altech chemicals limited€¦ · project, sms group will invest us$15m in altech. the confidence by...

Altech Chemicals Limited Leveraged to “new-age” technologies January 2018 Recommendation: BUY Robust outlook for high purity alumina (HPA) products Significantly advanced project, US$190m ECA funding approved Fixed price EPC and offtake agreements (Mitsubishi) in place

ASX: ATC Share Price: $0.16/sh Target Price: $0.41/sh M/Cap.: $68M Valuation: $0.41/share Valuation: $406M Shares/options: 427M Monthly T/over: $8.9M

Matthew Schembri Brett McKay +61 2 9239 9630 +61 2 9239 9605 [email protected] [email protected] Petra Capital Pty Ltd

January 2018

2

Contents Analysis............................................................................................................................................................... 4

Executive Summary ............................................................................................................................................ 5

Project Overview ................................................................................................................................................. 6

Mine .................................................................................................................................................................... 7

HPA Plant ........................................................................................................................................................... 8

SMS Group ....................................................................................................................................................... 11

Funding ............................................................................................................................................................. 13

Capital Costs .................................................................................................................................................... 14

Offtake .............................................................................................................................................................. 15

Modelled Assumptions ...................................................................................................................................... 16

Cashflow Analysis ............................................................................................................................................. 17

Valuation ........................................................................................................................................................... 18

Risks ................................................................................................................................................................. 20

Supply and Demand ......................................................................................................................................... 21 Demand ....................................................................................................................................................... 21 LEDs ............................................................................................................................................................ 23 Substitution Threat in LED’s ........................................................................................................................ 24 Supply .......................................................................................................................................................... 25

The Board & Top Shareholders ........................................................................................................................ 26

January 2018

3

Altech Chemicals Ltd (ATC) BUY Share Price: A$0.16 Leveraged to “new age” technologies Target Price: A$0.41 We initiate coverage of Altech Chemicals (ATC) with a BUY rating and a target price of A$0.41/sh, in line with our NPV. Altech has development ready plans to be the world’s first, pure play, High Purity Alumina (HPA) producer, with a mine in Western Australia and a processing plant in Malaysia. HPA is a high value, niche commodity, principally used as the feedstock for synthetic sapphire production where it is an essential material for many rapidly growing markets including LEDs and semiconductors. We forecast the 4N (99.99%) HPA market growing from 22ktpa in 2017 to 63ktpa in 2024 (CAGR of 16%). Altech is significantly advanced with its development plans, with German ECA funding (64% of capex), a fixed price EPC contract from a leading German metals processing firm (SMS Group) & offtake arrangements with Mitsubishi. We see Altech as a leading supplier of high value HPA into a growing market at a significantly lower cost than incumbent producers.

German ECA Funding and EPC Backing

• Altech have appointed SMS group, a leading German metals processing firm to construct the HPA plant under a fixed price EPC contract. The contract guarantees throughput, product quality and includes commissioning responsibility. As a further show of confidence in the project, SMS group will invest US$15m in Altech. The confidence by a large, leading metals processing firm gives important third party verification in this project.

• After 15 months of due diligence involving independent specialist technical, market and legal consultants, KfW IPEX, a German government owned bank have approved US$190m project debt covering 64% of US$298m capex.

High Purity Alumina (HPA)

• HPA is a niche, high value commodity, essential for high tech application in LEDs, semiconductors & potentially the Li-ion battery sector. Ignoring potential growth for Li-ion batteries, demand for 4N HPA is forecast to triple by 2024 (16% CAGR) requiring nine Altech sized plants to be constructed. Supply has historically been from specialist divisions of large chemical conglomerates.

• In a rapidly growing market, without a specialist pure play producer, this is an opportunity for Altech to become an industry leader.

Altech’s Leverage

• Altech is highly leveraged to the 4N HPA price. The opaque nature of the HPA market leads us to assume a very conservative US$30,000/t price in our base case forecasts. If current spot prices of US$40,000/t persist, our valuation increases by 82% to A$0.74/sh.

Company Data Shares – ordinary (M) 426.5 Market cap. (M) 68 12 month low/high ($) 0.10 / 0.26 Average monthly turnover ($M) 8.9 GICS Industry Materials

Financial Summary (fully diluted/normalised)

Year end June 2020F 2021F 2022F 2023F 2024F Revenue ($m) 0 0 76 140 174

Costs ($m) 1 1 32 46 53

EBITDA ($m) -1 -1 44 94 121

NPAT ($m) -2 -8 6 35 56

EPS (cps) -0.4 -2.0 1.4 3.5 5.6

EPS growth (%) -815% -365% 169% 159% 57%

PER (x) na na 12 5 3

Cashflow ($m) -2 -8 30 81 113

CFPS (cps) 0 -2 7 8 11

PCFPS (x) -38 -8 2 2 1

Enterprise Value ($m) 176 317 293 218 111

EV / EBITDA (x) -210 -378 7 2 1

Payout ratio (%) 0% 0% 0% 0% 0%

Board

Director Position Executive

Luke Atkins Chairman Non-executive

Iggy Tan Managing Director Executive

Peter Bailey Director Non-executive

Dan Tenardi Director Non-executive

Tunku Yaacob Khyra Director Non-executive

Uwe Ahrens Alternate Director Executive

ATC code – performance over one year

January 2018

4

Analysis

Source: Petra Capital

Altech Chemicals Ltd (ATC)29-Jan-18 Share Price ($) A$0.16Year End June Iss. Shares (M) 426.5

Dilution (M) 572.2Fully Diluted (M) 998.7Mkt Cap. ($M)

PROFIT & LOSS 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025FRevenue A$M 0 0 0 0 76 140 174 180 ReserveOperating Costs A$M 0 0 0 0 31 45 52 56 HPAExploration A$M 0 0 0 0 0 0 0 0 Tonnes Mt 1.36Other A$M 5 1 1 1 1 1 1 1 Grade (Al2O3 %) % 30%EBITDA A$M (5) (1) (1) (1) 44 94 121 123D&A A$M 0 0 0 0 21 31 33 31 Contained Al2O3 (kt) kt 408EBIT A$M (5) (1) (1) (1) 23 63 87 92Net Interest A$M (0) (2) 2 11 15 13 8 2 HPAPre-Tax Profit A$M (5) 0 (3) (12) 8 51 79 89 ProductionTax A$M (1) 0 (1) (4) 2 15 24 27 Ore Processed kt 0.0 0.0 0.0 0.0 23.1 36.7 42.5 43.5Net Profit A$M (3) 0 (2) (8) 6 35 56 63 Ore Grade % 0.0 0.0 0.0 0.0 0.3 0.3 0.3 0.3Abnormal A$M 0 0 0 0 0 0 0 0 Overall Recovery % 0% 0% 0% 0% 38% 38% 38% 38%Reported Profit A$M (3) 0 (2) (8) 6 35 56 63 HPA Produced kt 0.0 0.0 0.0 0.0 2.4 3.8 4.4 4.5Dividends Paid A$M 0 0 0 0 0 0 0 0 HPA Sold kt 0.0 0.0 0.0 0.0 1.9 3.5 4.3 4.5Adjustments A$M 0 0 0 0 0 0 0 0 C1 Costs A$'000/t - - - - 10.9 9.8 9.8 10.4

AISC A$'000/t - - - - 15.2 14.1 14.1 14.7 CASHFLOW Net Op Cash Flow A$M (5) (1) (1) (1) 44 94 121 123 REVENUENet Interest A$M 0 2 (2) (11) (15) (13) (8) (2) HPA Project A$M 0 0 0 0 76 140 174 180Tax Paid A$M 1 (0) 1 4 1 0 0 (14) Total A$M 0 0 0 0 76 140 174 180Op Cash Flow A$M (3) 0 (2) (8) 30 81 113 107

OPERATING COSTSNet Capex A$M 0 (132) (132) (132) (6) (6) (6) (6) Meckering (Mine) A$M 0 0 0 0 3 0 0 3Exploration A$M 0 0 0 0 0 0 0 0 Direct Processing A$M 0 0 0 0 17 28 32 33Inv Cash Flow A$M 0 (132) (132) (132) (6) (6) (6) (6) Transport A$M 0 0 0 0 2 3 3 4Free cash flow A$M (3) (132) (134) (141) 24 76 107 101 C1 Cash Cost A$M 0 0 0 0 26 37 43 47

Royalties A$M 0 0 0 0 5 8 9 9Net Borrowings A$M 0 0 203 51 (20) (70) (80) (76) Corporate A$M 0 0 0 0 0 0 0 1Dividends A$M 0 0 0 0 0 0 0 0 Total A$M 0 0 0 0 36 53 62 66Equity Issues A$M 17 143 0 0 0 0 0 0Other A$M 0 0 0 0 0 0 0 0 CAPEXFin Cash Flow A$M 17 143 203 51 (20) (70) (80) (76) Project A$M 0.0 132.4 132.4 132.4 0.0 0.0 0.0 0.0

Sustaining A$M 0.0 0.0 0.0 0.0 6.0 6.0 6.0 6.0Net Cash Flow A$M 14 11 69 (90) 4 6 27 24 Total A$M 0.0 132.4 132.4 132.4 6.0 6.0 6.0 6.0

BALANCE SHEET ASSUMPTIONS Cash A$M 15 26 95 5 9 15 41 66 Exchange Rate A$/US$ 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75Other Current A$M 0 0 0 0 0 0 0 0 Interest Paid % 3% 3% 3% 3% 3% 3% 3% 3%Cur Assets A$M 15 26 95 5 9 15 42 66 Interest Rec % 2% 2% 2% 2% 2% 2% 2% 2%Fixed Assets A$M 23 155 288 420 426 432 438 444 Diesel Price A$/L 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2Exploration A$M 0 0 0 0 0 0 0 0 Gas Price $6/GJ 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0Other A$M 0 0 0 0 0 0 0 0 HPA Price US$/t 30000 30000 30000 30000 30000 30000 30000 30000Non Cur Assets A$M 23 156 288 421 427 433 438 444 HPA Price A$/t 40000 40000 40000 40000 40000 40000 40000 40000Total Assets A$M 39 182 383 426 436 448 480 510Borrowings A$M 0 0 0 0 0 0 0 0 CASH FLOW FORECASTS INCL DEBT & EQUITYPayables A$M 7 7 7 7 7 7 7 7Other A$M 0 0 0 0 0 0 0 0Cur Liab A$M 7 7 7 7 7 7 7 7Borrowings A$M 0 0 203 254 234 164 84 8Provisions A$M 0 0 0 0 0 0 0 0Other A$M 0 0 0 0 0 0 0 0Non Cur Liab A$M 0 0 203 254 234 164 84 8Total Liabilities A$M 7 7 211 262 242 172 92 15Total Equity A$M 31 175 173 164 195 276 389 495RATIO ANALYSISEPS ¢ (0.8) 0.1 (0.4) (2.0) 1.4 3.5 5.6 6.3PER x na 270.2 na na 11.7 4.5 2.9 2.6EPS Growth % 17% 108% -815% -365% 169% 159% 57% 12%CFPS ¢ (0.8) 0.1 (0.4) (2.0) 7.1 8.2 11.3 10.7PCFR x na 270.2 na na 2.3 2.0 1.4 1.5DPS ¢ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Yield % 0% 0% 0% 0% 0% 0% 0% 0%Payout Ratio % 0% 0% 0% 0% 0% 0% 0% 0%Gearing ND/E % -48% -15% 63% 152% 116% 54% 11% -12% NPV (+1Yr) A$MInterest Cover x 18.5 0.8 na na 1.6 5.0 10.9 38.5EBITDA Margin % na na na na 58.2 67.2 69.4 68.3 HPA Operations 386EBIT Margin % na na na na 30.7 45.1 50.4 51.0 Corporate costs -6Return On Assets % (12.8) (0.7) (0.2) (0.2) 5.4 14.1 18.2 18.0 Net Cash (Debt) 26Eff Tax rate % 30% 30% 30% 30% 30% 30% 30% 30% Total 406 $0.41

A$68M

A$/sh.

$0.39-$0.01$0.03

-200

-150

-100

-50

-

50

100

150

200

250

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

A$m

Operating Cash FlowNew EquityChange in BorrowingsCapex & ExpChange in Cash

January 2018

5

Executive Summary Altech to become a low-cost, pure play HPA producer

Altech aim to be the world’s first, pure play, high purity alumina (HPA) producer. The market for 4N (99.99%) HPA is expected to triple in size by 2024 growing from 22kt to 63ktpa at a CAGR of 16%. Demand is being propelled by fast growing, high tech applications in LEDs and semiconductors that could be amplified by very promising applications in lithium-ion battery separators. Altech’s proposed West Australian mine and Malaysian HPA plant will produce 4.5kpta of 4N HPA at a significantly lower cost than incumbent producers. At spot prices of US$40,000/t, Altech will generate A$180m in annual revenue and account for ~10% of forecast world production in CY’22. The project is backed by ECA funding from German government owned KfW IPEX-Bank and a robust fixed price EPC contract from SMS group that incorporates commissioning and performance responsibilities. We see this backing as important third party verification of the project.

HPA is a fast growing commodity and highly leveraged to high tech applications

HPA is a high value, niche commodity that is essential for the synthetic sapphire industry. Synthetic sapphire used in the production of LEDs and semiconductors with these two markets currently account for 72% of total HPA demand and growing at 17% and 14% CAGR’s respectively. LED’s are rapidly gaining share of the light globe market, as lower total cost and better efficiency make them more attractive to consumers than incumbent light globes. Semiconductor demand is being driven by sensor and memory products for consumer and industrial applications. HPA can also be used directly within lithium-ion batteries as a key raw material for ceramic coated separators (CCS) which show some superior characteristics to traditional polymer separators. The increasing adoption of HPA in the CCS market could underpin further significant demand growth.

Strong backing from German groups

After an extensive due diligence process, Altech has recently secured ECA funding and locked in a robust EPC contract.

German government owned KfW-IPEX bank undertook a 15 month due diligence process to approve a US$190m project debt facility covering 64% of the US$298m capital requirement. The due diligence process included the appointment of independent specialist technical, marketing and legal advisors who undertook extensive examination of all key elements of the project. Importantly, the additional test work and process flowsheet analysis generated positive results.

SMS group is a privately owned German metals processing company who have been contracted to provide a fixed price EPC contract that guarantees throughput, process, commissioning and product quality. SMS group have also committed to contributing US$15m of equity into Altech.

Valuation of A$0.41/sh, highly leveraged to HPA price

Our valuation of A$0.41/sh is set in-line with our NPV10 which assumes a A$397m capital cost, A$12,000/t operating costs, and a US$30,000/t HPA price over a 30 year mine life. We assume a A$143m equity raising at A$0.25/sh

Our base case valuation of A$0.41/sh assumes a HPA price of US$30,000/t which is 25% below current spot prices. There is significant leverage to higher HPA prices, with US$40,000/t or US$50,000/t generating a valuation of A$0.74/sh or A$1.08/sh respectively.

Risks

A comprehensive assessment of the risks facing Altech is included in the main section of the report. Key areas of risk to achieving our target price include; a) commodity price b) funding c) licences and approvals, and; d) technical challenges.

January 2018

6

Project Overview Altech aim to produce 4,500tpa of high purity alumina (HPA) (>99.99% Al2O3; also known as 4N) at a

cost which is significantly lower than incumbent producers. The project is backed by a large (12.7Mt @ 30% Al2O3) multigenerational resource to be mined in Meckering, Western Australia (130km east of Perth) (Figure 1) with small volumes of high purity Kaolin clay shipped to Tanjung in Malaysia (Figure 2) for processing into HPA. Altech is planning to use existing technology based on a hydrochloric acid (HCl) based processing route to produce HPA at a significantly lower cost than current production. Capital costs for the whole project are expected to be US$298m (A$397m) and operating costs of ~US$9,000/t give a strong margin in relation to the current spot price of ~US$40,000/t for HPA.

