Interview with Altech Chemicals (ASX:ATC) MD, Iggy Tan

Ben Williamson
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[00:00:00] Ben: All right. Good day everyone, Ben here from Fresh. Please be joined by Iggy Tan from Altech Chemicals Limited, g'day Iggy, how you goin'?

[00:00:10] Iggy: Morning, Ben, how are you?

[00:00:11] Ben: I'm really well, thank you. Thanks for joining us on the Chairman's List today. Iggy, to start things off, give us that top-line elevator pitch on the business.

[00:00:20] Iggy: Altech Chemicals is an Australian company, we're listed on the ASX and I guess we are in the business of the battery energy space. We've got two projects. One is a high purity alumina project that we are currently in the funding process, and high purity alumina is actually using batteries today in the separator coatings and coatings of anode and cathode material.

[00:00:44] Iggy: The other project that we are also very excited about is the Silumina Anode Project. And essentially that technology is about coating silicon and graphite with high purity alumina, and it resolves some issues that the industry is trying to manage. We last year announced a 30% extra energy battery which we feel is game-changing for the lithium-ion battery industry.

[00:01:13] Ben: So tell me, obviously a lot of media coverage and investor coverage in lithium when we think of batteries. So when we think of batteries we think of Tesla, we think of Elon, and we think of lithium as a very strong part of that value chain. Tell me where you're playing and how the opportunity differs from lithium. Talk to me about maybe the difference in the size of the market, how many people are playing in the market? What the opportunity is there...

[00:01:42] Iggy: Yeah. So before that maybe I can give you the background of where the future of lithium-ion batteries is, as the cost of batteries has been coming down quite dramatically. Tesla has on their last battery day announced that in order to make that significant jump in costs from where we are today, more silicon needs to be added to the anode part of a battery.

[00:02:08] Iggy: So Ben in a lithium battery, there's a cathode part, and the negative part is the anode, which is generally graphite. Now silicon has 10 times the energy capacity of graphite. So from a layman's point of view, there are 10 times more sites that the lithium can sit on. And so potentially for a battery, it can increase the energy density of that battery.

[00:02:34] Iggy: Now, "if silicon is such a great anode material," as Elon has said in their battery day, "why isn't silicon in commercial batteries?" There are really two problems. The first one is that during the life of the battery, silicon expands 300% in volume and it fractures. And the second problem is that because it has so many active sites, it grabs a lot of the lithium on the first charge and it makes it inactive, this is called the first cycle loss. So the industry has been trying to resolve these two problems to get metallurgical silicon in commercial batteries today.

[00:03:14] Iggy: So there's a race and we call it "the race to crack the silicon code," and our company thought that with our high purity alumina coating, we could possibly coat the silicon and contain the fracturing process. And by coating the silicon, it also has a precoating and it stops lithium from being absorbed on the first charge.

[00:03:41] Iggy: So it resolves two problems, the first cycle loss and this fracturing problem. So last year, as I mentioned, we announced we were successful at producing a lithium battery with a 30% higher capacity. So for us, we believe it's a game-changing technology for the lithium-ion battery business.

[00:04:06] Ben: And where are you at in the process? So you've obviously got to the point where you can prove that it works. What's the next step? Where are you now?

[00:04:15] Iggy: Yeah. So all our work is done in-house, in our laboratories in Western Australia. And our focus is to also commercialise this technology very quickly. So we are running the commercialisation process in tandem with a lot of the research that's already happened. To do that, we have already acquired some land in Saxony, Germany and we are going to build a 10,000 ton per annum silumina anode plant. And the business basically is: we buy metallurgical silicon, we buy graphite, we coat it with our alumina technology, and we also have some additives, and we produce this blue powder, which would normally go to battery makers. They would normally buy graphite, they would buy our silumina anode material, but it's supercharged. Basically, it's got 30% extra energy capacity.

[00:05:19] Iggy: That's our business model. We have already announced that we are building a pilot plant in Saxony, Germany. Now, the reason for that Ben is there is a lot of interest in the industry for this product and we have to send them commercial samples. As you know, the qualification process for batteries is quite lengthy and they want to do all their test work and so on, so we need commercial samples.

[00:05:42] Iggy: The pilot plant is worth around $7 million Aussie. We are fully funded for that, and recently we signed a contract to start the process of procurement. So long lead items have been procured, we're using an engineering company called Küttner Engineering in Germany, and we have a site. So basically next to our land in Saxony, Germany. We've leased two very large warehouse spaces, and that's where we're going to build the pilot plant so that work is continuing.

[00:06:14] Iggy: We also recently announced the pre-feasibility study for this silumina anode project: 10,000 tons per annum of silumina anode. The investment is around USD $95m, but the rate of return is quite extraordinary. It's about 40% in IRR and the net present value is around USD $505m. Very exciting economic returns.

