Altech Chemicals (ASX:ATC) has announced the results of a Final Investment Decision Study (FIDS) for the development of a 4,500-tpa, High Purity Alumina (HPA) operation. This preceded the company’s announcement of a successful AU$17 million capital-raising. This analysis reviews thsi result and updates our valuation.
Debt financing nears completion1 Video - Oct 17
Altech Chemicals (ASX:ATC) is at an advanced stage of development for their High Purity Alumina (HPA) Project, which upon construction will be the first fully integrated HPA processing operation globally. Altech recently provided an update regarding the project’s development. Highlights include:
- Target date for a decision by the German government Inter-Ministerial Committee (IMC) for German ECA cover – 14 December 2017;
- Lender’s due diligence - final stage;
- Successful due diligence with no fatal flaws;
- Expert Opinion report for Euler Hermes nearing completion; and
- Finalisation of EPC contract.
Analyst Comment: Whilst the progress of debt financing has been slower than originally anticipated, it appears these negotiations are now drawing towards a positive conclusion. The major reason for the delay was due to a change in EPC contractor earlier this year (SMS Group).
In the long run it appears the change in contractor may have been a blessing in disguise, given SMS Group’s long standing relationship with the German debt providers and the export credit agency, as well as their vast experience in building facilities similar to Altech’s planned HPA project.
Catalysts: The company has highlighted a number of short term milestones that investors should be aware of in the coming months. These include:
- Mid October – All due diligence consultants to submit final reports to the expert opinion consultant;
- Mid October - finalise the EPC contract price;
- 9 November - expert opinion report submitted; and
- 14 December - decision on the offer for export credit project finance cover.
The information in this email should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.
Valuation: We maintained our valuation at $0.55 / share (SP $0.17 / share). We kept all assumptions in-line with previous guidance despite the company flagging capital costs will increase due to a change in the processing facility specifications, as well as a deterioration of the Euro/USD exchange rate.
It is likely that any increase in capital expenditure will potentially be matched by an increase in the size of the debt facility. This should result in only a minor change on a valuation per share basis, given future dilution will remain similar and the likely favorable terms that will be offered by the credit agency (low interest rate, long term repayment profile). We will review these assumptions once debt terms are offered.
In addition, our current valuation assumes an additional 40% discount to account for project development and financing risk. Once financing has been finalised this discount will be reduced.
Management Update1 Video - Oct 17
Interview with Managing Director, Iggy Tan, for an update on the company’s recent activities. Topics discussed include:
- Project financing;
- Change in EPC contractor – SMS; and
- Project development timeline.
Initiation Report8 Videos - Feb 17
Altech Chemicals is an ASX listed company and is developing a High Purity Alumina (HPA) Project, with operations in Western Australia & Malaysia. Report includes:
- Valuation & Investment Analysis;
- Site trip and review of the planned HPA operation;
- What is HPA; and
- Management Interviews.
Valuation Analysis1 Video - Feb 17
Detailed valuation analysis of Altech. Key assumptions explained in further detail include:
- Operating and capital cost assumptions;
- HPA price;
- Production rate; and
- Discount rate.
What is HPA?1 Video - Feb 17
4N High Purity Alumina (HPA) is used primarily in the LED, Lithium Ion Battery and smartphone industries and is set for a signficant increase in demand. This analysis take a the closer look at
- HPA’s uses;
- Supply and Demand factors; and
- How it is made.
Altech Chemicals1 Video - Feb 17
- The Pitch provides investors with a short introduction to a range of different company’s in the same time it takes to go up an elevator.
- Altech is developing the first vertically integrated High Purity Alumina (HPA) operation which is due to commence production in 2019.
Virtual site trip – HPA Project1 Video - Feb 17
Virtual site trip to the company’s operations, explaining the planned:
- Processing of Kaolin into HPA; and
- Offtake & distribution.