High Purity Quartz Pty Ltd Company Presentation – Equity Issue November 2016 0
Important Notice This document is confidential and its content may not be copied, reproduced, redistributed, quoted, referred to or otherwise disclosed, in whole or in part, directly or indirectly, to any third party, except with the prior written consent of High Purity Quartz Pty Ltd (“the Company” or “HPQM”). This document is for informational purposes only, and does not constitute or form part of an offer, solicitation or invitation of any offer, to buy or subscribe for any securities, nor should it or any part of it form the basis of, or be relied in any connection with, any contract or commitment whatsoever. Any invitation to subscribe for securities in the Company will be subject to a formal document. This document contains interpretations and forward-looking statements that are subject to risk factors associated with the mining and processing industries. You are cautioned not to place reliance on these forward-looking statements, which are based on the current view of the Company on future events. Investing in securities is risky and investors are advised to seek their own advice in this regard. Investors should undertake their own investigations on potential qualification and availability of any investment tax incentives. The Company believes that the expectations reflected in the document are reasonable but may be affected by a variety of variables and changes in underlying assumptions which could cause actual results to differ substantially from the statements made. These include but are not limited to: production fluctuations, commodity price fluctuations, variations to drilling, resource estimates, loss of market, industry competition, environmental risk, physical risks, legislative fiscal and regulatory changes, changes to licences/regimes, economic and financial market conditions, project delay or advancement, approvals and cost estimates. The Company and its Advisors and their Directors, agents, officers or employees do not make any representation or warranty, express or implied, as to endorsement of, the fairness, accuracy or completeness of any information, statement, representation or forecast contained in this document and they do not accept any liability for any statement made in, or omitted from, this document. The information contained in this document noted above are subject to change without notice. This document is intended only for the recipients thereof and may not be forwarded or distributed to any other person and may not be copied or reproduced in any manner. 1
Equity Investment Opportunity HPQ Materials (HPQM) is seeking interest from potential investors to raise target $532,000 to undertake • works to de-risk its high purity quartz resource to underpin its innovative High Purity Sand project. This initial work primarily involves a drilling & sampling program with associated assay/test work Successful completion of the drilling program will open up significant liquidity from major investors • through to planned IPO targeted for c12 months to fully fund its high purity sand project The proceeds from the Issue will be utilised to undertake a 5 to 6 holes drilling and assay program to • de-risk the resource and related costs. See slide 31 for detail HPQM will issue 46,450 ordinary shares representing c10% of the total post issue share capital of • HPQM at a valuation of cA$5m. Subscription price is A$11.45 per share. The minimum investment per subscriber is A$26,600 • representing minimum 2,322 shares. There is no limit to the number of shares which an individual investor may subscribe HPQM may, at its option, accept oversubscriptions up to a limit of $775,000. Any scale back will be at • HPQM discretion. Final allocations, based on valid Application Forms received, will be notified in writing and will require completion of the final Subscription Agreement An Application Form and copy of the draft Subscription Agreement can be can be requested from • HPQM by contacting one of the persons listed at the end of this presentation Subject to satisfaction of certain conditions and subject to investor status any investment made may qualify for Early Stage Innovation Company (ESIC) incentives with advantageous Australian Income Tax and CGT incentives for investors (see Slide 33 for more detail) 2
Corporate Structure - Proposed HPQM currently has 418,000 shares on issue, and will issue 46,450 new shares to bring the total shares on issue to 464,450 shares. The new issue will represent 10.01% of the share capital. This will raise A$532,000 at A$11.45 per share. The proposed structure is provided by way of illustration and allows flexibility for potential future asset acquisitions/disposals and corporate development. The structure is therefore indicative only but is in line with HPQM business plan. 3
Investment Thesis Renewable energy (solar PV) and semiconductor supply chain focus Clean-tech/hi-tech/high value markets • High barriers to entry in rapidly growing solar PV and Semiconductor markets • Security of Supply is an issue for Downstream buyers/users of high purity quartz sand • Long asset and project life > 40 years (pre-drill estimates based on geologist info) • Excellent Project Economics Low volume, low capex, low risk development • Sales under LOI for first 3/4 years of production • EBITDA margins 75%+, high returns • Pre-tax project NPV10 of > AUD$1.0Billion with exceptional project IRR (>50%) • Project Pathway established and investment de-risked Project de-risked via development and contracting strategy • Strong downside case ensures strong return on capital invested • Near term exits and IPO potential Upside case through high value, low cost, expansion and potential downstream integration • Resource de-risking will open the project to funding from large investors who have already • expressed interest. IPO in c12-15 months from date of initial funding is targeted • 4
What Do We Make? Why is it important to Green Tech & Hi Tech industries? 5
High Purity Sand is arguably the world’s most strategic mineral HPQM will quarry high purity lump quartz from its mining lease and crush, grind and process it too make HIGH PURITY QUARTZ SAND - Si02 . High Purity Sand is then sold to manufacturers of Czochralski (CZ) crucibles. The most efficient solar cells and semiconductors are made with CZ crucibles. Polysilicon metal (Si) is loaded into CZ crucibles (Si02) Polysilicon metal (Si) is then melted and drawn into cylindrical ingots (boules). These ingots are wafered and are the basis of solar PV cells and semiconductor wafers With huge growth in Solar PV energy and Semiconductor industries, security of high purity sand supply is now a key issue . Analogous to Lithium and battery storage markets 6
Concentration of Supply is a Major Risk to the PV/Semiconductor Industry There are few producing resources - economic sources of chemically pure quartz is rare globally. New entrants will be limited. Downstream PV market needs a new entrant to secure growth. 7
High Purity Sand Market Development and Current Market Size 8
High Purity Quartz Sand Market History & Development • HPQ sand used in radios, radar systems • In 1974, IMC began supplying HPQ sand from its Spruce Pines mines 1970’s • End 1970’s - market size around 10,000 tonnes of HPQ sand per annum • Unimin acquires IMC. • End 1980’s - market size around 20,000 tonnes per annum. 1980’s • All supplied by Unimin at a price around USD$5,000 per tonne • During the 1990’s fibre optics, Pentium chips boomed and solar panels started to appear. • End 1990’s – market size around 40,000-50,000 tonnes 1990’s • All supplied by Unimin at a price of US$5,000-US$6,000 per tonne • By 2007 solar was consuming more sand than the semiconductor sector • End 2010 - The Quartz Corp entered the market 2000’s • End 2010 – market size around 100,000 tonnes with prices averaging USD$7,500-USD$8,500 per tonne • Nov 2015 – COP21 Paris conference. All nations set to grow solar PV share of energy mix putting pressure on PV materials supply • Polysilicon markets under stress as demand starts to outstrip supply – proxy for HPQ Sand market 2010’s • Momentive 10K company filing highlights over-reliance on single supplier (Unimin) as a key business risk • Security of supply chain is a key issue for downstream developers of Solar PV • Analogous to market for Lithium driven by battery/storage development Today • HPQM has opportunity to deliver product into a rapidly evolving and supply-short market 9
Supply & Demand Projections (Source:HPQM based on various sources) • Demand for Solar grade HPQ sand is correlated to growth in new Solar pV capacity installations (base 15% downside 10%) and existing capacity renewal • These growth estimates are conservative compared to industry estimates - Solar CAGR – 25.4% to 2020 1 then 13.1% to 2025 2 • 1-PVMA/Becquerel Institute Global Market Report 2015-2020 • 2-CleanTechnica/GlobalData 2016 HPQ Materials plans to ease into the supply gap without oversupplying the market. Target market share of 10% to 15% once fully ramped-up over 5 years. 10
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