KfW Ipex-Bank, the German state-owned lender, has issued a US$190mn debt package for a Malaysian high purity alumina (HPA) project.

The borrower and project sponsor is Altech Chemicals, an Australian company that is “aiming to become one of the world’s leading producers of 99.99% HPA”. US$170mn of the debt is covered by export credit insurance issued by Euler Hermes.

It will fund the construction of the 4,500 tonnes per annum HPA plant in Tanjung Langsat Industrial Complex in Johor, near the Malaysian-Singaporean border. Altech CFO Shane Volk tells GTR that the facility will be built by Germany’s SMS Group, which explains the funding from KfW and the Hermes cover.

The non-covered US$20mn debt will be in the form of a seven-year loan, with a two-year grace period while construction completes. Terms have not been disclosed but in a statement, Altech says “by comparison to typical project finance, the project finance agreed with KfW Ipex-Bank is extremely attractive”.

Altech has secured a 10-year offtake agreement for the HPA project with Mitsubishi, for 100% of the proposed production. The company hopes to commence project development towards the middle of this year.

HPA is the critical ingredient required for the production of synthetic sapphire. Synthetic sapphire is used in the manufacture of substrates for LEDs, semiconductor wafers used in the electronics industry, and scratch-resistant sapphire glass used for wristwatch faces, optical windows and smartphone components. An emerging use for HPA is as a coating for lithium-ion battery separators.

Demand for the mineral is growing at 16.7% a year, according to Persistence Market Research. This is driven in part by worldwide adoption of LEDs, in particular the replacement of traditional lightbulbs with LED lighting.

Volk explains that the facilities that are in production produce their HPA from hydrate aluminium metal, which they must purchase. Altech’s process bypasses this stage because it has its own kaolin deposit, which contains about 30% alumina.

The company’s kaolin clay is sourced from a facility it owns in Meckering, Western Australia, 130km east of Perth. The kaolin will be shipped to Malaysia, for processing into HPA. The company says that its investment in technology allows it to produce HPA at a “significantly lower cost than current production”.