Altech Chemicals Limited (ASX:ATC) Company Presentation Institutional Investor Information Pack “Meeting a Sapphire Future” January 2017
Corporate Snapshot Trading information Share price performance (last 12 months) Volume (m) Price (A$) Share price (18-Jan-17) A$0.160 0.24 6 52 week low / high A$0.082 / A$0.205 0.20 5 Shares outstanding 1,2 266.2m 0.16 4 Market capitalisation A$42.6m 0.12 3 Cash (30-Sep-16) A$10.2m 0.08 2 Debt (30-Sep-16) Nil 0.04 1 Enterprise value A$32.4m - - Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Volume ATC Top shareholders Source: IRESS Board & management 18.9% Notes: 1. Excludes 3.6m unlisted options with exercise price range of A$0.20 to A$0.30 and exercise date Melewar International Investment Company – Malaysian 6.4% range of 31 January 2017 to 18 December 2017 2. Excludes 20.7m performance rights Industrial firm mandated to construct HPA plant MAA Group Berhad 4.4% Malaysian insurance, investment, credit and finance group Top 20 shareholders c. 42% A LEADING VERTICALLY INTEGRATED HPA DEVELOPER WITH A DEFINED STRATEGY TO REACH PRODUCTION ALTECH CHEMICALS LIMITED (ASX: ATC) INVESTOR MATERIALS / 2
What is HPA? High Purity Alumina (HPA) is a white, granular chemical that is a pure form of • 4N HPA consumption by application (2016) the commercially-produced aluminium oxide (Al 2 O 3 ) • HPA is the key ingredient for producing synthetic sapphire due to its physical Other includes: and chemical properties including: Sapphire glass for 13% • smartphone screens – LED ◦ Extreme hardness HIGH GROWTH 15% Semiconductor • Lithium-ion battery Corrosion resistance ◦ 53% separator coatings – Phosphor Chemical stability and biocompatibility HIGH GROWTH ◦ Other • Optical windows 20% • Sapphire is a special type of aluminium oxide used in a variety of high-end • Lenses speciality applications including: • Watch glasses ◦ Light-emitting diode (LED) production Source: Persistence Market Research The separator coating used in lithium-ion batteries ◦ Applications HPA is produced by treating aluminium with certain chemicals or via the • extraction of alumina from aluminous clays such as kaolin • Purity is determined by the concentration of trace elements contained in the alumina compound (e.g. Sodium (Na), Magnesium (Mg) and Iron (Fe)) Most common variants of HPA and associated indicative prices are: • ◦ 3N HPA (99.9% purity) – US$6,000/t Altech’s premium ◦ 4N HPA (99.99% purity) – US$23,000/t and optimal product focus ◦ 5N HPA (99.999% purity) – US$50,000/t ALTECH CHEMICALS LIMITED (ASX: ATC) INVESTOR MATERIALS / 3
Clean Technology Applications A growing awareness of the dangers of climate change has rapidly accelerated the commercial uptake of a number of clean-technologies, including lithium-ion • batteries and LEDs • Growing demand for these technologies is leading to accelerating demand for the required raw materials • LED-based lighting applications (the largest growth driver of HPA demand) have arisen as an efficient alternative to conventional lighting products; LEDs are estimated to be up to 85% more efficient than conventional incandescent lightbulbs Technological transitions strongly supported by policy developments and government investment, examples include: • Japan intending to phase out incandescent and fluorescent bulbs by 2020 ◦ India aiming to replace 770m incandescent bulbs with LEDs by 2019 ◦ LED lights Lithium-ion batteries Market size (US$m) Anode sheet 6,000 (graphite) Driven by government 5,000 policies and emerging market uptake 4,000 3,000 Separator 2,000 (HPA) Cathode sheet 1,000 (Lithium / cobalt) - 2016 2020 Source: LEDinside INCREASE IN HPA DEMAND DRIVEN BY ROLL-OUT OF CLEAN TECHNOLOGIES INCLUDING LITHIUM-ION BATTERIES AND LED LIGHTS ALTECH CHEMICALS LIMITED (ASX: ATC) INVESTOR MATERIALS / 4
