Altech Chemicals Ltd (asx:atc) Maiden Ore Reserve At Meckering Kaolin Deposit

Altech Chemicals Limited (Altech/the Company) (ASX:ATC) is pleased to announce the estimation of a maiden Ore Reserve based on the production of high purity alumina (HPA) using feedstock from its 100%-owned Meckering Kaolin Deposit (M70/1334), Western Australia (Meckering). The Ore Reserve was derived from a Mineral Resources estimation at Meckering, which was delineated for the purpose of HPA production.

Highlights

- Maiden Ore Reserve of 1.2Mt @ 30% Al2O3 (JORC 2012) at Altech's Meckering Kaolin Deposit (M70/1334)

- Ore Reserve and mine design will provide immediate kaolin feedstock for initial 30 years mine-life

- Mineral Resources (JORC 2012) estimation of 12.7Mt @ 29.5% Al2O3

- The Resource supports the proposed HPA plant for over 250 years

A maiden Ore Reserve is estimated at 1.2 million tonnes @ 30% Al2O3 (alumina) in the minus 300 micron (µm) kaolin fraction with a cut-off grade of 25% Al2O3. The Ore Reserve at Meckering is more than sufficient to support the proposed HPA processing operation (ore delivery rate of 41,000tpa) for the initial stage 1 mine-life of 30 years.

A Mineral Resource estimated 12.7 million tonnes @ 29.5% Al2O3 (alumina) in the minus 300 micron (µm) kaolin fraction with a cut-off grade of 25% Al2O3. The Mineral Resources estimation at Meckering is potentially sufficient to support its proposed HPA production for over 250 years.

The Mineral Resources estimate is inclusive of the above Ore Reserve estimate and based on data from the Company's April 2016 drilling program and subsequent test work results.

Altech managing director Mr Iggy Tan commented, "The Company is pleased to present both the maiden Ore Reserve and Mineral Resources estimation.

"The Ore Reserve statement is a significant milestone that confirms an initial stage 1 30 year mine-life at Meckering, providing over 1.2Mt of high-quality, alumina-rich kaolin feedstock to supply the proposed HPA plant.

"The Mineral Resource estimate is sufficient to supply the proposed HPA operation for over 250 years which will also allow further capacity expansions in the future.

"The next step of the process to bring Meckering into production is the submission of the mining proposal and mine closure plan as part of the approvals required for the commencement of construction in early 2017", he concluded.

ORE RESERVE STATEMENT (JORC 2012)

Material Assumptions

Material assumptions and outcomes were detailed in the Company's bankable feasibility study (BFS) which was first released in June 2015 and updated in March 2016.

The key assumptions are:

- A Meckering mining operation with kaolin ore shipped to Malaysia at a rate of 41,000 tpa for processing and production of 4,000 tpa of HPA product

- HPA processing, underpinned by batch testing, involves leaching the -300µm fraction of the mined kaolin ore

The Company's BFS indicated that:

- The kaolin resource can easily meet the processing feed requirements for the production targets of the proposed HPA operation.

- HPA product price of US$23,000 per tonne.

- The 30-year HPA project is profitable, with an estimated NPV of US$357.5 million at a discount rate of 9%, a payback period of 3.7 years and an IRR of 33.3%.

- Project capital expenditure of US$78.7 million and operating costs of US$9,070 per tonne.

- NPV calculations are before interest and tax.

- The cost of the proposed Meckering mining operation accounts for about 2% of the total HPA production cost.

Ore Reserve Classification

The Ore Reserve was prepared in accordance with the JORC Code 2012 by Orelogy Consulting Pty Ltd (Orelogy), a highly-experienced independent mine planning consultancy group based in Perth, Western Australia. Orelogy was first appointed by the Company in 2014 and has since been working closely with the Company to progress the Meckering mine development and approvals proceedings.

The BFS pit designs were updated based on the Mineral Resource provided (released as part of this announcement) and the proposed Malaysian HPA processing plant feed requirements. Proved Ore Reserves are based on Measured resource materials and Probable Ore Reserves are based on Indicated resource materials, constraint by the pit designs.

The Meckering Kaolin Deposit Ore Reserve estimate is summarised in Tables 2 and 3 (refer to link below, with the estimation process summarised in Appendix 1 (Section 4 of JORC Table 1 (refer to link below) for the estimation and reporting of Ore Reserves).

Confidence in Modifying Factors

Analysis of the sensitivity of the Project NPV to changes in key assumptions or estimates used in the financial model (base case) shows that the NPV is most sensitive to a movement in the HPA selling price and/or a movement in the USD/AUD exchange rate. The Company believes that these parameters were estimated conservatively. The NPV is not as sensitive to changes in capital or...