The Malaysian based HPA plant will be constructed under a fixed price EPC contract by SMS group, a large, and privately owned German metal processing company. The EPC is a lump sum, fixed price agreement including a series of guarantees on throughput, timing and product quality. SMS group provide the project with important third party verification and their expertise in working with ECA’s was, in our view, instrumental in Altech securing US$190m of debt funding from German owned KfW IPEX-Bank. We expect the remainder of the capital requirement (US$108m) to be sourced from traditional equity markets although we recognise other options will be investigated by Altech including a project level sell-down.

Figure 1: Meckering, Western Australia

Source: Company Reports

Figure 2: Tanjung Langsat Industrial Complex

Source: Open Source Mapping

January 2018

7

Mine Altech has a large, high grade, low impurity kaolin deposit near the town of Meckering in Western

Australia. The resource is 12.7Mt @ 30% Al2O3, with a reserve of 1.2Mt @ 30% Al2O3 which gives the resource a 250 year life and the reserve a ~30 year mine life. The company is proposing a conventional, open pit, free dig mining operation which will be operated on a campaign basis (Figure 3 & Figure 4). Each campaign will be stockpiled at Meckering and would be expected to provide enough feed to operate the Malaysian HPA plant for 3 years.

The Meckering site will have a container loading facility, which will operate continuously to screen and load the campaign stockpile. The kaolin will be loaded into 20 foot sea containers at a rate of ~36 containers per week for the duration of HPA production.

Mining

Every 3 years, a mining campaign will stockpile ~130kt of kaolin ore at the Meckering site. The mine will be a conventional, open pit, free dig operation with a strip ratio of 0.64:1. Mining will take place during the summer, to avoid wet conditions, and the small contract mining fleet will consist of excavators, articulated dump trucks and elevating motor scrapers. A total of 7 operators will be required per mining campaign.

Screening and Loading

The container loading facility will reclaim raw kaolin from the ROM stockpile using a front end loader and transferred to a trommel screen which will reject material >12mm. The undersize will be loaded into 20 foot containers using an extendible conveyor to ensure even distribution of kaolin over the length of the container.

Logistics and Freight

Meckering will fill ~36, 22t containers a week (800t), which will be trucked via the Great Eastern Highway to the port of Fremantle. Shipments from Fremantle to the Malaysian port of Tanjung Pelepas will occur weekly. The HPA plant is ~90km from the port at the Tanjung Langsat Industrial Complex.

Mining Approvals

Altech have a current mining lease over the Meckering deposit (M 70/1334) and have purchased the necessary freehold over the lease boundaries. All the necessary work permits are in place for Altech to commence site works and operate the mine and container loading facility.

Figure 3: Mine and Loading Facility Layout

Figure 4: Trial Kaolin Open Pit at Meckering

Source: Company Reports Source: Company Reports

January 2018

8

HPA Plant What is HPA?

High Purity Alumina (HPA) is alumina (Al2O3) with a purity of 99.99% (4N) or greater. In 2017, 72% of 4N HPA went into the manufacturing of synthetic sapphire for use in LEDs, semiconductors and scratch resistant glass. Synthetic sapphire has a different atomic structure but the same chemical composition as HPA. It has a hardness of 9 on the Mohs scale (second only to diamond), has good thermal properties with excellent electrical and dielectric properties permitting its use in aggressive environments where reliability, optical transmission and strength are required.

Current Production

Current HPA producers use a highly processed aluminium metal feedstock and apply one of four reprocessing methods to produce a HPA;

• Hydrolysis of aluminium

• Choline hydrolysis of aluminium

• Thermal decompression of ammonium aluminium sulphate

• Thermal decomposition of ammonium aluminium carbonate hydroxide

These processes have a significantly higher cost than the Altech’s proposed method due to the high cost of purchasing aluminium metal prior to the HPA process beginning (Figure 5).

HCl Processing Route

Altech began test work in 2011 to confirm and refine the application of HCl processing of kaolin. The process is based upon HCl processing technology that was initially developed and trialled in the 1980’s. The process allows kaolin (a low sodium, aluminous clay) to be combined with hydrochloric acid based processing technologies to produce a highly pure aluminium oxide. The process was initially developed as a way of producing alumina (99.5% Al2O3) however was not adopted by industry due its high cost compared to the Bayer Process which continues to be used today. A lack of demand for HPA in the 1980’s meant that the process was proven, but never commercialised. The rapid advance of certain technologies has now created a market for HPA, with demand expected to significantly outstrip supply over coming years. We expect this dynamic to provide a supportive backdrop for the HPA price.

Figure 5: Current HPA production vs HCl based processing


January 2018

9

Altech’s Flow Sheet

Altech are proposing a HCl based, hydrometallurgical processing method to produce HPA (Figure 6). This process has never been constructed at full scale, but utilises existing technology and the process has been extensively tested by Altech and thoroughly reviewed through the EPC and ECA funding due diligence processes. Altech plan to include a flexible back-end which provides the option to produce battery-grade HPA.

Figure 6: Final Flow Sheet


January 2018

10

Ten Steps to HPA Powder Production

• Wet Screening – ROM kaolin ore will be discharged from shipping containers into a wet screening circuit to reduce the kaolin particle size to <300µm removing the majority of oversize silica quartz.

• Calcination – Beneficiated kaolin will be calcined at ~700ºC in an indirect rotary kiln to convert the crystal structure to meta kaolin for leaching. The kiln will be fired by natural gas and will be configured to collect off-gas fines.

• Leaching – Meta kaolin will be mixed with hydrochloric acid at ~30% w/w. The exothermic reaction dissolves the oxide components (except silicas) into soluble chloride forming a high concentration of aluminium chloride (AlCl3). The leached slurry is filtered, with the silica residue neutralised and sold to brickworks/cement plants.

• Crystallisation – The pregnant liquor solution of aluminium chloride is crystallised out of solution as aluminium chloride hexahydrate (AlCl3.6H2O or ACH) by increasing the hydrochloric acid concentration by bubbling in anhydrous HCl gas. The ACH crystals are then centrifuged and washed from solution.

• Dissolution – ACH solids are dissolved in demineralised water and fed to the second crystallisation circuit, identical to the first stage. This dissolution process removes residual impurities trapped in the first stage crystallisation process. ACH solids are then fed to a third crystallisation circuit, similar to the first/second, but contains no washing stage.

• Heat Treatment – Purified ACH crystals undergo two stages of heat treatment. The first heating to ~700ºC in a gas fired rotary kiln in order to decompose the ACH to alumina, with trace amounts of basic aluminium chlorides (oxychlorides). The resulting HCl gas is recovered and reused in the process. The solids are fed into a second rotary kiln that removes the remainder of the HCl and water (H2O) to produce HPA – highly pure alpha alumina.

• Surface Washing – The HPA is fed into a final wash stage to remove trace surface impurities.

• Particle Sizing – The flexible product finishing line grinds all HPA to less than 1µm by wet bead milling and will then be dried using a conventional spray dryer.

• Synthetic Sapphire Product – The 1µm HPA will be aggregated in beads and heat treated in a tunnel kiln for use in the synthetic sapphire industry.

• Lithium-ion Battery Product – The 1µm HPA will be micronized to produce a fine HPA powder.

January 2018

11

SMS Group SMS group have become an instrumental supporter of Altech’s HPA project since being appointed the

EPC contractor in May 2017. We see SMS group’s expertise in metal processing combined with their US$15m equity investment bringing valuable third party verification to add credibility to this HPA project.

SMS group GmbH are a German headquartered, global engineering firm specialising in the design and construction of a very wide variety of metal processing plants (Figure 7 & Figure 8). The group has over 13,000 employees, had sales of over €3b in 2016 and at 31-Dec-2016 the company had cash of €808m. There is a global network of offices (Figure 9) with Asia being SMS Group’s largest region, generating 34% of sales in 2016. The group also has significant experience in operating in Malaysia including the recent completion of a smelter project in the country.

SMS group has significant expertise in working with export credit agencies including those from Germany, Switzerland, Luxembourg and Belgium. SMS group’s involvement, in our view, would have been instrumental in Altech receiving credit approval for a US$190m debt package for the project from German government owned KfW IPEX-Bank.

In May 2017, Altech appointed SMS, the EPC contractor for the Malaysian HPA plant. In a strong display of confidence in the design of Altech’s HPA plant, SMS are providing a;

• fixed price turnkey contract that removes completion and cost risk

• throughput guarantee

• process and product quality guarantee

• commissioning and startup responsibility

with the following penalties in the event SMS do not perform;

• liquidated damages for delay

• liquidated damage for failure to perform and

• performance and warrantee bonds.

We believe SMS groups experience in metal processing and commitment through the contractual terms of the EPC contract and their US$15m equity investment brings a level of third party verification that has yet to be fully valued by the equity markets.

Figure 7: Endorsed by SMS Group (EPC Contractor) and KfW IPEX-Bank (ECA Funding)


January 2018

12

Figure 8: SMS groups metal processing plant experience


Figure 9: SMS Office Locations


• Agglomeration• Coke Making• Iron Making• Residue Recycling

Primary Products

• Flat Products• Long Products

Processing

Tube & Pipe Making

• Flat Products

Cold Rolling

• Flat Products

Hot Rolling


Casting

• Closed Die• Extrusion• Open Die• Ring and Wheel Rolling

Forging/Pressing Processes

• Additive Manufacturing• Converter Steelmaking• Electric Steelmaking• Refining

Metallurgy


Mini Mills

January 2018

13

Funding Approval of ECA funding with German KfW IPEX-Bank

In December 2017 Altech received a positive decision from the German government inter-ministerial committee (IMC) which resulted in a legally binding offer of cover for a US$190m debt package for its HPA project from the German government owned KfW IPEX-Bank. The debt package covers 64% of the US$298m (A$397m) capex and is comprised of the following components;

• Export Credit Agency covered debt – US$170m – which is expected to be at long tenure and at highly attractive terms.

• Commercial debt – US$20m – which is expected to be at customary lending terms.

Subject to the finalisation of loan documentation and fulfilment of a series of conditions precedent including equity financing, Altech will be able to drawdown on this project financing facility.

Due Diligence Process

The approval by KfW IPEX-Bank came after an extensive due diligence process that commenced in August 2016 and was completed in October 2017. The process included the appointment of technical, market, legal and independent expert consultants.

The technical consultant examined all aspects of the HPA project from reserve estimates through to capital cost estimates and in addition requested further confirmatory test work including;

• Roaster kiln pilot trials

• Alumina refractory proposed lining tests

• Impurity management

• Bead mill tests

• Spray dryer tests

• Final product particle size test work

• HPA pelletising tests

• Pellet calcination tests

We believe that this 15 month, extensive due diligence process and the positive decision to provide a legally binding offer of cover, provides further third party verification for Altech’s HPA project.

Equity Financing

In our base case, we assume a project capex in line with the Final Investment Decision Study (FIDS) of A$397m (US$298m) and a 64/36 debt/equity split. Our funding assumptions include A$254m of debt and A$143m of new equity. We assume the issue of 572m new shares at A$0.25/sh (Figure 10).

Figure 10: Equity Funding Scenarios Base Case 64/36 D/E 60/40 D/E 50/50 D/E

Capital Requirement (A$m) 397 397 397 Debt (A$m) 254 238 199 % 64% 60% 50% Equity (A$m) 143 159 199 % 36% 40% 50% Equity Issue Issue Price 0.25 0.25 0.25 Current Shares on Issue 427 427 427 Shares Issued 572 636 795 Total Share on Issue 999 1062 1221 ATC (A$m) 406 406 406 ATC (A$/sh) 0.41 0.38 0.33


January 2018

14

Capital Costs Capital costs in the FIDS are estimated to be US$298m (A$397m) and are dominated by the SMS

group, fixed price EPC contract for the Malaysian HPA plant which accounts for 94% of the cost (Figure 11).

Capital Cost Evolution

The project capital costs have evolved significantly since the original BFS was released in June 2015. The original BFS was estimated by Simulus to have a capital cost of US$76.9m and this has grown to US$298m in the FIDS based on the SMS group, fixed price EPC contract. This evolution reflects greater conservatism in the plant design and improved understanding of the flowsheet. The plant design and EPC contract by SMS group has the following improvements over prior iterations;

• Superior lining materials in the back-end (post roasting) to reduce product contamination

• Flexibility in finished product by introducing capability to produce HPA for the synthetic sapphire industry and lithium-ion battery industry

• Improvement plant emission metrics to comply with Equator Principles and OECD common approaches

• Production increased 25% from 4,000tpa to 4,500tpa

• Introduction of additional EPC responsibilities including; product quality guarantee, throughput guarantee, startup and commissioning responsibility, which is ontop of the fixed price contract.

The modifications have added significant capital cost to the project, but also, in our view, significantly de-risk the project given Altech will be provided with a high quality plant which is guaranteed to be delivered on time and budget, and at the required performance levels.

Figure 11: Capital Cost Estimate Revisions (US$m) US$m FIDS BFS BFS

Date 23-Oct-17 16-Mar-16 29-Jun-15 HPA Plant Capital Estimates SMS group M+W Group Simulus Production 4,500tpa 4,000tpa 4,000tpa Meckering EPC 5.3 - 16.0 HPA Plant Land 4.1 - - HPA EPC 280.0 - 54.6 Owners Costs 8.2 - 6.3 Total 297.6 78.7 76.9


January 2018

15

Offtake In April 2016 Altech signed a 10 year, exclusive offtake sales and distribution arrangement with

Mitsubishi for 100% of Altech’s production. Under the agreement both parties have set specific offtake sales targets which aim to be at prevailing market prices. Mitsubishi will assume credit risk on sales and in exchange for receiving a 5% margin. We believe Altech will target the majority of sales into Japan, Korea and Taiwan with a small portion expected to go into China.

Mitsubishi are a leading Japanese trading company with a well-established global distribution network. The mineral resources and metals trading division; Mitsubishi Corp Resources to Market has extensive coverage across ferrous and non-ferrous metals and operates risk management, logistics, financing and marketing/procurement function (Figure 12 & Figure 13).

Mitsubishi has had demonstrable success with sales and distribution agreements with other ASX listed miners, including Galaxy Resources. It is our view that Mitsubishi will be able to leverage its experience selling and distributing niche commodities to the benefit of Altech.

Figure 12: Mitsubishi Group Value Chain


Figure 13: Mitsubishi is a Credible Partner with an International Profile


January 2018

16

Modelled Assumptions Altech released a Final Investment Decision Study (FIDS) for the HPA project on 23rd October 2017

which we broadly adopt in our base case development and production estimates. The study detailed a 4.5ktpa 4N HPA operation over a 30 year life with a capex of US$298m and an average operating cost of US$9.9/kg. We assume a capex of US$298m and an operating cost of US$9.0/kg (Figure 14).

Key production parameters for the HPA Operation

We make the following key assumption for the HPA operation;

• Average annual production of 4.5ktpa 4N HPA

• 30 year operating life

• Construction to commence in FY’19

• 3 year construction period

• First production in FY’22

• 3 year ramp-up to full production

• Operating costs (A$/t kaoline treated);

o Mining costs A$20/t o Shipping costs A$179/t o Direct process A$751/t o G&A A$82/t o Royalties; 7% on mined kaolin and 5% on 4N HPA o Sustaining capital of A$6mpa / A$228/t

• Average operating cost US$9,000/t 4N HPA

• HPA flat price forecast of US$30,000/t (A$40,000/t) at 0.75 AUDUSD.

Figure 14: Key production assumptions ATC (FIDS) Petra (As modelled)

Capital Cost US$298m US$298m Operating Life 30 years 30 years Construction Period 38 months 36 months Ramp up 3 years 3 years Production Rate 4.5ktpa 4.5ktpa Operating Cost US$9.9/kg US$9.0/kg Sales Price US$26.9/kg US$30/kg

Source: Company Reports, Petra Capital

January 2018

17

Cashflow Analysis Altech have completed a Final Investment Decision Study (FIDS) which outlines US$298m of capital

requirements of which ECA funding has now been secured for 64%. We expect the company to secure the remaining US$108m from equity markets, although believe Altech will assess a number of options to fund the remaining capex.

