne of HPA than chemical companies.
HPA plant outline
Controlled placement agreement
Altech has entered into a controlled placement agreement (CPA) with Acuity Capital for up to $10 million of standby equity capital for the period to January 31, 2023.
The company will control if and when the CPA is utilised, the quantum of shares issued, the minimum issue price of shares and the timing of any issue.
Altech also retains full flexibility to use all other methods or arrangements to raise capital whist the CPA is in place.
Loan facility progressing
The company is currently advancing a proposed US$90 million mezzanine loan facility following a recent meeting in London with its preferred mezzanine lender Macquarie Group Ltd (ASX:MQG) (OTCMKTS:MQBKY) with the bank reaffirming its continued interest in providing the facility to Altech - especially given the increased profile of planned lithium-ion battery plant construction in Europe.
The proposed mezzanine loan remains subject to Macquarie satisfying due diligence, various internal approvals and inter-creditor arrangements with senior lender KfW IPEX-Bank in Germany.
Fixed price offtake
While Altech has a 10-year offtake sales arrangement with Mitsubishi Corp’s (TYO:8058) Australian subsidiary, Mitsubishi Australia Ltd, Macquarie highlighted the importance of it selling a proportion of the planned HPA production to an end-user at fixed product prices to demonstrate some pricing transparency in an otherwise opaque market.
The company’s objective is to link with one or more HPA end-users that appreciate the advantage of a current commitment to accept future volumes of its 99.99% (or 4N) HPA product at pre-agreed or other transparent pricing, and/or to directly partner with Altech for the development of its HPA project.
European finance strategy
The company recently posted alternate director Uwe Ahrens to Germany is already starting to deliver increased engagement with emerging participants in the growing European lithium-ion battery sector.
The European-based initiatives will support the company’s objective of closing the balance of finance for its Malaysian HPA project, with Frankfurt Stock Exchange-listed Altech Advanced Materials AG (AAM) at the helm of this work.
AAM capital increase approved
In July 2019 Altech Chemicals sold an option to AAM whereby the German entity can acquire up to a 49% interest in Altech’s project for US$100 million.
A key step toward this is a capital raise by AAM of around €69.4 million which has been approved by shareholders at a shareholder meeting held in Germany on March 12, 2020.
The approval provides for AAM to issue up to 63,102,080 new shares at a minimum price of €1.10 per share, which would raise €69.4 million fully subscribed.
Updated prospectus submitted to BaFin
AAM has a period of 6-months in which to implement the capital increase.
The rights offer is scheduled to conclude by April 30, 2020 and will commence following approval by BaFin (German Federal Financial Supervisory Authority) of an updated AAM prospectus which has been submitted to BaFin.
Approval of the prospectus is expected in early April 2020.