The protracted study took longer than expected, but Tan said had substantially derisked the US$298 million project and clarified each step along the way, and would be vital in securing $185 million of debt cover from Germany’s KfW IPEX-Bank before the end of the year.
Completion of the study came just days after Altech finalised an increased plant design with its German engineering, procurement and construction contractor, SMS Group, which improved flexibility.
The larger plant has been designed to it can deliver either 4500tpa HPA for the synthetic sapphire industry, which aids in development of LED lights, semiconductors and scratch-resistant glass, or up to 1500tpa of HPA powder for the emerging lithium-ion battery sector that offers higher margins and is an emerging growth story.
The junior had earlier completed a bankable feasibility study for both the mine at Altech’s 100%-owned kaolin deposit at Meckering and the plant at the Tanjung Langsat Industrial Complex, which should produce HPA as much lower costs than incumbents.
The study found the project has a pre-tax net present value (7.5% discount rate) of $505 million, an internal rate of return at 22% assuming earnings of $76 million per annum, and a rapid payback period of just under four years.
The study assumed a conservative HPA price of $26.90/kg over the 30-year project life, which is currently around $40/kg in Japan –and if maintains at that level could almost halve the payback period.
The costs of production are estimated at $9.90/kg, giving healthy margins.
Tan said his focus over the next two months was to work closely with KfW IPEX-Bank and the appointed independent expert consultant to prepare for the German government inter-ministerial committee meeting in mid-December.
“A positive outcome will mean we attain the $165 million ‘offer of cover’ for the majority of the project debt and as the bank approvals process will run in parallel; the total target debt amount of $185 million,” he said.
The Meckering kaolin deposit, which is about 130km from the Port of Fremantle, already has a granted mining lease and Altech owns much of the freehold land that covers the 12 million tonne at 30% Al2O3 resource, enough to support 250 years production at a mining rate of 43,500tpa, and the 30 years reserves cover.
Assuming a final investment decision is taken next year it is estimated the plant could produce its first product within 31 months, with a three-year ramp up to full production to follow.
SMS will build the plant under a lump-sum contract that includes critical completion guarantees.
Altech shares last traded at A18.5c on October 20, valuing the company at $55 million before the company entered a trading halt pending a capital raising announcement, its third this year following total raisings of some $3.85 million earlier in the year.
At June 30 it had around $1.4 million in the bank.