We assume construction commences in FY19, first production in FY22, and a 3 year ramp-up to full production of 4,500tpa 4N HPA (Figure 15). At conservative 4N HPA prices of US$30,000/t we expect the project to be generating operating cash flow of A$127mpa from FY24. We expect payback of ~3 years on our commodity price forecasts (Figure 16 to Figure 19).

Figure 15: Rampup Profile


Figure 16: Altech net free cash flow

Figure 17: Cash flow forecasts incl debt & equity

Source: Petra Capital Source: Petra Capital

Figure 18: Cash cost breakdown and HPA production

Figure 19: Margin between revenue and costs

Source: Petra Capital Source: Petra Capital

0%10%20%30%40%50%60%70%80%90%100%

0

1

2

3

4

5

Y1'

Q1

Y1'

Q2

Y1'

Q3

Y1'

Q4

Y2'

Q1

Y2'

Q2

Y2'

Q3

Y2'

Q4

Y3'

Q1

Y3'

Q2

Y3'

Q3

Y3'

Q4

Y4'

Q1

Y4'

Q2

Y4'

Q3

Y4'

Q4 Pr

oduc

tion

at 4

N Q

ualit

y (%

)

Ann

ualis

ed P

rodu

ctio

n (k

tpa)

Annualised Production (ktpa) Production at 4N Quality (%)

January 2018

18

Valuation We model Altech on a 12 month forward looking basis using Petra commodity price assumptions and

currency forecasts. We calculate individual valuations for operating assets, net debt/cash and corporate costs (Figure 20). The discount rate is 10% and our share count is on a fully diluted basis with the assumption of a US$107m (A$143m) equity raising at A$0.25/sh.

Figure 20: Fully diluted valuation split (NPV @ 10%) NPV (+1Yr) A$m A$/sh

HPA Operations 386 0.39 Corporate costs -6 -0.01 Net Cash (Debt) 26 0.03 Total 406 0.41


Valuation Sensitivity

Altech is sensitive to the HPA price, capex and opex. The valuation sensitivities to capital cost and operating cost are shown in Figure 21 and Figure 22. The valuation sensitivities to HPA prices and capital assumptions are shown in Figure 23 and Figure 24.

Figure 21: Valuation sensitivity based on various capital and operating cost assumptions Total Operating Cost (US$/t HPA)

-20% -10% -5% 0% +5% +10% +20% 8,856 9,722 10,151 10,577 11,000 11,419 12,250

Cap

ital C

ost (

US$

m)

220 0.64 0.61 0.60 0.58 0.57 0.55 0.52 240 0.59 0.56 0.55 0.53 0.52 0.50 0.47 260 0.54 0.51 0.50 0.48 0.47 0.46 0.43 280 0.50 0.47 0.46 0.44 0.43 0.42 0.39 300 0.45 0.43 0.42 0.40 0.39 0.38 0.35 320 0.42 0.39 0.38 0.37 0.35 0.34 0.32 340 0.38 0.36 0.34 0.33 0.32 0.31 0.29 360 0.35 0.32 0.31 0.30 0.29 0.28 0.26 380 0.32 0.29 0.28 0.27 0.26 0.25 0.23


Figure 22: IRR sensitivity based on various capital and operating cost assumptions Total Operating Cost (US$/t HPA)

-20% -10% -5% 0% +5% +10% +20% 8,856 9,722 10,151 10,577 11,000 11,419 12,250

Cap

ital C

ost (

US$

m)

220 25% 25% 24% 24% 23% 23% 22% 240 24% 23% 23% 22% 22% 22% 21% 260 22% 21% 21% 21% 21% 20% 20% 280 21% 20% 20% 20% 19% 19% 18% 300 20% 19% 19% 19% 18% 18% 17% 320 19% 18% 18% 18% 17% 17% 16% 340 18% 17% 17% 17% 16% 16% 16% 360 17% 16% 16% 16% 16% 15% 15% 380 16% 16% 15% 15% 15% 15% 14%


January 2018

19

Figure 23: Valuation sensitivity based on various HPA prices and capital assumptions HPA Price (US$/t)

10,000

20,000

25,000

30,000

35,000

40,000

50,000

Cap

ital C

ost (

US$

/t)

220 -0.22 0.19 0.38 0.58 0.78 0.98 1.37 240 -0.23 0.15 0.34 0.53 0.72 0.91 1.29 260 -0.25 0.12 0.30 0.48 0.67 0.85 1.21 280 -0.26 0.09 0.27 0.44 0.62 0.79 1.14 300 -0.28 0.07 0.24 0.40 0.57 0.74 1.07 320 -0.29 0.04 0.21 0.37 0.53 0.69 1.01 340 -0.30 0.02 0.18 0.33 0.49 0.64 0.95 360 -0.31 0.00 0.15 0.30 0.45 0.60 0.90 380 -0.32 -0.02 0.13 0.27 0.42 0.56 0.85


Figure 24: IRR sensitivity based on various HPA prices and capital assumptions HPA Price (US$/t)

10,000

20,000

25,000

30,000

35,000

40,000

50,000

Cap

ital C

ost (

US$

/t)

220 -2% 14% 19% 24% 28% 32% 39% 240 -3% 13% 18% 22% 26% 30% 36% 260 -4% 12% 17% 21% 25% 28% 34% 280 -4% 11% 16% 20% 23% 27% 33% 300 -5% 10% 15% 19% 22% 25% 31% 320 -6% 10% 14% 18% 21% 24% 30% 340 -6% 9% 13% 17% 20% 23% 28% 360 -7% 8% 12% 16% 19% 22% 27% 380 -8% 8% 12% 15% 18% 21% 26%


January 2018

20

Risks Key risks associated with companies operating in the resource sector include exposure to commodity

price and currency fluctuations, technical and operating risk, litigation and political risks and funding equity/debt market risks. Risks specific to Altech include;

• Commodity Price – The value of Altech is highly dependent on the expected price of the 4N HPA produced from its plant in Malaysia. The price of HPA is affected by many factors, such as supply and demand fluctuations, macroeconomic factors, substitution and thrifting. In the event that the 4N HPA price falls significantly, the value of Altech is also likely to fall.

• Funding – As of 30-September 2017 Altech had A$280k in cash, the company subsequently raised A$17m in Oct-2017. In December 2017, the company received credit approval from German government owned KfW IPEX-Bank for a project finance facility of US$190m. To develop Altech’s assets to the indicated timeline, further funding of either debt, equity or both will be required. A number of options are being considered by Altech, including a project level sell down. There is no guarantee that additional funds will be available on a timely basis, favourable terms or that such funds, if raised, would be sufficient to implement its business strategy.

• Licences and Approvals – Altech’s project has received the necessary approvals to construct and operate the Meckering mining operation and has received preliminary approvals for the Malaysian HPA plant. Altech will require further governmental licences, permits, and authorisations in connection with the Malaysian HPA plant. Obtaining and complying with the necessary government permits and regulations can be particularly complex, costly and time-consuming and are therefore not assured. The duration, cost and success of these applications are contingent on some factors outside the control of Altech.

• Technical Challenges – A project of this style, size and commodity has not been completed before. There are a number of technical challenges unique to the project including; design and construction of a plant never previously completed, metallurgical risk due to the flow sheet having never been tested at a commercial scale. If any one of these technical risks has an adverse outcome, there would be detrimental effect on the timing of the project as well as impacting the technical and economic characteristics of the project. There are no take-or-pay obligations under the Mitsubishi offtake agreement.

• Substitution – Like most metals and materials, there is a risk of substitution. Whilst demand is currently increasing, substitution may curtail rates of growth.

January 2018

21

Supply and Demand Alumina/aluminium oxide (Al2O3) is a 120Mt market and predominantly produced from bauxite, for the

production of aluminium. High purity alumina (HPA) is a speciality subset of the alumina market currently consisting of ~30ktpa or ~0.02% of the broader alumina market. The HPA market consists of three main product categories; 4N (99.99%), 5N (99.999%) and 6N (99.9999%). Altech are proposing to produce 4N HPA which is the largest product category and has a spot price of ~US$40,000/t (Figure 25 & Figure 26).

Figure 25: HPA market product categories

Figure 26: HPA 4N pricing

Source: Persistence Market Research Source: Persistence Market Research

Demand HPA is a high value, speciality product. Its principal application is as a feedstock for the production of

synthetic sapphire for use in LEDs, semiconductor manufacturing and speciality glass. HPA can be used directly in the production of phosphors and has some promising emerging applications in ceramic coated separators for use in lithium ion batteries (Figure 27). Demand for 4N HPA is expect to grow strongly at 15-20% CAGR out to 2024. This forecast growth rate is expected to drive the market from 22ktpa in 2017 to 64ktpa in 2024 (Figure 28). Importantly, these demand forecasts do not include increased adoption in the Li-ion battery sector which is a potential large growth market for HPA. A number of ASX-listed HPA development companies (including Altech) have made preliminary forecasts of potential demand for HPA in the rapidly growth Li-ion battery market.

Figure 27: Application of 4N HPA (2017e)

Figure 28: 4N HPA Demand Estimates, ex batteries


4N74%

5N24%

6N2%

0

10

20

30

40

50

60

70

2008

2009

2010

2011

2012

2013

2014

2015

2016

e

2017

HPA

4N (U

S$/k

g)

High (US$/kg) Low (US$/kg)

LEDs56%

Semiconductors16%

Phosphor15%

Others13%

January 2018

22

Demand Summary

• LEDs – 56% – Synthetic sapphire is used as a substrate for LED manufacturing. A single synthetic crystal sapphire provides chemical stability and favourable mechanical properties (Figure 29).

• Semiconductors – 16% – Synthetic sapphire is used as a thin film substrate, semiconductor polishing, semiconductor process equipment amonst others. A single synthetic crystal sapphire boule is sliced into wafers (Figure 30).

• Phosphors – 15% – HPA is used in the production of LED phosphors such as YAG (yttrium aluminium garnets) and other phosphors that are used in LEDs where light emitted is converted into different wavelengths (Figure 31).

• Others – 13% – Other applications include the production of synthetic sapphire glass for a variety of applications such as optical windows, mobile phone screens, lenses, watch glass, lithium ion battery separator coatings, abrasives, ceramics etc (Figure 32).

Synthetic Sapphire

Sapphire is an aluminium oxide (Al2O3), sharing the same chemical composition as HPA, but with a different atomic structure. The bulk of the world’s synthetic sapphire is manufactured using an adaption of the Czochraiski process, which is able to produce a single sapphire crystal.

HPA is melted at 2,200ºC and a thin seed of sapphire is dipped into the melt. The seed crystal is withdrawn at a controlled rate whilst the crystal and crucible are rotated in opposite directions. The process is repeated and crystal layers are added until the target size and shape is realised. The process can take many weeks.

Figure 29: Growth Rate from LEDs

Figure 30: Growth Rate from Semiconductors


Figure 31: Growth from Phosphors

Figure 32: Growth Rate from Other


January 2018

23

LEDs A light-emitting diode (LED) is a two-lead semiconductor light source which consists of three

components (Figure 33);

• substrate – the substrate provides the mounting for the p-type and n-type semiconductors to be deposited, the substrates are typically made of one of the following

o Sapphire (incumbent) o Silicon-Carbide (SiC) o Gallium Nitride (GaN) o Silicon (Si)

• n-type (negative) semiconductor – this semiconductor contains excess available electrons

• p-type (positive) semiconductor – this semiconductor contains excess electron holes.

When a suitable voltage is applied, the electrons in the n-type semiconductor recombine with the electron holes in the p-type semiconductor and generate energy in the form of photons/light. The colour of the light emitted is dictated by the material used as the n/p type semiconductor.

Figure 33: LED schematic


LEDs are used in general lighting, LCD TVs and monitors, projectors and large signs/displays. As a form of lighting they offer a far more energy efficient option than traditional incandescent light globes and compact fluorescent lamps (CFL). Up to 80% of energy used in traditional light globes is wasted as heat. The total cost of ownership of an LED light is 18% of the cost of traditional incandescent light globes (Figure 34). Longer life and reduced maintenance also allows LED applications in an increasing number of new areas. As the cost of LED light globes decreases (Figure 35), the penetration rate is increasing (Figure 36).

Figure 34: Light Globe Total Cost of Ownership (TCO) Incandescent CFL LED

Cost A$1 A$2 A$8

Life Span 1,200hrs 8,000hrs 25,000hrs

Wattage 60 14 10

No. bulbs for 25,000hrs 21 3 1

Total purchase price A$21 A$6 A$8

Electricity Use @ 30c/kwh A$450 A$105 A$75

TCO over 23 Years A$471 A$111 A$83


January 2018

24

Figure 35: Cost of LED Light Globes

Figure 36: LED Penetration Rate

Source: US DoE Source: US DoE

Substitution Threat in LED’s Sapphire is the incumbent LED substrate, but is being challenged by SiC, Si and GaN. Yole

Developpement, a leading researcher in this field, expect sapphire to lose market share out to 2020, but to retain a 90%+ dominance (Figure 37).

Figure 37: Substrate Market Share

Source: Yole Developpement

0

20

40

60

80

100

120

140

160

180

2008

2009

2010

2011

2012

2013

2014

2015

2016

e

US$

per k

ilolu

men

0%

10%

20%

30%

40%

50%

60%

70%

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Pene

trat

ion

Rate

(%)

84%

86%

88%

90%

92%

94%

96%

98%

100%

2012

2013

2014

2015

2016

2017

e

2018

e

2019

e

2020

e

Subs

trat

e M

arke

t Sha

re (%

)

Sapphire SiC Si GAN

January 2018

25

In Figure 38 we detail the relative advantages and disadvantages of each substrate type.

• Users – Sapphire is the incumbent substrate technology and is well understood by all LED producers. Other substrate technologies have been adopted by individual LED producers and are far more proprietary and specialised.

• Lattice Mismatch – LEDs are manufactured using a process called MOCVD (metal organic chemical vapor phase deposition) which is a highly complex process for growing crystalline layers. In a process called epitaxy, the n/p type semiconductor is “grown” upon the substrate. If there is a contrast in crystal lattice between the substrate and the n/p type semiconductor epitaxy is far more difficult. Sapphire does not have the lowest lattice mismatch, but that mismatch is now very well understood and incorporated into the manufacturing process.

• Price – SiC has the lowest lattice mismatch, but is the most expensive. Si has the potential to be the cheapest, but has the highest lattice mismatch. It is this low cost that lead Yole Developpement to believe that Si market share will grow the most by 2020. Sapphire’s cost is somewhere in between SiC and Si, but as the well understood incumbent is expected to retain a dominant market position.

Figure 38: Relative Merits of Substrate Substitutes

Users Lattice

Mismatch Advantages Disadvantages

Sapphire Almost Everyone

13.0% Lattice mismatch well researched Expensive

SiC CREE 3.5% Vert stable; Low lattice mismatch;

High thermal conductivity

Most expensive; Poor industry adoption

Si Osram, Birdgelux,

China

17.0% 80% cost reduction High lattice mismatch

GaN Soraa 0.0% No lattice mismatch; Homogenous materials

Unstable; High defect rate; Relatively costly

Source: Greentech Media

Supply The top 5 producers accounted for 55% of HPA production in 2016 (Figure 39) with production

concentrated in APAC and dominated by China (Figure 40). HPA production has traditionally been from small divisions within global chemical companies such as Sumitomo and Sasol. Chinese supply has been a relatively recent phenomenon as demand for synthetic sapphire production has increased.

Figure 39: HPA Production by Company in 2016

Figure 40: HPA Production by Country in 2016


-

1,000

2,000

3,000

4,000

5,000

Prod

uctio

n (t)

China43%

Japan10%

S. Korea13%

US12%

France3%

Russia1%

n/a18%

January 2018

26

The Board & Top Shareholders Luke Atkins (Non-Executive Chairman) is a lawyer by profession and one of the founders of the

Company. He has extensive experience in the areas of mining, exploration, and corporate governance. Mr Atkins is also a non-executive director of Bauxite Resources Ltd (BRL). Mr Atkins formerly held the role of executive chairman of BRL after co-founding the company in 2007. Mr Atkins has had extensive experience in capital raisings and has held a number of executive and non-executive directorships of private and publicly listed companies.

