Our HPA plant planning and funding are coming together

29 Dec 2015

 

With the success of signing the kaolin mining deal under our belt, we’ve now had some good news on the financing of our processing plant at Johor Bahru in Malaysia.

Earlier this month, we signed a project finance mandate with German bank KfW IPEX-Bank, which is an export and project finance specialist. KfW IPEX-Bank has very strong expertise in the debt financing of worldwide mining and chemical projects: it will help us structure the senior debt project financing for our high-purity alumina (HPA) project.

And because we’ve appointed German group M+W as the project’s engineering, procurement, construction and management (EPCM) partner, this positions us to gain access to up to US$40 million in German government-backed export guarantees, through the German Export Credit Agency (ECA), which guarantees foreign trade. We’re eligible for this because most of the plant and equipment we’ll use will come from European Union manufacturers, and because of M+W’s involvement.

We will now make a presentation to the ECA, assisted by KfW IPEX-Bank and M+W, and it will assess the project for ECA funding. If we get this, it will be at a commercially attractive interest rate and at long tenor.

We’ve also made a big decision on the plant: instead of beneficiating the kaolin at the mining site at Meckering – as we envisaged in the bankable feasibility study (BFS) for the HPA project we completed in June – we’ll now do that in Malaysia, too.

The detailed design of the plant got under way in September. We’ve appointed Dr Jingyuan Liu as general manager of operations, and he will oversee the project. Jingyuan is working closely with Perth-based engineering consultancy Simulus Engineering and M+W on the project. We’re very excited to have secured Jingyuan for this role: he is a very experienced chemical engineer, and more importantly he was previously general manager of development and technologies at Galaxy Resources Limited, a producer of high-purity lithium carbonate, and his experience includes building, commissioning and operating plants for making high- purity chemicals. That makes Jingyuan a particularly great fit for this project.

The detailed design work includes a lot of work on optimisation opportunities for process flow design, plant layout, capital equipment and operating costs. The more that Jingyuan and his team, and our external consultants, got to grip with this work, the more we realised that it really did not make sense to beneficiate the kaolin material on-site at Meckering.

We had designed a four-stage wet screening circuit to remove the oversized pieces of silica sand, then filter and dry the clay, and bag it for transport to Fremantle, and shipment to our Malaysian plant. But locating the kaolin beneficiation plant next to the proposed HPA processing plant in Malaysia will result in a simpler, more streamlined operation.

Firstly, we won’t need the proposed dryer, bagging unit and supporting infrastructure at Meckering. Secondly, a beneficiation plant at Johor Bahru can be smaller in size, because it will be able to operate 24 hours a day, as opposed to the 12 hours a day to which we would have been limited in Australia. Thirdly, the construction costs in Malaysia will be significantly lower. Lastly, operating costs for the Malaysian beneficiation plant will also be lower because of much lower power and natural gas charges, lower labour costs and various maintenance and operating synergies.

These estimated lower operating costs for the Malaysian beneficiation plant will more than offset the additional freight costs. Where the BFS envisaged shipping 18,500 tonnes a year of beneficiated kaolin from Meckering to Johor Bahru, we will now be sending about 40,000 tonnes a year of un-beneficiated kaolin.

Also, while it is difficult to quantify, experience tells us that having all of the project’s major processing infrastructure at one site and within one jurisdiction, Malaysia, will deliver a lot of efficiencies and savings, and both operating and project financing advantages.