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Altech Chemicals Ltd granted kaolin mining lease application at Meckering

Altech Chemicals Ltd (ASX:ATC) has been granted its kaolin mining lease 100 kilometres east of Perth.

The lease is estimated to contain 11 million tonnes of kaolin mineral resources, which will feed the company's proposed high purity alumina (HPA) plant in Malaysia for over 250 years.

The granting of the lease moves Altech closer to mine development, next it must submit a mining proposal and mine closure plan.

The granting of the mining leases also triggers a $1.75 million cash inflow from Dana Shipping and Trading S.A.

Iggy Tan, managing director commented: "Altech can now progress to the next stage in preparation for mine development, the submission of what will be a relatively straightforward mining proposal and mine closure plan.

"Upon approval of these items, the site at Meckering will be ready for the development of the campaign mining and container loading operation to supply feedstock for Altech's proposed Malaysian HPA plant."

Background

Altech is aiming to become one of the world's leading suppliers of 99.99% HPA.

HPA is a high-value, high margin and highly demanded product as it is the critical ingredient required for the production of artificial sapphire.

Artificial sapphire is used in the manufacture of substrates for LED lights, semiconductor wafers used in the electronics industry and scratch-resistant artificial sapphire glass. Sapphire glass is used in models of the Apple watch.

There is no substitute for HPA in the manufacture of artificial sapphire.

Altech is planning to mine 120,000 tonnes of kaolin at Meckering every three years on a campaign basis, each mining campaign will last two months.

The resultant raw kaolin will be stockpiled, then containerised into standard shipping containers at the rate of around 40,000 tonnes per annum and transported to Johor, Malaysia for processing into HPA at the company's proposed plant.

Analysis

The granting of the mining lease is a significant milestone for Altech.

It progresses the production timeline at Meckering, which in turn will help Altech in its bid to secure project financing for the development of the HPA plant in Malaysia.

Furthermore, the granting of the mining lease triggers a $1.75 million cash payment from Dana to Altech and ends a dispute with Dana around the termination of the Kaolin Mining Rights Deed.

Achieving project financing for the proposed Malaysian HPA plant remains a key catalyst for Altech.

A broker report was released in February, 2016 valuing Altech at $0.41 per share.

The share price remains heavily discounted to this valuation currently trading at $0.10 per share.

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