Ignatius Tan (Managing Director) is a highly experienced mining and chemical executive with a number of significant achievements in commercial mining projects including successful capital raisings, funding, construction, start-ups and operations. Mr Tan has over 30 years' chemical and mining experience and has been an executive director of a number of ASX-listed companies. Having been involved in the commissioning and start-up of seven resource projects in Australia and overseas, including high purity technology projects, Mr Tan is an accomplished project builder and developer. He previously held the positions of managing director of Nickelore Limited, Galaxy Resources Limited and Kogi Iron Limited.

Daniel Tenardi (Non-Executive Director) is a highly experienced mining executive with over 40 years' experience in the industry, having worked with a number of global resource industry leaders across a range of commodities, including iron ore, gold, bauxite, and copper. Mr Tenardi previously spent 13 years with Alcoa at its bauxite mines in the Darling Range in Western Australia; and a further two years at Alcoa's Kwinana refinery in Western Australia. Mr Tenardi subsequently worked at executive level for Rio Tinto's Robe River Iron Associates. Mr Tenardi was formerly managing director of Bauxite Resources Ltd and general manager of operations and chief operating manager at CITIC Pacific Mining. Mr Tenardi is currently non-executive director of Grange Resources Ltd.

Peter Bailey (Non-Executive Director) is a highly experienced and qualified engineer with over 40 years' experience in the mining and industrial mineral production industries. With an electrical engineering degree from the University of London, Mr Bailey's career spans across the iron ore, bauxite, zinc-lead-copper mining sector; and the alumina refining and chemicals sectors. Mr Bailey was president of Alcoa Bauxite & Alumina in 1996; he was responsible for Alcoa's eight alumina plants outside of Australia. He was also the chairman of the Alcoa Bauxite joint venture in Guinea, Africa. In 1998, he was appointed president of Alcoa Worldwide Chemicals' industrial chemicals department. Post Alcoa, Mr Bailey was CEO and co-owner of Sherwin Alumina, an alumina refinery located in Texas, USA.

Shane Volk (Company Secretary & Chief Financial Officer) has extensive accounting and corporate governance experience in Australian and international mining operations. Mr Volk is a qualified Chartered Secretary and has a Bachelor of Business (Accounting) from the Royal Melbourne Institute of Technology. Mr Volk has previously worked in Papua New Guinea, Indonesia and Australia across a diverse range of mining-related capacities such as exploration, operations, business development and corporate governance. Mr Volk was previously chief financial officer and company secretary for African Iron Ltd, Emerson Resources Limited, and Kogi Iron Limited.

Tunku Yaacob Khyra (Non-Executive Director) is the executive chairman of the Melewar Khyra Group of Companies (Melewar), a Malaysian-based diversified financial and industrial services group. He is the major owner and shareholder of Melewar. Tunku Yaacob sits on the boards of Khyra Legacy Berhad, Mycron Steel Berhad, MAA Group Berhad, Melewar Industrial Group Berhad, Ithmaar Bank B.S.C. (listed on the Bahrain Stock Exchange) and several other private companies. Tunku Yaacob graduated with a Bachelor of Science (Hons) degree in economics and accounting from City University, London. An accountant by training, he is a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Malaysian Institute of Accountants.

Uwe Ahrens (Alternate Director) is executive director of Melewar Industrial Group Berhad and managing director of Melewar Integrated Engineering Sdn Bhd. He also sits on the boards of several other private companies. Mr Ahrens holds masters degrees in both mechanical engineering and business administration from the Technical University Darmstadt, Germany. Upon graduation, Mr Ahrens joined the international engineering plant supplier, KOCH Transporttechnik GmbH in Germany, now belonging to FLSmidth Group, where he held a senior management position for 12 years, working mainly in Germany, USA and South Africa.

January 2018

27

Figure 41: Directors’ Interests Director Shares Options Total

Ignatius (Iggy) Tan 3,167,000 3,167,000 Luke Atkins 8,958,837 8,958,837 Daniel Tenardi 9,194,915 9,194,915 Peter Bailey 2,683,801 2,683,801 Tunku Yaacob Khyra 2,683,801 2,683,801 Uwe Ahrens 42,862,774 42,862,774

Figure 42: Top 20 Shareholders (Dated 31 August 2017) Name Amount %

1 MAA Group Berhad 25,913,621 8.68 2 Lake Mcleod Gypsum Pty Ltd 18,678,752 6.26 3 Melewar Int Inv Co 16,949,153 5.68 4 Mr Daniel Lewis Tenardi 8,694,915 2.91 5 BNP Paribas Nominees Pty Ltd 6,121,469 2.05 6 Citicorp Nominees Pty Limited 5,466,040 1.83 7 Mr Lindsay George Dudfield 5,245,497 1.76 8 Lake Mcleod Gypsum Pty Ltd 4,681,250 1.57 9 J P Morgan Nominees Australia 4,356,100 1.46 10 Australian Mineral Investment 3,750,000 1.26 11 Mrs Judith Melissa Tan 3,167,000 1.06 12 Dilkara Nominees 3,022,727 1.01 13 Cleanser Pty Ltd 2,928,140 0.98 14 HSBC Custody Nominees 2,743,583 0.92 15 Mr Luke Frederick Atkins 2,500,000 0.84 16 Waylen Bay Capital Pty Ltd 2,312,500 0.77 17 Ms Margot Jean Ainsworth 2,227,000 0.75 18 Mr Colman Cohan 2,046,881 0.69 19 Rapcorp Pty Ltd 1,906,365 0.64 20 Querion Pty Ltd 1,881,000 0.63 Total 124,591,993 41.74

Source: Company reports

Figure 43: Meckering mineral resource and reserve estimates

Category Quantity (Mt)

Yield % of minus 300µm

Minus 300µm Al2O3 (%)

Ore Reserve Proved 0.45 69 30.1 Probable 0.77 71 30.0 Total 1.22 70 30.0

Mineral Resources (including Ore Reserve)

Measured 1.5 - 30.0

Indicated 3.3 - 30.0

Inferred 7.9 - 29.1

Total 12.7 - 29.5

Source: Company reports

January 2018

Petra Capital Level 17, 14 Martin Place, Sydney NSW 2000

Director: George Marias +61 (0)2 9239 9601 [email protected]

Research (Resources): Brett McKay +61 (0)2 9239 9605 [email protected]

Research (Resources): Matthew Schembri +61 (0)2 9239 9630 [email protected] Research (Resources): Craig Brown +61 (0)2 9239 9629 [email protected]

Research (Industrials): Killian Murphy +61 (0)2 9239 9607 [email protected]

Research (Industrials): Daniel Porter +61 (0)2 9239 9625 [email protected]

Research (Industrials): James Lennon +61 (0)2 9239 9618 [email protected]

Research (Property): Jonathan Kriska +61 (0)2 9239 9633 [email protected]

Sales: Frank Barila +61 (0)2 9239 9603 [email protected] Sales: Neil Watson +61 (0)2 9239 9602 [email protected]

Sales: Vincent Pisani +61 (0)2 9239 9617 [email protected] Sales: Peter Veldhuizen +61 (0)2 9239 9609 [email protected]

Sales: Colin Redmond +61 (0)2 9239 9613 [email protected]

Sales: Vince Barila +61 (0)2 9239 9627 [email protected] Sales: Iain Gow +61 (0)2 9239 9608 [email protected] Sales: Richard Macphillamy +61 (0)2 9239 9604 [email protected]

Corporate (ECM): Conrad Anderson +61 (0)2 9239 9610 [email protected]

Administration: Krystle Garven +61 (0)2 9239 9635 [email protected]

Administration: Samantha Tingley +61 (0)2 9239 9636 [email protected]

Administration: Silvia Fratta Pasini +61 (0)2 9239 9621 [email protected]

Administration: Larissa Falvo +61 (0)2 9239 9611 [email protected]

Legal & Compliance: Stephen Newton +61 (0)2 9239 9612 [email protected]

Financials: Tony Christelis +61 (0)2 9239 9615 [email protected]

Disclosure This document has been prepared in Australia by Petra Capital Pty Ltd which holds an Australian Financial Services License AFSL 317 944. Petra Capital Pty Ltd is an ASX Market Participant. Petra Capital Pty Ltd and its associates, officers, directors, employees and agents, from time to time, may receive brokerage, commissions, fees or other benefits or advantages, hold securities in companies researched by Petra Capital Pty Ltd and may trade in these securities either as principal or agent. Disclaimer The information or advice contained in this report has been obtained from sources that were accurate at the time of issue, however the information has not been independently verified and as such, Petra Capital Pty Ltd cannot warrant its accuracy or reliability. Persons relying on this information do so at their own risk. To the extent permitted by law, Petra Capital Pty Ltd disclaims all liability or responsibility for any direct or indirect loss or damage (including consequential loss or damage) caused by any error or omission within this report, or by persons relying on the contents of this report. This report is published by Petra Capital Pty Ltd by way of general information or advice only. This report does not take into account specific investment needs or other considerations that may be pertinent to individual investors. Before making any investment decisions based on this report, parties should consider, with or without an investor adviser, whether any relevant part of this report is appropriate to their financial circumstances and investment objectives. Petra Capital Pty Ltd is a licensed institutional/wholesale stockbroking firm. The report is only intended for institutional and sophisticated clients to whom Petra Capital Pty Ltd has issued the report. Petra Capital Pty Ltd is not licensed to advise retail investors – retail investors should contact their own stockbroker or financial adviser/planner for advice. Ratings Information regarding the scope and expertise of our research services, processes for selection for coverage, and the management of conflicts of interest can be found on Petra Capital’s website at http://www.petracapital.com.au/research-disclosures. Petra Capital uses the following ratings system and definitions: Buy - Forecast to outperform the Market by more than 5%; Hold - Forecast to perform up to 5% above or below the Market; Sell - Forecast to underperform the Market by more than 5%; Speculative Buy - Speculative Investment; Take Profits - Recommend taking short term profits in a stock we remain fundamentally positive on a medium term view; Accept Offer - For a company under takeover where we see the offer as a fair price with low risk of a competing offer; No Rating - No rating at this time. Market performance is relative to the S&P/ASX Small Ordinaries Index which we assume generates a neutral return on a 12 month basis. US Investors This material is intended for use by major U.S. institutional investors (as such term is defined in the U.S. Securities Exchange Act of 1934) and “$100 million investors” only and not the general investing public or retail customers. “$100 million investors” means any entity, including any investment adviser (whether or not registered under the U.S. Investment Company Act of 1940) that owns or controls (or in the case on an investment adviser has under management) in excess of US$100 million in aggregate financial assets (i.e. cash, money-market instruments, securities of unaffiliated issues, futures and options on futures and other derivative instruments). Transactions by or on behalf of any US person in any security mentioned in this document may only be effected through Global Alliance Securities, LLC (“Global Alliance”), a U.S. broker dealer. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, its accuracy is not guaranteed. Additional and supporting information is available upon request. This is not an offer or solicitation of an offer to buy or sell any security or to make any investment. Any opinion or estimate constitutes the preparer’s best judgement as of the date of preparation and is subject to change without notice. Petra Capital Pty Ltd or Global Alliance and their associates or affiliates, and their respective officers, directors and employees may buy or sell securities mentioned herein as agent or principal for their own account. Other International International investors are encouraged to contact their local regulatory authorities to determine whether restrictions apply in buying/selling this investment.

ABN 95 110 952 782 ACN 110 952 782

AFSL 317 944

mailto:[email protected]

http://www.petracapital.com.au/research-disclosures

19 March 2018

Lithium-ion batteries, much like rocket fuel and explosives, contain an oxidiser (cathode) and fuel (anode/electrolyte) in a sealed container. If the cathode and anode are allowed to make direct contact, a highly exothermic reaction called a thermal runaway will commence. A porous membrane separator maintains the structural integrity in a battery and prevents a thermal runaway; it allows lithium-ions to travel between the electrodes without the two electrodes touching. As the energy density of batteries increase this separator becomes ever more important for a battery to operate safely. Altech’s High Purity Alumina (HPA) is a crucial raw material for a new generation of separators which are coated in this inorganic material to greatly improve the thermal stability of the battery.

Evolution of Separators

• Most lithium-ion battery separators (LiBS) in use today are based on polyethylene (PE) or polypropylene (PP). PE has a melting point of 135ºC, and PP 155ºC. In a battery at these temperatures the polymers shrink and can expose the anode and cathode, starting a thermal runaway event.

• Some LiBS incorporate a “fuse” by combining PE and PP in a trilayer PP/PE/PP combination. If the battery reaches 135ºC, the PP layers remains stable but the PE layer melts and seals the pores, preventing lithium-ions travelling through the membrane and shuts down the battery.

• Enhancing the physical and chemical properties of the LiBS further, HPA particles are being introduced to create a composite separator that can withstand temperatures of >200ºC. HPA is being utilised by the world’s leading LiBS manufacturers such as Celgard (AsahiKasei), SK, UBE and W-Scope in ceramic coated separator (CCS) products for use in high energy density batteries in XEVs and energy storage applications.

Demand for HPA to Accelerate • The use of CCS was commercialised in c2008 and the

technology has been adopted in line with increased demand from XEVs and energy storage applications. We expect the superior safety characteristics will begin to attract the attention of regulators and will eventually become widely adopted and potentially mandatory.

Separator Market to Boost HPA Demand • Our base case assumption is for the separator market

to grow to 19% of the HPA market by 2025 at a CAGR of 26%, our forecasts show the separator market consuming 23ktpa by 2025 (the equivalent of 5 Altech projects).

Company Data

Shares – ordinary (M) 426.5 Market capitalisation ($M) 68 12 month low/high ($) 0.10 / 0.26 Average monthly turnover ($M) 2 GICS Industry Materials


Year end June 2020F 2021F 2022F 2023F 2024F Revenue ($m) 0 0 76 140 174

Costs ($m) 1 1 32 46 53

EBITDA ($m) -1 -1 44 94 121

NPAT ($m) -2 -8 6 35 56

EPS (cps) -0.4 -2.0 1.4 3.5 5.6

EPS growth (%) na na 169% 159% 57%


Cashflow ($m) -2 -8 30 81 113

CFPS (cps) 0 -2 7 8 11

PCFPS (x) -38 -8 2 2 1


EV / EBITDA (x) -210 -378 7 2 1

Payout ratio (%) 0% 0% 0% 0% 0%

Board

Director Position Executive

Luke Atkins Chairman Non-executive

Iggy Tan Managing Director Executive

Peter Bailey Director Non-executive

Dan Tenardi Director Non-executive

Tunku Yaacob Khyra Director Non-executive

Uwe Ahrens Alternate Director Non-executive

ATC – performance over one year

Disclosure and Disclaimer This report must be read with the disclosure and disclaimer on the final page of this document.

Altech Chemicals Ltd (ATC) BUY Share Price: A$0.16 HPA Critical to Lithium-ion Battery Market Target Price: A$0.41

Matthew Schembri +61 2 9239 9630

19 March 2018

2

Analysis


Altech Chemicals Ltd (ATC)14-Mar-18 Share Price ($) A$0.16Year End June Iss. Shares (M) 426.5








A$68M

A$/sh.

$0.39-$0.01$0.03

-200

-150

-100

-50

-

50

100

150

200

250

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

A$m


19 March 2018

3

Investment Thesis Altech aim to be the world’s first, pure play, high purity alumina (HPA) producer. The market for all

grades of HPA is expected to quadruple in size by 2025, growing from 33ktpa to 122ktpa. Demand is being propelled by fast growing high tech applications, including LEDs and lithium-ion battery separators.

