A key condition of Altech's application for German export credit project finance cover is the provision of a throughput guarantee for the HPA plant by the EPC contractor. The previously envisaged EPC contractor was unable to provide this guarantee.
SMS, as the incoming EPC contractor has proposed the following to Altech:
1. Fixed price turnkey EPC contract (existing);
2. Completion and cost guarantees (existing);
3. Process guarantee including final product quality (additional);
4. Throughput guarantee (additional);
5. Commissioning and start up responsibility (additional);
6. Initial subscription of US$100,000 of Altech shares (additional); and
7. Project equity or subordinated debt support at project financial close (additional).
SMS has proposed a clear and concise guarantee to Altech for HPA plant throughput. In addition, having prior experience with the kaolin-HPA hydrogen chloride processing technique that Altech will use, SMS has proposed process and final product guarantees and this will significantly strengthen Altech's export credit project finance cover application. The additional guarantees proposed by SMS are extremely positive outcomes that significantly de-risk the project.
SMS has also agreed to an initial US$100,000 subscription of Altech shares upon formal execution of contract documentation, and has proposed an equity investment or subordinate debt support for Altech at project financial close.
By mutual agreement, the previously envisaged EPC contractor will cease its preparatory work for the project and transfer all information to the SMS project team. SMS will continue with finalising the project capital cost estimation, which is expected in the coming months following the transition of all project information.
SMS is a large privately owned German engineering company with an annual turnover of approximately 3.3 billion Euros. SMS builds turnkey solutions based on innovative plant technology, complete with buildings, infrastructure and auxiliary equipment for processing plants such as Altech's proposed HPA plant. SMS was founded in 1871 and is based in Dusseldorf, Germany with office locations worldwide. SMS has recent EPC contract experience in Malaysia, having successfully completed the Sakura smelting project, in Sarawak.
Commenting on the appointment of SMS as EPC contractor, Altech managing director Iggy Tan said, "The appointment of SMS as EPC contractor for the proposed Malaysian HPA plant, although only recently envisaged, will be a huge positive for the project. Not only does SMS have prior experience with the Company's kaolin to HPA hydrogen chloride acid leaching process, it has demonstrated its confidence in Altech and the process with an initial US$100,000 equity investment pledge and project equity or subordinated debt support upon financial close. SMS also has extensive experience with German ECA cover and is amongst the top three users of this facility in Germany."
About Altech Chemicals Ltd
Altech Chemicals Limited (ASX:ATC) (FRA:A3Y) is aiming to become one of the world's leading suppliers of 99.99% (4N) high purity alumina (HPA) (Al2O3). HPA is a high-value product because it is the major source material for scratch-resistant artificial sapphire glass. Sapphire glass is used to produce a range of high-performance electronic applications such as LEDs, semi-conductors, phosphor display screens, as well as new emerging products such as smartphones and tablet devices. The global HPA market is approximately 19,040tpa (2014) and is expected to at least double over the coming decade.
Altech Chemicals Ltd