High Purity Alumina (HPA) - Project
Altech Advanced Materials AG, Heidelberg, ISIN DE000A2LQUJ6, has signed an option agreement with Altech Chemicals Limited and Atech Chemicals Australia PTY allowing the Company to acquire up to 49% of the shares in Altech Australia's high-purity Alumina Project ("HPA").
Altech Chemicals Limited (Altech) intends to position itself as one of the world's leading suppliers of high purity alumina (4N) (Al2O3).
High purity alumina (HPA) is a high quality, economically lucrative and highly sought after product as it is essential for the production of synthetic sapphire. Synthetic sapphire is used in the manufacture of substrates for LED lamps, semiconductor wafers in the electronics industry and scratch-resistant synthetic sapphire glass for wristwatches, optical windows and smartphone components. There is no substitute material for HPA in the manufacture of synthetic sapphire.
At the international level, the demand for HPA is around 25,315 tons per year (2016). Demand is expected to grow by a total of 16.7 % annually (2016 - 2024), driven primarily by the increasing use of LEDs worldwide. As an energy-efficient, longer-lasting and more cost-effective lighting variant, LED luminaires are increasingly displacing conventional incandescent lamps from the market.
The HPA producers currently active on the market use expensive and highly processed impact materials such as aluminium metal to produce high-purity aluminium oxide.
Altech has prepared a bankable feasibility study for the construction and operation of an HPA plant with an annual capacity of 4,000 tonnes at the Tanjung Langsat industrial complex in Johor, Malaysia. The plant will produce high-purity alumina directly from kaolin from the company's 100% owned kaolin deposit near Meckering in Western Australia.
Altech will use a conventional standard plant with standard equipment in its production process for the extraction of high purity alumina using a hydrogen chloride (HCl) method. Production costs are expected to be significantly lower than those of established HA producers.
- Input tax NPV US$ 505.6 million
- Repayment 4.5 years
- IRR 21.9%
- Capex US$ 297.6 million
- Opex US$ 44.6
- HPA selling price US$ 26,90/kg
- Profit margin US$ 63%
- EBITDA US$ 75.7 million
The assumed selling price for HPA is US$26.9 per kg (US$26,900 per ton), the assumed exchange rate USD:AUD is 0.7 for CAPEX (investment costs) and USD:AUD is 0.8 for OPEX (operating costs).
Altech intends to become a leading global supplier of high purity alumina to meet the global demand for LED lighting, lithium-ion battery separators and smartphone components.
Meckering Kaolin Deposit
The majority of alumina producers use expensive and highly processed raw materials such as aluminum metal to produce HPA. A significant advantage of the company's approach is the clay, rich in alumina and naturally low in impurities, which provides a cost-effective alternative to the raw material for the production of HA.
Altech's processing technology
Altech uses a conventional and proven technology based on hydrogen chloride (HCI) and is particularly suitable for producing high quality HA from kaolin clay. Altech's manufacturing process will use a conventional standard plant with standard equipment, which will significantly reduce production costs.
Market demand for HPA
At the international level, the demand for HPA is around 25,315 tonnes per year (2016). Demand is growing at an annual rate of 16.7 % (2016 - 2024), driven primarily by the increasing use of LEDs worldwide. As an energy-efficient, longer-lasting and more cost-effective lighting variant, LED luminaires are increasingly displacing conventional incandescent lamps from the market.
There is a growing demand for HPA due to its increasing importance in the production of today's high performance electronic devices;
The high-quality properties of HPA are relevant features for many existing and new applications, such as sapphire glass for smartphones;
The value of the 4N HPA product is a high value product ranging from US$15 - US$40 per kg.
Summary of the
- The process described uses well-established technologies and equipment that have been tried and tested over many years and are low in risk;
- It is to be expected that production costs will be competitive worldwide due to their relative simplicity in implementation;
- It is expected that the return on investment will be significant due to the high quality and rapid demand growth of the product, which is driven by the electronics industry.
The current demand is experiencing exponential growth due to the continuous development of higher-value high-tech products such as LEDs, lithium-ion batteries and smartphone products. AAM is ready to take advantage of this growth market and believes it is the right opportunity to invest.
In July, AAM signed an option agreement with Altech Chemicals Limited ("Altech") and Altech Chemicals Australia PTY LTD ("Altech Australia") allowing the Company to acquire up to 49% of Altech Australia's high purity alumina project ("HPA") for US$100 million. For this option, the Company will pay Altech a fee of EUR 500,000 in cash upon closing. The option can be exercised until January 1, 2021.
The option agreement essentially provides for this:
- AAM will have the right to acquire at least 10% (for a pro rata amount of USD 20.408 million) up to a direct HPA project interest of maximum 49% for USD 100 million through the acquisition of interests in Altech Australia;
- AAM undertakes to sell the acquired shares back to Altech 6 years after the start of the project ("Project Financial Close") on the basis of a fixed increase in value of 15% p.a.;
- Altech will have the right to require AAM to repurchase the acquired shares in Altech Australia on an equal basis within 6 years,
- AAM may terminate its resale obligation at any time and thus retain its HPA project participation.
The Cicero report and white papers on the HPA project can be found here:
Altech Chemicals Limited: Green Bond Second Opinion