Altech’s proposed West Australian mine and Malaysian HPA plant will produce 4.5ktpa of HPA and generate A$180m in revenue at spot prices of US$40,000/t.

The project is significantly advanced. Development approvals are in place, ECA funding of US$190m is committed, and a fixed price EPC contract has been signed with leading German firm SMS Group that guarantees throughput volumes/quality and includes commissioning responsibility. Altech is BUY rated with a A$0.41/sh target price (1xNPV).

Separator Overview

Lithium ion battery A lithium-ion battery is a rechargeable battery in which lithium ions travel from the negative electrode

to the positive electrode during discharge and back again when charging. The battery consists of three main components;

• Electrodes – one negative and one positive. When discharging the positive electrode is the cathode and is typically lithium based, the negative electrode is the anode and is typically graphite based.

• Separator – is a thin, porous sheet, which prevents the electrodes from touching, but allows lithium ions to pass through.

• Electrolyte – the electrolyte or electrolytic solution provides for the movement of lithium ions, it typically consists of a lithium salt in an organic solvent.

Thermal Runaway In this report we focus on the role and technological evolution of the separator and its importance in

the safety and integrity of the battery. A battery is unique in that it contains an oxidiser (cathode) and fuel (anode/electrolyte) in a sealed container. In most other applications this combination has the risk of explosion, but in a battery, under normal operation, the anode and cathode are kept apart by a separator and convert this energy electrochemically. However, if the anode and cathode make contact, a short circuit occurs and this energy is converted directly into heat and gas. Once started, this chemical reaction will proceed to completion because of the intimate contact of fuel and oxidiser, becoming a thermal runaway. Once the thermal runaway has begun, the ability to stop it is impossible and only ceases once the fuel has expired.

Importance of Separators in XEVs Lithium-ion batteries in XEV applications are fundamentally different to those developed for other

applications;

• Scale – orders of magnitude larger than those in consumer electronics.

• Environmental conditions – exposed to a wide range of temperatures, short circuits, crushing, fire exposure, mechanical shock, and vibration.

• Performance demands – overcharge/undercharge, high rates of discharging/charging, requirements for high voltage demanding long strings of cells, long life, and high energy.

These requirements place strain on all components particularly the separator, which is required to maintain its integrity to prevent catastrophic failure of the lithium-ion battery.

19 March 2018

4

Separator Technology

Manufacturing Methods

Lithium-ion battery separators (Figure 1) are polymer based porous sheets which are manufactured using one of two processing methods (Figure 2);

• Dry Process – The cheaper, simpler manufacturing method. The polymer, either polypropylene (PP) or polyethylene (PE) is extruded into a thin sheet, this precursor film is then annealed (cooled slowly) to improve its crystalline structure. The film is then stretched in a single direction when cold, and then stretched again when hot. The cold stretch creates pore structure whilst the hot stretch increases pore size. A porosity of 35-45% can be achieved using this method. This process can also produce a trilayer PP/PE/PP separator.

• Wet Process – The more expensive manufacturing method but typically produces stronger and thinner separators. Polyethylene (PE) is the polymer usually used, which is mixed with other additives to make a homogenous solution which is extruded into a thin, gel like sheet and then annealed. The sheet is stretched in two directions and exposed to a volatile solvent to remove the additives leaving a porous sheet. A porosity of 40-50% can be achieved using this method.

Figure 1: Rolls of Lithium-ion Battery Separator Figure 2: Asahi’s Products and Manufacturing Technology Lines

Source: Company Reports Source: AsahiKASEI

Separator Products

Monolayer Polymers

Monolayer polymers can be prepared using simple methods, at relatively low costs and are widely used as lithium-ion battery separators in a range of applications.

• Monolayer PP – A single layer of polypropylene (PP) usually manufactured using the dry production method. PP has a higher melting temperature than PE (155ºC vs 135ºC) and is cheaper to manufacture, but typically has a lower porosity. The porosity is formed from slit like pores which have a more open and straight porous structure (Figure 3). These properties make PP more suitable for high power density batteries.

• Monolayer PE – A single layer of polyethylene (PE) usually manufactured using the wet production method. PE has a lower melting point than PP (135ºC vs 155ºC) and is more expensive to manufacture. The interconnected pores and tortuous structure is beneficial to prevent the growth of dendrites and is better suited to long cycle life batteries (Figure 4).

19 March 2018

5

Figure 3: SEM of polymer separator prepared by dry process (PP)

Figure 4: SEM of polymer separator prepared by wet process (PE)

Source: H.Lee et al, Energy Environmental Science 2014 Source: H.Lee et al, Energy Environmental Science 2014

Multilayer Membranes Monolayer polymers are simple and low cost but often struggle to achieve mechanical strength,

thermal resistance, and electrochemical performance simultaneously. This has led to the development of multilayer membranes which can combine the characteristics of different polymers.

• Trilayer PP/PE/PP – The most common multilayer membrane. Manufactured using a uniaxial, dry-stretch process, the tri-layer of PP/PE/PP (Figure 5) combines good puncture resistance with shutdown and thermal stability. In scenarios where the cell begins to experience higher temperatures the two PP layers provide dimensional structure and mechanical strength whilst the PE layer acts as a thermal fuse. As the PE layer reaches its melting point (135ºC) the PE layer melts and closes its pore network, this blocks the pathway of ions and shuts down the battery whilst maintaining the separators integrity, preventing a thermal runaway but rendering the battery useless.

Figure 5: SEM of PP/PE/PP Trilayer separator

Source: Dalhousie, Handbook of Batteries

19 March 2018

6

Coated Membrane Separators

Coated membranes were commercialised in c2008 in response to demand for separators that could provide safer batteries with greater short protection and better structural integrity at higher temperatures for applications in XEVs and energy storage. In general, any polymer-based membrane can be coated and benefit from the improved characteristics (Figure 6).

Figure 6: Asahi battery separator product suite

Source: AsahiKASEI

• Dry/wet process coated – Provides enhanced short prevention and excellent structural integrity at high temperatures. Nano sized inorganic particles such as alumina (Al2O3), silicon dioxide (SiO2), titanium dioxide (Ti2O) and aramid resin can significantly improve the mechanical strength, thermal stability and ionic conductivity of polymer membranes (Figure 7 & Figure 8). Coating the separator also increases its wettability (how easily it can be soaked by a liquid) and surface area which improves the effectiveness of the liquid electrolyte.

In addition to coated separators, inorganic particles can also be utilised in two other membrane types; inorganic filled membranes and inorganic particle filled non-woven mats. We understand these latter technologies are less advanced than other coated membranes.

Figure 7: Al2O3 coated PE membrane, using different concentrations of non-solvent a) 2% b) 4% c) 6% d) 8%

Figure 8: SiO2 coated PE composite with different particle sizes a) no particles b) 530nm c) 40nm

Source: AsahiKASEI Source: AsahiKASEI

19 March 2018

7

Evolution of Cathode Materials The increased adoption of electric vehicles has had a profound effect on battery costs and energy

density (Figure 9). Battery costs are falling through the economies of scale that larger battery manufacturing facilities bring to the industry, and energy density is improving as research and development continues to improve key properties of the battery.

In the future there will be a continuous focus to improve both battery costs and energy density. The improvements to energy density are likely to be achieved through changes to the battery chemistry, and particularly the cathode. Recent improvements to energy density have been achieved by increasing the nickel content (Figure 10) of the cathode.

The increased energy density increases the consequences of thermal runaway and places greater importance of the separator to keep the two electrodes apart.

Figure 9: Battery Costs and Battery Energy Density

Source: US Department of Energy

Figure 10: Specific Energy by Cathode Type


0

100

200

300

400

500

0

200

400

600

800

1000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

e

2018

e

2019

e

2020

e

2021

e

2022

e

Batte

ry E

nerg

y D

ensi

ty (W

h/l)

Batte

ry C

ost (

US$

/kW

h)

Battery Cost (US$/kWh) (LHS)Battery Energy Density (Wh/l)

0

50

100

150

200

250

300

LFP LMO LCO NMC NCA

Spec

ific

Ener

gy (W

h/kg

)

Cathode Evolution

NCANickel Cobalt Aluminium

NCMNickel Cobalt Manganese

LCOLithium Cobalt Oxide

LMOLithium Manganese Oxide

LFP Lithium Iron Phosphate

19 March 2018

8

Why HPA? It is clear that the integration of inorganic particles into polymer membranes improves the

characteristics of the separator, and that HPA is the dominant inorganic particle, but there other materials that provide similar characteristics (Figure 11 to Figure 14).

Inorganic materials for battery separator manufacturing include;

• Al2O3 (HPA) – is the incumbent and dominant inorganic particle utilised in lithium ion battery separators. It has very favourable characteristics to improve thermal stability (Figure 11) and wettability (Figure 14), and does not electrochemically react with the other battery components. In addition, the particle morphology and slurry consistencies are well understood for applying the HPA to polymer based separators.

• SiO2 (Silica) – has been extensively tested and performs better than alumina in many aspects, it can show lower shrinkage and higher wettability than alumina. Despite these better physical characteristics, silica has not been adopted within inorganic separators due to the electrochemical reaction that can occur between silica and the lithium within the battery. Silica can easily become lithiated (bind with lithium) when in contact with the electrodes or the electrolyte, this consumes the lithium present in the battery and can reduce the battery life.

• ZrO2 (Zirconia) / Zeolite – the development of both materials as coatings appears to be immature with no known commercial applications. Zirconia shows some positive thermal stability characteristics but apart from that, HPA and silica have better attributes.

Figure 11: Shrinkage at 130ºC for 30 mins (lower is better)

Figure 12: Gurley seconds (proxy for porosity, higher is better)

Source: Linghui et al. 2017 Source: Linghui et al. 2017

Figure 13: Resistivity (higher is better)

Figure 14: Coating Angle proxy for wettability (lower is better)

Source: Linghui et al. 2017 Source: Linghui et al. 2017

19 March 2018

9

Manufacturers Producing Ceramic Coated Separators Ceramic coated separators utilising HPA have been commercially adopted in both consumer

electronic and XEV applications. The following leading separator manufacturers produce ceramic coated separators.

• AsahiKasei – 25% Mkt Share – AsahiKasei is a Japanese chemical conglomerate and became the world’s largest LiBS producer following the acquisition of Polypore International in 2015.

The group produce a range of wet (PE) and dry (PP) separators through the brands Hipore (wet) and Celgard (dry). Celgard produce several dry ceramic coated separator products which utilise HPA.

• Toray – 15% Mkt Share – Toray Industries is a Japanese chemical conglomerate. The group recently announced a US$1.1b capital plan to establish a European LiBS facility with capacity of 80msqm and establish a similar plant in the US. The group aims to have a global production capacity of 1.95bnsqm per year by ~2020.

The group produce a range of wet and dry separators through the Setela brand which can be coated following the acquisition of LG Chem’s South Korean LiBS ceramic coating facilities in 2016.

• SK Innovation – 9% Mkt Share – SK Innovation is South Korea’s largest energy chemical company. The group have invested heavily in lithium-ion battery production capabilities and are suppliers to major automakers Hyundai Motor Group, BAIC Group and Daimler AG. In Dec-17 the group announced a US$920m expansion of LiBS and battery manufacturing capabilities in Europe and South Korea. In Feb-18 SK Innovation signed a 7 year offtake deal for 60ktpa NiSO4 and 12ktpa CoSO4 with Australian Mines (AUZ.ASX) and acquired 19.9% of the company for A$80m.

The group produce a ceramic coated PE separator under the brand Enpass.

• Sumitomo Chemical – 6% Mkt Share – Sumitomo Chemicals is a Japanese chemical conglomerate. The group produce both high purity alumina in the Inorganic Materials Division and LiBS in the Battery Materials Division.

The group produce a coated separator under the brand Pervio. Following a patent dispute settled with Polypore in 2014 (subsequently acquired by AsahiKasei) the company utilises aramid as the inorganic particle rather than high purity alumina. Pervio separators are utilised by Panasonic and car manufacturer Tesla.

• Entek – 4% Mkt Share – Entek is a US based battery separator manufacturer.

The group produce a range of wet process PE separators including ceramic coated and PVDF coated PE separators for use in EV applications and large format polymer cells respectively.

• Ube Industries – 6% Mkt Share – Ube Industries is a Japanese chemical conglomerate. In 2011 Ube Industries formed a JV with Hitachi Maxell to produce a ceramic coated separator under the business name Ube Maxell. In 2014 Ube Maxell licenced LG Chem’s Safety Reinforced Separator (SRS) technology for ceramic coated separators.

Ube Industries has 200msqm of dry separator production capacity for the UPORE brand whilst UbeMaxell produces ceramic coated separators.

• W-Scope – 6% Mkt Share – W-Scope is a Japanese plastic film producer. The company has been investing heavily in coating facilities to meet growing demand from high end applications in consumer electronics and EVs.

W-Scope produce wet separator products. In Q4’17 30% of the company’s separator sales were from coated separators.

19 March 2018

10

HPA Demand The electrification of transport thematic is robust and is unquestionably placing unprecedented

demand on a range of commodities. It is our view that as the energy density of batteries increases, it will make ceramic coated separators a rising necessity, placing increased demand on HPA.

Our base case assumption is for the separator market to grow to 19% of the HPA market by 2025 and by 2025 our forecasts show the separator market consuming 23ktpa (the equivalent of 5 Altech projects). This has grown from 3% of demand in 2014, to 10% of demand in 2017. Our assumptions are based on the following;

• Demand forecasts from W-Scope, a separator manufacturer (Figure 15).

• Alumina intensity of use equivalent to 4g per 1m2.

• In our base case we assume that 60% of all separators are coated by 2025 (Figure 16) up from ~30% in 2017.

• In our bear/bull case scenarios we assume that 30%/100% respectively of all separators are coated by 2025 (Figure 16).

Figure 15: Separator Demand

Source: W-Scope

Figure 16: Demand for HPA from coated separators


0123456789

10

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Sepa

rato

r Dem

and

(Billi

on m

2)

0%

20%

40%

60%

80%

100%

120%

0

5

10

15

20

25

30

35

40

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Mkt

Sha

re C

oate

d (%

)

HPA

Dem

and

(kt)

HPA Demand (Bear Case) HPA Demand (Base Case)

HPA Demand (Bull Case) Coated Mkt Share (Bear Case)

Coated Mkt Share (Base Case) Coated Mkt Share (Bull Case)

19 March 2018

11

Overall HPA Market Dynamic HPA is a high value, speciality product. Its principal application is as a feedstock for the production

of synthetic sapphire for use in LEDs, semiconductor manufacturing and speciality glass. HPA can be used directly in the production of phosphors and has some promising emerging applications in ceramic coated separators for use in lithium ion batteries (Figure 17). Demand for all grades of HPA are expected to grow strongly at 15-20% CAGR out to 2025. This forecast growth rate is expected to drive the market from 33ktpa in 2017 to 122ktpa in 2025 (Figure 18).