[00:06:42] Iggy: The company has decided to now move into the bankable feasibility study. And once we complete the bankable feasibility study, then we will look at the financing of the project. So lots of things happening in tandem and to quickly commercialise this technology.

[00:07:02] Ben: We're talking about Europe. You just got back from Europe, correct? I think it was last week?

[00:07:07] Iggy: Yes, absolutely so very productive trip. We had meetings with the local authorities, we had meetings with engineering companies to make sure the project is on track. And I guess you were asking me about, "why?" What's the macro decision of building this plant in Europe, in Germany?

[00:07:26] Iggy: I don't know whether you know, Ben, but our belief is that the lithium iron battery story will be about Europe in the next coming decades. I guess it's fair to say that the lithium battery story was about Japan, Korea, and China in the past, but our belief is that Europe will be the next player in the lithium-ion battery space.

[00:07:49] Iggy: And the reason for that is all around EU regulations. So the EU has regulations on vehicles that all manufacturers need to average below 95 grams of CO2 per kilometre. A diesel car is about 140 grams of CO2, and in order to average that down, they have to go to electric. And so if you follow the auto market in Europe, all the car manufacturers have announced that they will go all-electric by 2030 and 2035 only to meet the EU regulations.

[00:08:36] Iggy: And they have announced billions of dollars in the investment of building electric vehicle manufacturing as well as battery making. So if you look at all the battery makers that have been announced, their projects in Europe, there's something like 600 gigawatts of battery capacity being announced in Europe. And so the European Union have also said they would prefer that all the materials that go into that supply chain be sourced within Europe. So there's a focus on getting a lot of European-sourced materials and that's our strategy to be part of that supply chain and to build that plant in Europe.

[00:09:21] Iggy: It also makes sense, that's the closest end market. There's no point in making product in Australia and China, and shipping it all the way across, because there's also a lot of focus on green products. So making sure that when the products are made, they comply with the environmental ESG conditions. So shipping it across the world doesn't help the green levels of products.

[00:09:48] Ben: Do you have a similar plan with regards to like offtake agreements and those things? Are there appropriate steps for the plant to, as it passes through the bankable feasibility study, start to look for offtakes?

[00:10:05] Iggy: Yeah, absolutely. We well know that when you do the bankable feasibility study, part of that is the offtakes of the final products. And we have a couple of NDAs with two large European automakers. And we have an NDA with a European battery maker. What we have to do is provide them with commercial samples, go through some part of the qualification process, and then convert that to some sort of offtake agreements, and that will really make the financing much easier. So that's the aim of this bankable feasibility study, that's the aim of the pilot plant, and that's the aim of talking to those end users and the visit to Germany and Europe in the last three or four weeks.

[00:10:53] Ben: It's obviously been more than a minute since you've been involved in the business, you've been going for a while. In terms of looking forward how long until you think those commercial samples are with these parties? Like how long until the pilot plant's up and running? I don't know if you've announced this, can you talk about it? How long until you see that step is completed?

[00:11:14] Iggy: Yeah. We haven't announced any timelines because with all the issues in Europe at the moment supply chains have been affected. So the most important thing for listeners is that we are well underway, we are progressing on all fronts, and obviously, we want to build this pilot plant as quick as we can. So that's the most important thing.

[00:11:35] Iggy: You asked me about how long I've been in the business. I guess in the past I was in the lithium business, and I was probably one of the early trailblazers in the lithium industry. This is no different. This is really recognising where the demand is going to come from in the future and where the world is going to move to and what materials are going to be required when the world gets there.

[00:12:00] Iggy: This is no different from the lithium sector 15 years ago. It's exactly the same thematics. Where is the demand coming from? It's coming from lithium-ion batteries. Yes graphite, yes lithium, but anything that you can do to increase the energy density of that, which is silicon and incorporating silicon, is going to be the way forward.

[00:12:20] Iggy: So part of the role of the Managing Director is looking to the future and then having a vision of where that's going to head to, and getting the company to be ready to supply materials to that future. That's part of the game and success can't be guaranteed, but there are a lot of opportunities that we're going for.

[00:12:42] Ben: So I guess on that point, you have been here for eight years and you've got a very strong history as well. I don't think you have to be in this business, I think you have options in terms of what you do. So tell me, and you've probably already covered it but even just to recap, what is the most exciting part of this? What's keeping you at Altech? What's driving you here as MD? What are you most looking forward to in the next 12 or 24 months?

[00:13:06] Iggy: Ben, that's a great question. The number one thing is, I always say to people, "I love my job," and part of loving the job is creating a business. Looking out to the future and saying where the future is going to end up, and then creating a business or a project that will meet that future.

