Meckering clay to new-age, must-have material

Altech Chemicals (ASX: ATC) is ahead of the game with an offtake agreement and financing underway for its long-life project turning simple kaolin clay into a raw material for lithium-ion battery and LED components and unscratchable watch faces. NGAIRE McDIARMID reports.

Meckering clay to new-age, must-have material Meckering clay to new-age, must-have material Meckering clay to new-age, must-have material Meckering clay to new-age, must-have material Meckering clay to new-age, must-have material

HPA is the vital ingredient to artificial sapphire substrates found in LED lights

A clay pit near Meckering in Western Australia is the key to Altech Chemicals’ high-purity alumina (HPA) project – a project which will have a pre-tax NPV of US$357 million, according to its bankable feasibility study.

Altech is already in finance discussions to develop a low-cost vertically integrated business, mining its 100%-owned kaolin clay and turning it into high-value HPA at its planned processing plant in Malaysia.

The company aims to become one of the world’s leading suppliers of 99.99% HPA at a considerably lower cost to other producers and its project has a forecast life of more than 250 years.

The advantage Altech has over competitors is its high-purity deposit and its low-cost, single-plant processing.

In a strong vote of confidence for the company’s plans, Japanese giant Mitsubishi’s Australian subsidiary has signed an exclusive offtake sales agreement for 100% of the first 10 years of Altech’s HPA production.

Mitsubishi Australia will be the exclusive global distributor and buyer of the full 4,000tpa production capacity.

Altech managing director Iggy Tan said the agreement signed in April was an important milestone and bolstered the company’s credibility as it continued finance discussions.

“High purity alumina will be part of the next ‘new age’ materials boom like rare earths, lithium and graphite,” he said.

He was quick to point out that HPA was not a new material but it was in growing demand thanks to its role as a critical ingredient in artificial sapphire, which is used in LED lights, watch faces and smartphone components. Lithium-ion battery producers are now also using HPA for the battery’s separator. 

“It’s used in sodium lamps, medical applications, semiconductors, industrial applications, optical lenses, electronic substrates, and even the military where they toughen up the vehicle’s windows to make them bullet proof,” Tan said.

“The biggest growth is in the LED (light emitting diodes) sector, which can produce the same wattage as regular light bulbs with less energy – and a lot of countries are now mandating a move towards LEDs.

“On the pie-chart of HPA uses, lithium batteries and smartphone screens don’t even feature yet so that’s another growing market.

“There is no substitute for HPA in making artificial sapphire.

“The current market of HPA is about 20,000 tonnes per annum worldwide – it’s not a big market yet but it’s high value and it’s growing about 25% year on year.

“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.”

Tan said typically, bauxite was processed to create smelter grade alumina (SGA), which was turned into aluminium, which HPA producers then purchased and re-processed to create a high-purity alumina.

“Our HPA process is quite a disruptive technology,” he said.

“We’re taking it straight from the ore to the four-nines (99.99% purity) in one single step without going through the aluminium metal stage.

“And the only reason we can do that is our kaolin orebody has had a lot of impurities leached out, and we will ship it to Malaysia to be converted into HPA through a thoroughly tested and proven hydrochloric acid leaching process.

“So we’re using that established technology to meet this new demand in the electronics sector, we have a high purity deposit and we’ve brought together very experienced people.”

Tan and general manager operations Dr Jingyuan Liu were instrumental in establishing Galaxy Resources’ Mt Cattlin spodumene project in WA and associated lithium carbonate processing plant in China.

Comprehensive testing has proved Altech can produce a 99.99% HPA product through the established hydrochloric acid leaching process.

Tan said the growth in LEDs alone was expected to grow demand for HPA from 20,000tpa to 48,000tpa by 2018.

“The next area of growth is in lithium-ion batteries,” he said.

He said HPA was used as a fire retardant on separators inside larger batteries like those in electric vehicles.

The future is in the smartphone market where artificial sapphire scratch-resistant screens are becoming more common.

“We forecast by 2025 this lithium battery sector will require 15,000tpa of HPA and that is nearly four times the 4,000tpa plant we intend to build in Malaysia,” Tan said.

“So what we’re saying is that we’re entering a market where there’s high growth and we’re not going to be fighting for market share, we’re going to fill the growth demand.

“About 70% of the demand for HPA is in the Asia-Pacific region and we think we’re well placed to meet that demand because our deposit is in Western Australia and our plant is in Malaysia.”

He said Altech chose to build in a chemical park in Malaysia that had port access and government incentives.

Altech’s updated bankable feasibility study (BFS) puts the capital expenditure costs for the plant and mine at US$80 million with a payback of less than four years.

“Our NPV on discounted cashflow is US$357 million and it’s not often you have a project where the NPV is four times the capex,” Tan said.

“The internal rate of return is about 33% and with an operating cost of about US$9,000/t and an anticipated margin of about $14,000/t, the project throws off about US$55 million in EBITDA.”

The BFS covers a 30-year minelife, which will process about 1.3 million tonnes of kaolin and Tan said the project had up to a 250-year life.

The company has raised about A$5 million since March 2016 and also welcomed Malaysian insurance, investment, credit and finance group MAA Group Berhad as another cornerstone investor.

Altech expects to close project financing by the end of 2016 and start siteworks at both Meckering and Malaysia early next year.

With about half of the Johor plant using German technology, Altech has sought funding support from German bank KfW IPEX-Bank and export credit agency (ECA) Euler Hermes Aktiengesellschaft. 

“We’re producing a product at the high-end of the market and from that point of view, German engineering and equipment is world class,” Tan said.

The company’s banking partners KfW IPEX-Bank are now in the process of finalising the senior debt finance package for the project.

Tan said the possibility of accessing low interest rate, long-term project financing that could be available under ECA funding was compelling.

“So we believe we’re in the right place at the right time, with the right deposit and the right technology to feed this business going forward – and the right people on board,” he said.

Altech Chemicals – at a glance

HEAD OFFICE: Suite 8, 295 Rokeby Rd, Subiaco WA 6008

Ph: +61 08 6168 1555

Fax: +61 08 6168 1551

Email: info@altechchemicals.com

Web: www.altechchemicals.com

DIRECTORS: Luke Atkins, Iggy Tan, Dan Tenardi, Peter Bailey, Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah, Uwe Ahrens

QUOTED SHARES ON ISSUE: 178.53 million 

MAJOR SHAREHOLDERS: Lake McLeod Gypsum Pty Ltd (13.94%), Melewar IIC Ltd (9.49%), D Tenardi (4.87%), L G Dudfield (3.14%), JM Tan (3.01%)

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