Figure 17: Application of HPA (all grades) (2017e)

Source: Persistence Market Research

Figure 18: HPA (all grades) Demand Estimates

Source: Persistence Market Research

LEDs51%

Semiconductors19%

Separators11%

Phosphors10%

Other9%

0%

5%

10%

15%

20%

25%

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2014

2015

2016

e

2017

e

2018

e

2019

e

2020

e

2021

e

2022

e

2023

e

2024

e

2025

e

All H

PA D

eman

d G

row

th (%

)

All H

PA D

eman

d (t)

LED Semiconductor Phosphor

Other Separator Growth

19 March 2018


Research (Resources): Brett McKay +61 (0)2 9239 9605 [email protected] Research (Resources): Matthew Schembri +61 (0)2 9239 9630 [email protected] Research (Resources): Craig Brown +61 (0)2 9239 9629 [email protected] Research (Resources): Peter Chilton +61 (0)2 9239 9634 [email protected] Research (Industrials): Killian Murphy +61 (0)2 9239 9607 [email protected] Research (Industrials): James Lennon +61 (0)2 9239 9618 [email protected] Research (Industrials): Mark Tomlins +61 (0)2 9239 9625 [email protected] Research (Property): Jonathan Kriska +61 (0)2 9239 9633 [email protected] Sales: Frank Barila +61 (0)2 9239 9603 [email protected] Sales: Neil Watson +61 (0)2 9239 9602 [email protected] Sales: Vincent Pisani +61 (0)2 9239 9617 [email protected] Sales: Peter Veldhuizen +61 (0)2 9239 9609 [email protected] Sales: Colin Redmond +61 (0)2 9239 9613 [email protected] Sales: Jamie Campbell +61 (0)2 9239 9620 [email protected] Sales: Vince Barila +61 (0)2 9239 9627 [email protected] Sales: Michael Casey +61 (0)2 9239 9608 [email protected] Sales: Richard Macphillamy +61 (0)2 9239 9604 [email protected] Corporate (ECM): Conrad Anderson +61 (0)2 9239 9610 [email protected] Administration: Krystle Garven +61 (0)2 9239 9635 [email protected] Administration: Samantha Tingley +61 (0)2 9239 9636 [email protected] Administration: Silvia Fratta Pasini +61 (0)2 9239 9621 [email protected] Administration: Larissa Falvo +61 (0)2 9239 9611 [email protected] Legal & Compliance: Stephen Newton +61 (0)2 9239 9612 [email protected] Financials: Tony Christelis +61 (0)2 9239 9615 [email protected]

Disclosure This document has been prepared in Australia by Petra Capital Pty Ltd which holds an Australian Financial Services License AFSL 317 944. Petra Capital Pty Ltd is an ASX Market Participant. Petra Capital Pty Ltd and its associates, officers, directors, employees and agents, from time to time, may receive brokerage, commissions, fees or other benefits or advantages, hold securities in companies researched by Petra Capital Pty Ltd and may trade in these securities either as principal or agent. Petra Capital Pty Ltd acted as sole lead manager and bookrunner for GPR’s placement of $10.5m at A$0.03/share on 1 September 2017, for which a fee was received. Disclaimer The information or advice contained in this report has been obtained from sources that were accurate at the time of issue, however the information has not been independently verified and as such, Petra Capital Pty Ltd cannot warrant its accuracy or reliability. Persons relying on this information do so at their own risk. To the extent permitted by law, Petra Capital Pty Ltd disclaims all liability or responsibility for any direct or indirect loss or damage (including consequential loss or damage) caused by any error or omission within this report, or by persons relying on the contents of this report. This report is published by Petra Capital Pty Ltd by way of general information or advice only. This report does not take into account specific investment needs or other considerations that may be pertinent to individual investors. Before making any investment decisions based on this report, parties should consider, with or without an investor adviser, whether any relevant part of this report is appropriate to their financial circumstances and investment objectives. Petra Capital Pty Ltd is a licensed institutional/wholesale stockbroking firm. The report is only intended for institutional and sophisticated clients to whom Petra Capital Pty Ltd has issued the report. Petra Capital Pty Ltd is not licensed to advise retail investors – retail investors should contact their own stockbroker or financial adviser/planner for advice. Key Risks – Resources Companies under Coverage Key risks in relation to the resources sector and the resources companies that are the subject of research by Petra Capital’s analysts include commodity price volatility, currency risk, technical/licencing/operational risks, litigation/political risk, development risk and sovereign risk for overseas assets, as well as feasibility, permitting and financing risks related to the development of growth projects.

Ratings Information regarding the scope and expertise of our research services, processes for selection for coverage, and the management of conflicts of interest can be found on Petra Capital’s website at www.petracapital.com.au/research-disclosures. Petra Capital uses the following ratings system and definitions: Buy - Forecast to outperform the Market by more than 5%; Hold - Forecast to perform up to 5% above or below the Market; Sell - Forecast to underperform the Market by more than 5%; Speculative Buy - Speculative Investment; Take Profits - Recommend taking short term profits in a stock we remain fundamentally positive on a medium term view; Accept Offer - For a company under takeover where we see the offer as a fair price with low risk of a competing offer; No Rating - No rating at this time. Market performance is relative to the S&P/ASX Small Ordinaries Index which we assume generates a neutral return on a 12 month basis. US Investors This material is intended for use by major U.S. institutional investors (as such term is defined in the U.S. Securities Exchange Act of 1934) and “$100 million investors” only and not the general investing public or retail customers. “$100 million investors” means any entity, including any investment adviser (whether or not registered under the U.S. Investment Company Act of 1940) that owns or controls (or in the case on an investment adviser has under management) in excess of US$100 million in aggregate financial assets (i.e. cash, money-market instruments, securities of unaffiliated issues, futures and options on futures and other derivative instruments). Transactions by or on behalf of any US person in any security mentioned in this document may only be effected through Global Alliance Securities, LLC (“Global Alliance”), a U.S. broker dealer. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, its accuracy is not guaranteed. Additional and supporting information is available upon request. This is not an offer or solicitation of an offer to buy or sell any security or to make any investment. Any opinion or estimate constitutes the preparer’s best judgement as of the date of preparation and is subject to change without notice. Petra Capital Pty Ltd or Global Alliance and their associates or affiliates, and their respective officers, directors and employees may buy or sell securities mentioned herein as agent or principal for their own account. Other International International investors are encouraged to contact their local regulatory authorities to determine whether restrictions apply in buying/selling this investment.

ABN 95 110 952 782 ACN 110 952 782

AFSL 317 944


24 April 2018

Following Altech’s success, a peer group of high purity alumina (HPA) developers has emerged on the ASX. The peers include Hill End Gold (HEG.ASX), FYI Resources (FYI.ASX) and Collerina Cobalt (CLL.ASX). Their emergence is positive as it provides critical mass and raises awareness of this robust thematic. Altech remains unquestionably the most advanced developer of the group and has several key advantages in the race to market. We maintain our BUY rating and target price of A$0.41/sh.

Altech Leads the HPA Pack • Altech has a significantly advanced project. All the

necessary approvals, permits and engineering work has been completed through a 3.5 year process that was initiated by Iggy Tan since his appointment as MD in Aug-2014.

• In contrast the peer group has recently released resource statements and are all due to release PFS studies in Q2’18. If Hill End, FYI and Collerina follow a similar timeline to Altech, they will not be development ready until Sep-2021.

Difference in Deposits

• The value driver of these HPA projects is in the plant, but the deposit does help. Kaolin is plentiful and the kaolin deposits for Altech, Hill End and FYI are similar although subtle differences are apparent.

• Each resource is reported on a screened basis, with Altech reporting the highest screen size (-300µm) with a 69% yield. Hill End and FYI use a much smaller screen size of -63µm and -45µm with yields of 43% and 84% respectively. This implies Altech’s deposit is easier to beneficiate which would have a positive impact on processing costs.

Supportive Registers • All the HPA developers have attracted supportive

registers, which in turn has raised awareness of the broader peer group.

• Altech and Collerina boast industrial conglomerates whilst FYI and Hill End have high profile sophisticated investors. Melewar International and engineering firm SMS group hold 12% and 9% of Altech respectively with each incentivised to see the project in production. Hill End has mining identity Tolga Kumova with 7% and FYI attracting Regal and Paragon funds managers with 13% and 8% respectively.

Company Data

Shares – ordinary (M) 427 Market capitalisation ($M) 73 12 month low/high ($) 0.10 / 0.27 Average monthly turnover ($M) 1.9 GICS Industry Materials


Year End June 2020F 2021F 2022F 2023F 2024F Revenue ($m) 0 0 76 140 174

Costs ($m) 1 1 32 46 53

EBITDA ($m) -1 -1 44 94 121

NPAT ($m) -2 -8 6 35 56

EPS (cps) -0.4 -2.0 1.4 3.5 5.6

EPS growth (%) -815% -365% 169% 159% 57%


Cashflow ($m) -2 -8 30 81 113

CFPS (cps) 0 -2 7 8 11

PCFPS (x) -39 -8 2 2 1


EV / EBITDA (x) -213 -380 7 2 1

Payout ratio (%) 0% 0% 0% 0% 0%

Dividend (cps) 0 0 0 0 0

Yield (%) 0 0 0 0 0

Franking (%) 0 0 0 0 0

ATC – performance over one year


Altech Chemicals (ATC) BUY Share Price: A$0.17 Altech leads HPA peers Target Price: A$0.41


24 April 2018

2

Analysis


Altech Chemicals Ltd (ATC)24-Apr-18 Share Price ($) A$0.17Year End June Iss. Shares (M) 426.5








A$73M

A$/sh.

$0.39-$0.01$0.03

-200

-150

-100

-50

-

50

100

150

200

250

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

A$m


24 April 2018

3

HPA Becoming a Sector As the first HPA developer on the ASX, Altech was a pioneer, but it now has three other developers

following in its path; Hill End Gold (HEG.ASX), FYI Resources (FYI.ASX) and Collerina Cobalt (CLL.ASX). In this note we look at how these peers compare.

Hill End and FYI can be compared directly to Altech. The projects are all based on deposits of kaolinite, which is an aluminium rich clay mineral and they all propose to convert this to HPA through a hydrochloric acid (HCl) leach process. Collerina Cobalt is different, it is based on a nickel laterite, which has much lower grades of aluminium and will use a counter current atmospheric leach (CCAL) process to produce HPA along with co-products of scandium, nickel, cobalt and manganese.

Altech has been through a lengthy process of studies, approvals, permitting and third party due diligence led by Iggy Tan, over a 3.5 years period. Altech has secured US$190m of debt funding by German government owned KfW IPEX-Bank towards the US$298m capex and has commitment by SMS group, a leading construction engineering firm for a fixed price EPC contract that guarantees throughput, quality and assumes commissioning risk.

In contrast, the peers have only just released resource statements. If these peers follow a similar timeline to Altech they will not become development ready until Sep-2021.

Corporate Altech and Collerina have similar enterprise values (Figure 1) despite Altech being development

ready and Collerina still at resource stage. Altech had cash of A$9m at 31-Dec-17 with Hill End, FYI and Collerina having cash of between A$1m and A$3m.

• Altech’s cash balance of A$9m at 31-Dec-17 provides more than sufficient cover for overheads and some detailed design before the full financing package is due to be finalised in mid-2018.

• Hill End’s cash balance of A$3m at 31-Dec-17 is sufficient to complete the PFS due in Q2’18 and begin the DFS study. The company raised A$3.8m in Nov-17.

• FYI underwent a A$3m capital raise in Feb-18 on top of a pre-existing A$0.9m and is now fully funded to complete its PFS and start the BFS with all associated project activities.

• Collerina’s cash balance of A$3m at 31-Dec-17 is sufficient to complete the PFS due in Q2’18. The company raised A$3.5m in Nov-17.

Figure 1: Enterprise Value of HPA developers


24 April 2018

4

Register The registers for Altech and Collerina (Figure 2) are similar in that they both contain large industrial

conglomerates.

• Altech’s register includes Melewar International, a Malaysian based industrial firm with links to Malaysian royalty and SMS group a privately owned German firm with a deep experience in metals processing.

• Collerina’s register includes PT Rajawali which is one of Indonesias largest conglomerates spanning property, hospitality, agriculture and mining.

The presence of these industrial firms on Altech and Collerina’s register is a material benefit for the respective projects as they are incentivised to see them developed. In Altech’s case, Melewar International provides in country support for the development of the Malaysian HPA plant and SMS group has been instrumental in securing ECA funding for the project and has also provided a robust EPC contract (fixed price, removes commissioning risk and guarantees throughput/quality).

The registers for FYI and Hill End have attracted high quality investors which has increased the profile of the respective companies and the broader peer group.

• Hill End has Tolga Kumova as a top shareholder who has been associated with other resource success stories including Syrah Resources and New Century Zinc.

• FYI’s register now includes substantial holders Regal Funds Management and Paragon Funds Management who both have a strong record of accomplishment by investing early in emerging thematics.

Figure 2: Major shareholders ATC % HEG %

Melewar International 11.7% Tolga Kumova 6.7%

SMS Investments 9.1% Merrill Lynch Nominees 5.6%

Lake Macleod Gypsum 5.8% JP Morgan Nom. 4.4%

CitiCorp Nom. 3.4%

Quartz Mountain Mining 2.1%

FYI % CLL % Regal Funds Mgt 12.9% PT Rajawali Corp 22.3%

Roland Hill 5.9% Permgold (N Seckold) 12%

Paragon Funds Mgt 8.1% Budworth Capital 7.2%

Empire Resources 3.8% BT Portfolio Service 6.5%

Source: Company Reports, Iress, Petra Capital

24 April 2018

5

Deposits FYI Resources, Hill End Gold and Altech all have kaolin deposits that are reported on a screened

basis, whilst Collerina Cobalt has a nickel laterite deposit which is rich in alumina and contains nickel and cobalt co-products.

Based on the publicly available information, the kaolin deposits have similar grades and morphology with some subtle but important differences in screen size and yields (Figure 3 and Figure 4). Altech has the largest reported screen size of -300µm with a good yield of 69% versus FYI at -63µm/43% and Hill End at -45µm/84%. The relatively low yield of 43% at Hill End and the low screen size of -45µm at FYI may imply beneficiation will be more costly at these two projects.

The Collerina Cobalt project is a very different style of alumina deposit, it is a nickel laterite rather than kaolin deposit and consequently the grade and contained alumina is much lower. The project is therefore considering HPA extraction via Counter Current Atmospheric Leaching (CCAL) rather than the HCl leach process proposed by the rest of the peer group.

Figure 3: Deposit details ATC HEG FYI CLL

Project Meckering Project Yendon Project Cadoux Kaolin Project

Collerina Project

Deposit Style Kaolin Deposit Kaolin Deposit Kaolin Deposit Nickel Laterite Deposit

Screen size of Resource

-300µm -63µm -45µm Not Screened

Yield 69% 43% 84% Not Screened

Tonnes (Mt) 8.70* 1.59* 13.59* 16.30

Al2O3 Grade (%) 29.5%* 34.7%* 33.0%* 5.9%

Ni Grade (%) 0.9%

Co Grade (%) 0.05%

Al2O3 (Mt) 2.57* 0.55* 4.48* 1.80

Approx Mine Life (@5kpta HPA)

385 83 673 270

Proposed Process HCl Leach HCl Leach HCl Leach CCAL

Source: Company Reports, Petra Capital (*reported as screened)

Figure 4: Tonnes, grade and contained alumina


ATC

HEGFYI

CLL

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0 5 10 15 20

Al2

O3

Gra

de (%

)

Tonnes (Mt)

24 April 2018

6

Development Altech’s project has completed the lengthy study and approvals process and is now development

ready. The rest of the peer group is at the resource stage and due to complete their respective PFSs in Q2’18. We assume Altech begin construction in Q3’18 once financing is complete. Hill End Gold are the only peer with a targeted construction date which is Q1’20 (Figure 5).

As non-conventional mining projects in a niche commodity, the progress to first production is slow. In the case of Altech, the process to becoming development ready was initiated by Iggy Tan when he was appointed MD in Aug-14, it took 3.5 years, including a 2 year due diligence period to secure a A$190m debt facility with German government owned KfW IPEX-Bank.

If Altech’s peers took a similar period of time to become development ready, this wouldn’t occur until Sep-21.

