Altech Chemicals Ltd secures partner to fund bulk kaolin study

Highlights

- Altech secures partner to fund ~$100,000 bulk kaolin scoping study
- MOU provides a First Option over 10Mt of kaolin, for a $1m share placement and 2% gross sales royalty
- Second Option for a further 10Mt of kaolin, for an additional $1m share placement and 2% gross sales royalty

Altech Chemicals Limited is pleased to advise that a Memorandum of Understanding (MOU) has been signed with Dana Shipping and Trading S.A. (Dana) to fund a scoping study to assess the commercial viability of mining and processing bulk kaolin from the Company's Meckering kaolin (or aluminous clay) deposit (Meckering Deposit). Bulk kaolin is predominantly used in the ceramics, paper, rubber and paint industries. The estimated cost of the study is approximately $100,000.

In return for conducting the study, Altech has granted Dana until 30 September 2015 to which it can exercise the exclusive right to mine up to 10Mt of kaolin from the Company's Meckering Deposit (First Option). On exercise of the option, Dana will be required to subscribe to $1,000,000 of Altech fully paid ordinary shares, to be priced at a 10% premium to the volume weighted average price of the shares as traded on the ASX in the 120 calendar days prior to the option exercise date, and pay the Company a 2% gross sales royalty on all future bulk kaolin sales.

In the event Dana exercises its First Option, Altech will grant Dana a second option (Second Option) to mine an additional 10Mt of kaolin from the Meckering Deposit. The Second Option is exercisable within 3 months from the date of the first sale of commercial bulk kaolin from the Meckering Deposit, and if the Second Option is exercised Dana must subscribe to an additional $1,000,000 of Altech fully paid ordinary shares, to be priced at a 10% premium to the volume weighted average price of the shares as traded on the ASX in the 120 calendar days prior to the option exercise date, and continue to pay a 2% gross sales royalty on all bulk kaolin sales.

Dana is an Athens-based global shipping company with a focus on dry cargo operations, working with a diversified suite of dry bulk commodities such as coal, iron ore, grains and minor bulks across all dry bulk vessel sizes.

Dana CEO Mr Patrick Hodgins commented, "Dana is pleased with the agreement that Altech has worked hard to finalise. We believe that our investigation will confirm the great potential in this project to export to markets aligned with this high grade kaolin clay and to supplement our shipping activities in the long term."

Commenting on the MOU, Altech managing director Iggy Tan explained, "The Company remains focused on its High Purity Alumina (HPA) project and the completion of the Bankable Feasibility Study (BFS) for the construction of a 4,000tpa HPA plant in Johor Bahru, Malaysia. However, we have always known that kaolin from the Company's.

Meckering Deposit, with its high brightness and whiteness properties, is attractive as a bulk product for ceramics and paper producers, and with a 65Mt JORC resource, the Meckering Deposit is more than capable of accommodating the annual requirement of ~40,000 tonnes of kaolin for the Company's proposed HPA project, and the 10Mt-20Mt total bulk kaolin requirement for Dana, if it exercises its options.

"The structure of the Dana option agreement has the added advantage of providing the Company with development funds at a share price premium, if the options are exercised, which will be applied towards the current BFS", he concluded.