[00:13:23] Iggy: And that's the exciting bit, when you're looking out and having a vision of where things are, there are always challenges, you're dealing with a lot of uncertainty. So part of the role and part of the excitement of the role is really building a business and building people and teams and a company. It's no different from when we started with lithium. In those days, the company was a market cap of $5-10 million, and Galaxy eventually ended up at a $2 billion company.

[00:13:53] Ben: I think if you look at this, it's really quite interesting, at least from my point of view, and I think this would be reflected from people listening in or reading the transcript as well, that you've got a lot of investment into your own laboratory and testing and processes, your own site that you're doing a pilot plant, and progressing to BFS for a full plant. I think a lot of companies at your stage in the market, when people are looking at where do they put their money, some companies are set up for just, "we're gonna go for a discovery and not build any infrastructure around it and really just have the one shop that we get bought out." To me, the way that you're doing that I'm sure you'd be open to those things if they come along and the offer is great, but it appears to me like you are building a genuine business with a long track record in front of you as well, that you can really develop and build through.

[00:14:52] Iggy: Yeah, that's a great question, Ben, I often get the question, " are you building the business so that you can sell the business?" No. My track record I've come from the chemical industry, a process engineer by background, so my background is building projects and our focus is to build the project. So we never think of a buyout. We are always focused on building the project and running the project as a business. So we're doing a lot of stuff that is geared to getting this project up and running. So often we would be thinking about operating procedures, "how we will operate these supply chains?" And all those things that go to operating the business. I think people in the markets or the industry understand that we're our project builders, we're not here to tidy it up and sell it. So that's important.

[00:15:42] Ben: I guess on that basis, ah, no forward-looking statements, think about this as a, "in X year's time it's now a billion dollar business." What is that business look like? Has it got a plant going in Germany? Are there other operations? What does that scale of the operations look like?

[00:16:01] Iggy: Yeah. Another good question. So the European market just on the battery side will require something like 400,000 tons of graphite every year, just for Europe. 400,000 tons of graphite. Now we are just building a 10,000 ton per annum silumina anode, which is essentially a part of that graphite. So our plant is minuscule to the demand that is potentially just from Europe. So the future is getting up the first plant in Germany, 10,000 tons per annum, and if the demand is there and the product is accepted then we look at subsequent plants or trains. It could be in Germany, it could be other parts of Europe, and then that would be a copy and paste type scenario.

[00:16:54] Ben: You said 400,000 tons for Europe, right?

[00:16:57] Ben: So yeah. So 10,000...

[00:16:58] Iggy: So 10,000 outta 400,000 is...

[00:17:02] Ben: ...two and a half per cent. Chemically, is there anything from a feed-in stock point of view? Is there anything structurally that could stop it being, instead of 2.5%, 25%? Is there a limiter that says, " the max we can get to is 40,000 tons per or 50,000 tons?" Or is it literally, as you said, "we do one, we test it, we prove it, and if the demand's there, we just cookie cutter and there's no endpoint."

[00:17:32] Iggy: That is correct because what Europe has also realised, is that 400,000 tons of graphite are a lot of material that may not be supplied with all the operations around the world. So when you talk to someone and say that we can actually produce a material that would reduce your graphite requirement by 30%. Imagine if your anode is actually 30% higher density, you can actually use less of it in your battery, so you are really reducing the amount of graphite that you can use.

[00:18:07] Iggy: So that's also another attract attractive point for a lot of the battery makers that if you can give us a 30% higher energy graphite material I can use 30% less graphite overall. But you are right, if the material is widely accepted in the industry there are no limits to the number of extra plants that you can build.

[00:18:30] Ben: Fantastic now wanna wrap up so that we give people back their time, but usually at the end I'm sure I've missed something. Iggy, I go on a bit of a wandering journey with my questions and I guess, what have I missed? Have I missed anything that you think is extremely important or questions that you have been asked by someone else that have been great and are worth repeating?

[00:18:52] Iggy: I think to sum it up, you mentioned about the past, I think it's a very similar thematic in the lithium space. It's looking forward to where the world is moving and what it's going to be requiring and then positioning the company or your projects to supply that, having a vision about it and moving through years of development. And finally getting to a worthwhile business and a very high market cap company.

[00:19:19] Ben: If people wanna reach out and jump on your website reach out on social media?

[00:19:24] Iggy: Yeah, we've got a lot of information on our website,, and also we've got a lot of information going through our social media: Facebook, Twitter, LinkedIn, and so on. And please feel free to contact the company

[00:19:40] Ben: And as always feel free to check out the stock it's ATC on the ASX, and I know you just put out a 4C yesterday which will probably give away when we did this recording, but you've just put out a 4C with a whole bunch of information on it as well. So check that out people, but Iggy, thank you for coming along once again.

[00:20:01] Iggy: Thank you for your time.

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