Figure 5: Development hurdles Milestones ATC HEG FYI CLL

Resource Complete Complete Complete Complete

Proof of Concept Metallurgy Complete Complete Complete Complete

PFS Complete Q2'18* Q2’18* Q2'18*

Metallurgical Studies Complete Offtake Complete Environmental Approvals Complete Location Study for Plant Complete Q4'18* Pilot Trials Complete Q4'18-Q1'19* DFS Complete Q1'19* Mining Lease Complete FID Complete Equity Financing Q2/Q3’18 Construction Q3’18^ Q1'20* Commissioning Q3’21^ Q2'21*

Source: Petra Capital, Company Reports

^Petra Estimate *Respective Peer Estimate

24 April 2018

7

ASX Listed HPA Developer Summary

Figure 6: Key Metrics for ASX Listed HPA Developers Ticker ATC HEG FYI CLL

Name Altech Chemicals Hill End Gold FYI Resources Collerina Cobalt

Mkt Cap (A$m) 73 15 27 58

Cash (A$m) (31-Dec-17) 9 3 1 3

EV (A$m) 63 12 26 56

Project Meckering / Tanjung Langsat Yendon Project Cadoux Kaolin Project Collerina Project

Location Western Australia/Malaysia Victoria Western Australia New South Wales

Status FID Complete PFS Underway Due Q2'18 PFS Underway Due Q2'18 PFS Underway Due Q2'18

Screen Size of Resource -300um -63um -45um Not Screened

Yield (%) 69% 43% 84% Not Screened

Tonnes (Mt) 8.7 1.6 13.6 16.3

Grade (Al2O3) 30% 35% 33% 1%

Al2O3 (Mt) 2.57 0.55 4.48 0.03

Processing Route HCl HydroMet HCl HydroMet HCl HydroMet Counter Current Atmospheric Leach

Planned Production 4.5ktpa 8ktpa 5-10ktpa 10ktpa

Capital Cost (US$m) US298m ??? ??? ???


24 April 2018

8

Investment Thesis Altech aim to be the world’s first, pure play, high purity alumina (HPA) producer. The market for all

grades of HPA is expected to quadruple in size by 2025, growing from 33ktpa to 122ktpa. Demand is being propelled by fast growing high tech applications, including LEDs and lithium-ion battery separators.

Altech’s proposed West Australian mine and Malaysian HPA plant will produce 4.5ktpa of HPA and generate A$180m in revenue at spot prices of US$40,000/t.

The project is significantly advanced. Development approvals are in place, ECA funding of US$190m is committed, and a fixed price EPC contract has been signed with leading German firm SMS Group that guarantees throughput volumes/quality and includes commissioning responsibility. Altech is BUY rated with a A$0.41/sh target price (1xNPV).

Overall HPA Market Dynamic HPA is a high value, speciality product. Its principal application is as a feedstock for the production

of synthetic sapphire for use in LEDs, semiconductor manufacturing and speciality glass. HPA can be used directly in the production of phosphors and has some promising emerging applications in ceramic coated separators for use in lithium ion batteries (Figure 7). Demand for all grades of HPA are expected to grow strongly at 15-20% CAGR out to 2025. This forecast growth rate is expected to drive the market from 33ktpa in 2017 to 122ktpa in 2025 (Figure 8).

Figure 7: Application of HPA (all grades) (2017e)

Figure 8: HPA (all grades) Demand Estimates


24 April 2018


Director: George Marias +61 (0)2 9239 9601 [email protected] Research (Resources): Brett McKay +61 (0)2 9239 9605 [email protected] Research (Resources): Matthew Schembri +61 (0)2 9239 9630 [email protected] Research (Resources): Craig Brown +61 (0)2 9239 9629 [email protected] Research (Resources): Peter Chilton +61 (0)2 9239 9634 [email protected] Research (Industrials): Killian Murphy +61 (0)2 9239 9607 [email protected] Research (Industrials): James Lennon +61 (0)2 9239 9618 [email protected] Research (Industrials): Mark Tomlins +61 (0)2 9239 9625 [email protected] Research (Property): Jonathan Kriska +61 (0)2 9239 9633 [email protected] Sales: Frank Barila +61 (0)2 9239 9603 [email protected] Sales: Neil Watson +61 (0)2 9239 9602 [email protected] Sales: Vincent Pisani +61 (0)2 9239 9617 [email protected] Sales: Jamie Campbell +61 (0)2 9239 9620 [email protected] Sales: Peter Veldhuizen +61 (0)2 9239 9609 [email protected] Sales: Colin Redmond +61 (0)2 9239 9613 [email protected] Sales: Vince Barila +61 (0)2 9239 9627 [email protected] Sales: Michael Casey +61 (0)2 9239 9608 [email protected] Sales: Richard Macphillamy +61 (0)2 9239 9604 [email protected] Corporate (ECM): Conrad Anderson +61 (0)2 9239 9610 [email protected] Administration: Krystle Garven +61 (0)2 9239 9635 [email protected] Administration: Samantha Tingley +61 (0)2 9239 9636 [email protected] Administration: Silvia Fratta Pasini +61 (0)2 9239 9621 [email protected] Administration: Larissa Falvo +61 (0)2 9239 9611 [email protected] Legal & Compliance: Stephen Newton +61 (0)2 9239 9612 [email protected] Financials: Tony Christelis +61 (0)2 9239 9615 [email protected]


ABN 95 110 952 782 ACN 110 952 782

AFSL 317 944

mailto:[email protected]


14 May 2018

Altech Chemicals Ltd (ATC) BUY Share Price: $0.16 Funding strategy taking shape

Target Price: A$0.41

The receipt of an indicative mezzanine debt term sheet for a US$90m facility, in addition to the US$190m ECA financing committed by KfW IPEX-Bank in Feb-18, demonstrates the progress and third-party verification Altech continues to make for its high purity alumina (HPA) project. We see the term sheet, from a global investment bank, as a positive and important step towards a fully financed project in a commodity that shows a very robust outlook leveraged by growth in LEDs and lithium-ion batteries. We maintain our BUY rating with an unchanged A$0.41/sh target price.

First debt term sheets received

• Following extensive preliminary due diligence, a top tier, global investment banking group, has provided Altech with a term sheet for a US$90m mezzanine facility. (US$120m including accrued interest during construction and commissioning).

• The mezzanine facility will be fully subordinate to the US$190m ECA facility committed by German government owned KfW IPEX-Bank.

• Altech are soliciting term sheets from other top-tier lenders to maintain competitive tension.

Early works maintain momentum until finance close

• In a notice of general meeting, a resolution has been requested for pre-approval to raise up to A$30m of equity to commit to early works.

• Early works such as foundation piling and construction engineering are critical pathway work packages. We see their commencement as being positive for the project and provides for strong newsflow whilst the mezzanine lenders finalise due diligence and before finance close.

Investment Thesis

• Altech aim to be the world’s first, pure play, high purity alumina (HPA) producer. The market for all grades of HPA is expected to quadruple in size by 2025, growing from 33ktpa to 122ktpa. Demand is being propelled by fast growing high tech applications, including LEDs and lithium-ion battery separators.

• Altech has a significantly advanced project. Development approvals are in place, ECA funding (US$190m) has been committed, an indicative mezz debt term sheet has been received, and a fixed price EPC contract has been signed with German firm SMS group that guarantees throughput volumes/product quality and includes commissioning responsibility.

ATC – performance over one year $0.26

$0.24

$0.22

$0.20

$0.18

$0.16

$0.14

$0.12

$0.10

$0.08

Jun17 Jul17 Aug17 Sep17 Oct17 Nov17 Dec17 Jan18 Feb18 Mar18 Apr18

ATC.AS X XAO .A SX

6300

6200

6100

6000

5900

5800

5700

Matthew Schembri

+61 2 9239 9630


Company Data

Shares – ordinary (M) 426.5 Market capitalisation ($M) 68.2 12 month low/high ($) 0.10 / 0.26 Average monthly turnover ($M) 1.7 Index All Ords GICS Industry Metals & Mining



Costs ($m) 1 1 32 46 53 EBITDA ($m) -1 -1 44 94 121

NPAT ($m) -2 -8 6 35 56

EPS (cps) -0.4 -2.0 1.4 3.5 5.6

EPS growth (%) -815% -365% 169% 159% 57%


Cashflow ($m) -2 -8 30 81 113 CFPS (cps) 0 -2 7 8 11

PCFPS (x) -39 -8 2 2 1


EV / EBITDA (x) -213 -380 7 2 1

Payout ratio (%) 0% 0% 0% 0% 0%

Dividend (cps) 0 0 0 0 0

Yield (%) 0 0 0 0 0

Franking (%) 0 0 0 0 0

ASSUMPTIONS

14 May 2018

Analysis

Altech Chemicals Ltd (ATC) 14-May-18 Share Price ($) A$0.16

Year End June Iss. Shares (M) 426.5 Dilution (M) 572.2

Fully Diluted (M) 998.7 Mkt Cap. ($M) A$68M

Revenue A$M 0 0 0 0 76 140 174 180 Reserve Operating Costs A$M 0 0 0 0 31 45 52 56 HPA Exploration A$M 0 0 0 0 0 0 0 0 Tonnes Mt 1.36 Other A$M 5 1 1 1 1 1 1 1 Grade (Al2O3 %) % 30%

EBITDA A$M (5) (1) (1) (1) 44 94 121 123 D&A A$M 0 0 0 0 21 31 33 31 Contained Al2O3 (kt) kt 408

EBIT A$M (5) (1) (1) (1) 23 63 87 92 Net Interest A$M (0) (2) 2 11 15 13 8 2

Pre-Tax Profit A$M (5) 0 (3) (12) 8 51 79 89 Production Tax A$M (1) 0 (1) (4) 2 15 24 27 Ore Processed kt 0.0 0.0 0.0 0.0 23.1 36.7 42.5 43.5 Net Profit A$M (3) 0 (2) (8) 6 35 56 63 Ore Grade % 0.0 0.0 0.0 0.0 0.3 0.3 0.3 0.3

Abnormal A$M 0 0 0 0 0 0 0 0 Overall Recovery % 0% 0% 0% 0% 38% 38% 38% 38% Reported Profit A$M (3) 0 (2) (8) 6 35 56 63 HPA Produced kt 0.0 0.0 0.0 0.0 2.4 3.8 4.4 4.5

Dividends Paid A$M 0 0 0 0 0 0 0 0 HPA Sold kt 0.0 0.0 0.0 0.0 1.9 3.5 4.3 4.5 Adjustments A$M 0 0 0 0 0 0 0 0 C1 Costs A$'000/t - - - - 10.9 9.8 9.8 10.4

AISC A$'000/t - - - - 15.2 14.1 14.1 14.7 CASHFLOW Net Op Cash Flow A$M (5) (1) (1) (1) 44 94 121 123 REVENUE Net Interest A$M 0 2 (2) (11) (15) (13) (8) (2) HPA Project A$M 0 0 0 0 76 140 174 180

Tax Paid A$M 1 (0) 1 4 1 0 0 (14) Total A$M 0 0 0 0 76 140 174 180 Op Cash Flow A$M (3) 0 (2) (8) 30 81 113 107

Net Capex A$M 0 (132) (132) (132) (6) (6) (6) (6) Meckering (Mine) A$M 0 0 0 0 3 0 0 3 Exploration A$M 0 0 0 0 0 0 0 0 Direct Processing A$M 0 0 0 0 17 28 32 33

Inv Cash Flow A$M 0 (132) (132) (132) (6) (6) (6) (6) Transport A$M 0 0 0 0 2 3 3 4 Free cash flow A$M (3) (132) (134) (141) 24 76 107 101 C1 Cash Cost A$M 0 0 0 0 26 37 43 47

Royalties A$M 0 0 0 0 5 8 9 9 Net Borrowings A$M 0 0 203 51 (20) (70) (80) (76) Corporate A$M 0 0 0 0 0 0 0 1

Dividends A$M 0 0 0 0 0 0 0 0 Total A$M 0 0 0 0 36 53 62 66 Equity Issues A$M 17 143 0 0 0 0 0 0

Other A$M 0 0 0 0 0 0 0 0 Fin Cash Flow A$M 17 143 203 51 (20) (70) (80) (76) Project A$M 0.0 132.4 132.4 132.4 0.0 0.0 0.0 0.0

Sustaining A$M 0.0 0.0 0.0 0.0 6.0 6.0 6.0 6.0 Net Cash Flow A$M 14 11 69 (90) 4 6 27 24 Total A$M 0.0 132.4 132.4 132.4 6.0 6.0 6.0 6.0

Cash A$M 15 26 95 5 9 15 41 66 Exchange Rate A$/US$ 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 Other Current A$M 0 0 0 0 0 0 0 0 Interest Paid % 3% 3% 3% 3% 3% 3% 3% 3%

Cur Assets A$M 15 26 95 5 9 15 42 66 Interest Rec % 2% 2% 2% 2% 2% 2% 2% 2% Fixed Assets A$M 23 155 288 420 426 432 438 444 Diesel Price A$/L 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2

Exploration A$M 0 0 0 0 0 0 0 0 Gas Price $6/GJ 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 Other A$M 0 0 0 0 0 0 0 0 HPA Price US$/t 30000 30000 30000 30000 30000 30000 30000 30000

Non Cur Assets A$M 23 156 288 421 427 433 438 444 HPA Price A$/t 40000 40000 40000 40000 40000 40000 40000 40000 Total Assets A$M 39 182 383 426 436 448 480 510 Borrowings A$M 0 0 0 0 0 0 0 0 Payables A$M 7 7 7 7 7 7 7 7

Other A$M 0 0 0 0 0 0 0 0

Cur Liab A$M 7 7 7 7 7 7 7 7 Borrowings A$M 0 0 203 254 234 164 84 8

Provisions A$M 0 0 0 0 0 0 0 0 Other A$M 0 0 0 0 0 0 0 0

Non Cur Liab A$M 0 0 203 254 234 164 84 8 Total Liabilities A$M 7 7 211 262 242 172 92 15 Total Equity A$M 31 175 173 164 195 276 389 495

EPS ¢ (0.8) 0.1 (0.4) (2.0) 1.4 3.5 5.6 6.3 PER x na 270.2 na na 11.7 4.5 2.9 2.6

EPS Growth % 17% 108% -815% -365% 169% 159% 57% 12%

CFPS ¢ (0.8) 0.1 (0.4) (2.0) 7.1 8.2 11.3 10.7 PCFR x na 270.2 na na 2.3 2.0 1.4 1.5

DPS ¢ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Yield % 0% 0% 0% 0% 0% 0% 0% 0%

Payout Ratio % 0% 0% 0% 0% 0% 0% 0% 0% Gearing ND/E % -48% -15% 63% 152% 116% 54% 11% -12%

Interest Cover x 18.5 0.8 na na 1.6 5.0 10.9 38.5

250

200

150

100

50

-

-50

-100

-150

-200

EBITDA Margin % na na na na 58.2 67.2 69.4 68.3 HPA Operations 386

EBIT Margin % na na na na 30.7 45.1 50.4 51.0 Corporate costs -6 Return On Assets % (12.8) (0.7) (0.2) (0.2) 5.4 14.1 18.2 18.0 Net Cash (Debt) 26

$0.39

-$0.01 $0.03

Eff Tax rate % 30% 30% 30% 30% 30% 30% 30% 30% Total 406 $0.41


2

Operating Cash Flow New Equity Change in Borrowings Capex & Exp Change in Cash

A$m

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

14 May 2018


ABN 95 110 952 782 ACN 110 952 782

AFSL 317 944

Director: George Marias +61 (0)2 9239 9601 [email protected] Research (Resources): Brett McKay +61 (0)2 9239 9605 [email protected] Research (Resources): Matthew Schembri +61 (0)2 9239 9630 [email protected] Research (Resources): Craig Brown +61 (0)2 9239 9629 [email protected] Research (Resources): Peter Chilton +61 (0)2 9239 9634 [email protected] Research (Industrials): Killian Murphy +61 (0)2 9239 9607 [email protected] Research (Industrials): James Lennon +61 (0)2 9239 9618 [email protected] Research (Industrials): Mark Tomlins +61 (0)2 9239 9625 [email protected] Research (Property): Jonathan Kriska +61 (0)2 9239 9633 [email protected] Sales: Frank Barila +61 (0)2 9239 9603 [email protected] Sales: Neil Watson +61 (0)2 9239 9602 [email protected] Sales: Vincent Pisani +61 (0)2 9239 9617 [email protected] Sales: Jamie Campbell +61 (0)2 9239 9620 [email protected] Sales: Peter Veldhuizen +61 (0)2 9239 9609 [email protected] Sales: Colin Redmond +61 (0)2 9239 9613 [email protected] Sales: Vince Barila +61 (0)2 9239 9627 [email protected] Sales: Michael Casey +61 (0)2 9239 9608 [email protected] Sales: Richard Macphillamy +61 (0)2 9239 9604 [email protected] Corporate (ECM): Conrad Anderson +61 (0)2 9239 9610 [email protected] Corporate (ECM): Verity Barritt +61 (0)2 9239 9622 [email protected] Administration: Krystle Garven +61 (0)2 9239 9635 [email protected] Administration: Samantha Tingley +61 (0)2 9239 9636 [email protected] Administration: Silvia Fratta Pasini +61 (0)2 9239 9621 [email protected] Administration: Larissa Falvo +61 (0)2 9239 9611 [email protected] Legal & Compliance: Stephen Newton +61 (0)2 9239 9612 [email protected] Financials: Tony Christelis +61 (0)2 9239 9615 [email protected]



18 June 2018

Altech Chemicals Ltd (ATC) BUY Share Price: $0.19 Funding gap closes with streaming finance facility Target Price: A$0.41

Altech has now received commitments and/or term sheets for US$340m of financing facilities. The announcement of an indicative US$60m streaming finance facility, in our view, demonstrates the advanced nature of Altech’s HPA project. This facility would be structured to operate in conjunction with Altech’s offtake agreement with Mitsubishi and would need to be acceptable to both the senior lender, KFW- IPEX Bank, and any mezzanine lender. We see this development significantly closing the funding gap as Altech nears a fully financed project, in a commodity that shows a very robust outlook leveraged by growth in LEDs and lithium-ion batteries. We maintain our BUY rating with an unchanged A$0.41/sh target price.