Demand for HPA • Historical growth in demand for HPA has been driven by the increase in demand for LEDs This is expected to continue with forecasted LED demand CAGR of c. 17.6% between 2016-2024 ◦ Forecasted demand for HPA driven by structural changes in energy generation and greater interest in environmentally sustainable solutions • Largely used as separator coatings in lithium-ion batteries, sapphire glass for smartphones and further LED growth ◦ Early indications that the iPhone 8 screen may utilise sapphire glass (produced from HPA) ◦ • 2016 estimated HPA demand of 25.3kt (18.8kt 4N HPA, 6.5kt 5N and 6N HPA) • 2024 estimated HPA demand of 86.8kt (62.5kt 4N HPA, 24.3kt 5N and 6N HPA) Demand highly concentrated within the APAC region, driven by China, Japan and South Korea (collectively >42% of total LED market in 2015) • Geographical HPA demand distribution (%) Forecast annual consumption of 4N, 5N and 6N HPA (kt) 100 0.2 Total 4N, 5N + 6N HPA CAGR (2016-2024) = 16.7% Latin America 2.3 80 4N HPA CAGR (2016-2024) = 16.2% 0.5 Strong demand MEA 60 1.5 growth globally 2.3 40 Europe 6.4 APAC region set to continue as the major demand driver 3.4 20 North America 10.6 - 18.3 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 APAC 66.2 4N HPA 5N HPA & 6N HPA 2016 2024 Source: Persistence Research ALTECH CHEMICALS LIMITED (ASX: ATC) INVESTOR MATERIALS / 5
Supply of HPA • Robust demand growth underpins the need for significant HPA Existing HPA producers supply side investment and ramp-up Company Production locations % expected 2016 output • Existing supply of HPA is dominated by large diversified chemicals 17% Sumitomo Chemical Japan; South Korea companies and is highly concentrated in the APAC region (>80%) Hebei Pengda New Material China 15% 9% Expected 2016 global HPA production of 25.4kt (4N, 5N and 6N) Sasol USA • 8% Zibo Xinfumeng Chemicals China • Unlikely that large producers will make significant investment to 6% Baikowski France; USA increase production capacity, due to diversified operations and the 4% Xuan Cheng Jing Rui China low proportion of revenue generated from HPA production Nippon Light Metal Japan 4% ◦ Generally very low proportion of total revenue is derived from 3% Dalin Hiland Photoelectric China HPA production (e.g. less than 5% for Sumitomo Chemicals) 2% HMR Co South Korea • Significant opportunity for specialty producers of HPA to bridge the Distribution of 2016E global HPA production (4N, 5N, 6N) looming supply shortage ◦ In particular, those with lower processing costs that use alternative feedstock such as kaolin Significant advantage derived from being first to market due to • substantial capital outlay required, long development lead times, high levels of product qualification and consumer relationship building required Source: Persistence Market Research Russia, 1% ALTECH SET TO BE ONE OF THE FIRST SPECIALTY HPA PRODUCERS TO MARKET, PROVIDING A SIGNIFICANT COMPETITIVE ADVANTAGE ALTECH CHEMICALS LIMITED (ASX: ATC) INVESTOR MATERIALS / 6
Operational and corporate progress SUCCESSFUL PROGRESSION OF NUMEROUS OPERATIONAL AND CORPORATE WORKSTREAMS TO ACCELERATE ACHIEVEMENT OF HPA PRODUCTION Operational progress Corporate progress February 2011 August 2015 Surface mineral rights obtained to explore the Meckering Kaolin A$1.1m placement to fund detailed design of HPA Project Project Melewar IIC introduced as a cornerstone investor Pre- 2015 September 2015 Exclusive HPA sales and distribution rights for Japan signed with May 2013 Mitsubishi Successful production of 99.99% HPA (4N) using Meckering kaolin Option lease secured for Johor site December 2015 June 2015 Exclusive mandate signed with KfW IPEX-Bank for structuring and BFS confirms robust project economics with pre-tax NPV of advisory of a senior debt financing facility for HPA plant 2015 US$326m March 2016 Placement and SPP raising A$2m to finalise detailed design of HPA November 2015 facility - MAA Group secured as cornerstone investor Detailed design optimisation indicates that kaolin beneficiation plant April 2016 should be located in Johor, Malaysia 10 year sales & offtake agreement signed with Mitsubishi for 100% HPA production from plant, Johor March 2016 July 2016 2016 Updated BFS upgrades pre-tax NPV to US$358m Placement raising A$10m to continue project development and debt financing negotiations October 2016 August 2016 Maiden Ore Reserve of 1.2Mt @ 30% Al 2 O 3 defined at Meckering Announced US$70m project debt package with German government owned KfW IPEX-Bank, subject to due diligence ALTECH CHEMICALS LIMITED (ASX: ATC) INVESTOR MATERIALS / 7
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