Streaming Finance

• A global investment group, with US$4.5b under management, has provided Altech with a term sheet for a US$60m streaming facility. The facility would be in exchange for an undisclosed percentage of future gross sales.

• The facility remains subject to further due diligence and agreement from the senior lender, KFW-IPEX Bank and any mezzanine lender.

• The interest shown from a variety of financiers shows the advanced nature of Altech’s HPA project.

Investment Thesis

• Altech aims to be the world’s first, pure play, high purity alumina (HPA) producer. The market for all grades of HPA is expected to quadruple in size by 2025, growing from 33ktpa to 122ktpa. Demand is being propelled by fast growing high tech applications, including LEDs and lithium-ion battery separators.

• Altech has a significantly advanced project. Development approvals are in place, ECA funding (US$190m) has been committed, an indicative mezz debt term sheet (US$90m) and indicative streaming facility term sheet (US$60m) has been received (Figure 1), and a fixed price EPC contract has been signed with German firm SMS group that guarantees throughput volumes/product quality and includes commissioning

ATC – performance over one year $0.26

$0.24

$0.22

$0.20

$0.18

$0.16

$0.14

$0.12

$0.10 Jul17 Aug17 Sep17 Oct17 Nov17 Dec17 Jan18 Feb18 Mar18 Apr18 May18

ATC.AS X XAO .A SX

6300

6200

6100

6000

5900

5800

5700

responsibility.


Company Data

Shares – ordinary (M) 426.5 Market capitalisation ($M) 79 12 month low/high ($) 0.1/ 0.26 Average monthly turnover ($M) 2.1 GICS Industry Metals & Mining



Costs ($m) 1 1 32 46 53 EBITDA ($m) -1 -1 44 94 121

NPAT ($m) -2 -8 6 35 56

EPS (cps) -0.4 -2.0 1.4 3.5 5.6

EPS growth (%) -815% -365% 169% 159% 57%


Cashflow ($m) -2 -8 30 81 113

CFPS (cps) 0 -2 7 8 11

PCFPS (x) -43 -9 3 2 2


EV / EBITDA (x) na na 7 2 1

Payout ratio (%) 0 0 0 0 0

Dividend (cps) 0 0 0 0 0 Yield (%) 0 0 0 0 0

Franking (%) 0 0 0 0 0

18 June 2018

2

BALANCE SHEET ASSUMPTIONS

NPV (+1Yr) A$M A$/sh.

Analysis Altech Chemicals Ltd (ATC) 18-Jun-18 Share Price ($) A$0.19

Year End June Iss. Shares (M) 426.5 Dilution (M) 572.2

Fully Diluted (M) 998.7 Mkt Cap. ($M) A$79M

Revenue A$M 0 0 0 0 76 140 174 180 Reserve Operating Costs A$M 0 0 0 0 31 45 52 56 HPA Exploration A$M 0 0 0 0 0 0 0 0 Tonnes Mt 1.36 Other A$M 5 1 1 1 1 1 1 1 Grade (Al2O3 %) % 30%

EBITDA A$M (5) (1) (1) (1) 44 94 121 123 D&A A$M 0 0 0 0 21 31 33 31 Contained Al2O3 (kt) kt 408

EBIT A$M (5) (1) (1) (1) 23 63 87 92 Net Interest A$M (0) (2) 2 11 15 13 8 2 Pre-Tax Profit A$M (5) 0 (3) (12) 8 51 79 89 Production Tax A$M (1) 0 (1) (4) 2 15 24 27 Ore Processed kt 0.0 0.0 0.0 0.0 23.1 36.7 42.5 43.5 Net Profit A$M (3) 0 (2) (8) 6 35 56 63 Ore Grade % 0.0 0.0 0.0 0.0 0.3 0.3 0.3 0.3

Abnormal A$M 0 0 0 0 0 0 0 0 Overall Recovery % 0% 0% 0% 0% 38% 38% 38% 38% Reported Profit A$M (3) 0 (2) (8) 6 35 56 63 HPA Produced kt 0.0 0.0 0.0 0.0 2.4 3.8 4.4 4.5

Dividends Paid A$M 0 0 0 0 0 0 0 0 HPA Sold kt 0.0 0.0 0.0 0.0 1.9 3.5 4.3 4.5 Adjustments A$M 0 0 0 0 0 0 0 0 C1 Costs A$'000/t - - - - 10.9 9.8 9.8 10.4

AISC A$'000/t - - - - 15.2 14.1 14.1 14.7 CASHFLOW Net Op Cash Flow A$M (5) (1) (1) (1) 44 94 121 123 REVENUE Net Interest A$M 0 2 (2) (11) (15) (13) (8) (2) HPA Project A$M 0 0 0 0 76 140 174 180

Tax Paid A$M 1 (0) 1 4 1 0 0 (14) Total A$M 0 0 0 0 76 140 174 180 Op Cash Flow A$M (3) 0 (2) (8) 30 81 113 107

Net Capex A$M 0 (132) (132) (132) (6) (6) (6) (6) Meckering (Mine) A$M 0 0 0 0 3 0 0 3 Exploration A$M 0 0 0 0 0 0 0 0 Direct Processing A$M 0 0 0 0 17 28 32 33

Inv Cash Flow A$M 0 (132) (132) (132) (6) (6) (6) (6) Transport A$M 0 0 0 0 2 3 3 4 Free cash flow A$M (3) (132) (134) (141) 24 76 107 101 C1 Cash Cost A$M 0 0 0 0 26 37 43 47

Royalties A$M 0 0 0 0 5 8 9 9 Net Borrowings A$M 0 0 203 51 (20) (70) (80) (76) Corporate A$M 0 0 0 0 0 0 0 1

Dividends A$M 0 0 0 0 0 0 0 0 Total A$M 0 0 0 0 36 53 62 66 Equity Issues A$M 17 143 0 0 0 0 0 0

Other A$M 0 0 0 0 0 0 0 0

Fin Cash Flow A$M 17 143 203 51 (20) (70) (80) (76) Project A$M 0.0 132.4 132.4 132.4 0.0 0.0 0.0 0.0 Sustaining A$M 0.0 0.0 0.0 0.0 6.0 6.0 6.0 6.0

Net Cash Flow A$M 14 11 69 (90) 4 6 27 24 Total A$M 0.0 132.4 132.4 132.4 6.0 6.0 6.0 6.0

Cash A$M 15 26 95 5 9 15 41 66 Exchange Rate A$/US$ 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 Other Current A$M 0 0 0 0 0 0 0 0 Interest Paid % 3% 3% 3% 3% 3% 3% 3% 3%

Cur Assets A$M 15 26 95 5 9 15 42 66 Interest Rec % 2% 2% 2% 2% 2% 2% 2% 2% Fixed Assets A$M 23 155 288 420 426 432 438 444 Diesel Price A$/L 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2

Exploration A$M 0 0 0 0 0 0 0 0 Gas Price $6/GJ 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 Other A$M 0 0 0 0 0 0 0 0 HPA Price US$/t 30000 30000 30000 30000 30000 30000 30000 30000

Non Cur Assets A$M 23 156 288 421 427 433 438 444 HPA Price A$/t 40000 40000 40000 40000 40000 40000 40000 40000 Total Assets A$M 39 182 383 426 436 448 480 510 Borrowings A$M 0 0 0 0 0 0 0 0

Payables A$M 7 7 7 7 7 7 7 7 Other A$M 0 0 0 0 0 0 0 0

Cur Liab A$M 7 7 7 7 7 7 7 7 Borrowings A$M 0 0 203 254 234 164 84 8

Provisions A$M 0 0 0 0 0 0 0 0 Other A$M 0 0 0 0 0 0 0 0

Non Cur Liab A$M 0 0 203 254 234 164 84 8 Total Liabilities A$M 7 7 211 262 242 172 92 15 Total Equity A$M 31 175 173 164 195 276 389 495

EPS ¢ (0.8) 0.1 (0.4) (2.0) 1.4 3.5 5.6 6.3

PER x na 312.4 na na 13.5 5.2 3.3 3.0 EPS Growth % 17% 108% -815% -365% 169% 159% 57% 12%

CFPS ¢ (0.8) 0.1 (0.4) (2.0) 7.1 8.2 11.3 10.7 PCFR x na 312.4 na na 2.6 2.3 1.6 1.7

DPS ¢ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Yield % 0% 0% 0% 0% 0% 0% 0% 0%

Payout Ratio % 0% 0% 0% 0% 0% 0% 0% 0% Gearing ND/E % -48% -15% 63% 152% 116% 54% 11% -12%

Interest Cover x 18.5 0.8 na na 1.6 5.0 10.9 38.5

250

200

150

100

50

-

-50

-100

-150

-200

EBITDA Margin % na na na na 58.2 67.2 69.4 68.3 HPA Operations 386

EBIT Margin % na na na na 30.7 45.1 50.4 51.0 Corporate costs -6 Return On Assets % (12.8) (0.7) (0.2) (0.2) 5.4 14.1 18.2 18.0 Net Cash (Debt) 26

$0.39

-$0.01 $0.03

Eff Tax rate % 30% 30% 30% 30% 30% 30% 30% 30% Total 406 $0.41


OPERATING COSTS

RATIO ANALYSIS

PROFIT & LOSS 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F

HPA

CAPEX

CASH FLOW FORECASTS INCL DEBT & EQUITY

Operating Cash Flow New Equity Change in Borrowings Capex & Exp Change in Cash

A$m

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

18 June 2018

3

Project Financing Status

Figure 1: Project Financing Status Facility Financier Amount Status Date Senior Loan KFW-IPEX Bank US$190m Committed Feb-18

Mezzanine Loan Global Merchant Bank US$90m Indicative Term Sheet May-18

Stream Finance Global Investment Group US$60m Indicative Term Sheet Jun-18 Total US$340m

Source: Petra Capital, Company Reports

18 June 2018


ABN 95 110 952 782 ACN 110 952 782

AFSL 317 944

Director: George Marias +61 (0)2 9239 9601 [email protected] Research (Resources): Brett McKay +61 (0)2 9239 9605 [email protected] Research (Resources): Matthew Schembri +61 (0)2 9239 9630 [email protected] Research (Resources): Craig Brown +61 (0)2 9239 9629 [email protected] Research (Resources): Peter Chilton +61 (0)2 9239 9634 [email protected] Research (Industrials): Killian Murphy +61 (0)2 9239 9607 [email protected] Research (Industrials): James Lennon +61 (0)2 9239 9618 [email protected] Research (Industrials): David Fraser +61 (0)2 9239 9633 [email protected] Research (Property): Jonathan Kriska +61 (0)2 9239 9633 [email protected] Sales: Frank Barila +61 (0)2 9239 9603 [email protected] Sales: Neil Watson +61 (0)2 9239 9602 [email protected] Sales: Vincent Pisani +61 (0)2 9239 9617 [email protected] Sales: Jamie Campbell +61 (0)2 9239 9620 [email protected] Sales: Peter Veldhuizen +61 (0)2 9239 9609 [email protected] Sales: Colin Redmond +61 (0)2 9239 9613 [email protected] Sales: Vince Barila +61 (0)2 9239 9627 [email protected] Sales: Michael Casey +61 (0)2 9239 9608 [email protected] Sales: Richard Macphillamy +61 (0)2 9239 9604 [email protected] Corporate (ECM): Conrad Anderson +61 (0)2 9239 9610 [email protected] Corporate (ECM): Verity Barritt +61 (0)2 9239 9622 [email protected] Administration: Krystle Garven +61 (0)2 9239 9635 [email protected] Administration: Samantha Tingley +61 (0)2 9239 9636 [email protected] Administration: Silvia Fratta Pasini +61 (0)2 9239 9621 [email protected] Administration: Larissa Falvo +61 (0)2 9239 9611 [email protected] Legal & Compliance: Stephen Newton +61 (0)2 9239 9612 [email protected] Financials: Tony Christelis +61 (0)2 9239 9615 [email protected]

Disclosure This document has been prepared in Australia by Petra Capital Pty Ltd which holds an Australian Financial Services License AFSL 317 944. Petra Capital Pty Ltd is an ASX Market Participant. Petra Capital Pty Ltd and its associates, officers, directors, employees and agents, from time to time, may receive brokerage, commissions, fees or other benefits or advantages, hold securities in companies researched by Petra Capital Pty Ltd and may trade in these securities either as principal or agent. Disclaimer The information or advice contained in this report has been obtained from sources that were accurate at the time of issue, however the information has not been independently verified and as such, Petra Capital Pty Ltd cannot warrant its accuracy or reliability. Persons relying on this information do so at their own risk. To the extent permitted by law, Petra Capital Pty Ltd disclaims all liability or responsibility for any direct or indirect loss or damage (including consequential loss or damage) caused by any error or omission within this report, or by persons relying on the contents of this report. This report is published by Petra Capital Pty Ltd by way of general information or advice only. This report does not take into account specific investment needs or other considerations that may be pertinent to individual investors. Before making any investment decisions based on this report, parties should consider, with or without an investor adviser, whether any relevant part of this report is appropriate to their financial circumstances and investment objectives. Petra Capital Pty Ltd is a licensed institutional/wholesale stockbroking firm. The report is only intended for institutional and sophisticated clients to whom Petra Capital Pty Ltd has issued the report. Petra Capital Pty Ltd is not licensed to advise retail investors – retail investors should contact their own stockbroker or financial adviser/planner for advice. Ratings Information regarding the scope and expertise of our research services, processes for selection for coverage, and the management of conflicts of interest can be found on Petra Capital’s website at http://www.petracapital.com.au/research-disclosures. Petra Capital uses the following ratings system and definitions: Buy - Forecast to outperform the Market by more than 5%; Hold - Forecast to perform up to 5% above or below the Market; Sell - Forecast to underperform the Market by more than 5%; Speculative Buy - Speculative Investment; Take Profits - Recommend taking short term profits in a stock we remain fundamentally positive on a medium term view; Accept Offer - For a company under takeover where we see the offer as a fair price with low risk of a competing offer; No Rating - No rating at this time. Market performance is relative to the S&P/ASX Small Ordinaries Index which we assume generates a neutral return on a 12 month basis. US Investors This material is intended for use in the US only by major US Institutional Investors, as that term is defined by the SEC Rule 15a-6. Transactions with US Institutional Investors and major US Institutional Investors, as those terms are defined by SEC Rule 15a-6, are chaperoned by Global Alliance Securities, LLC, (“Global Alliance”), a SEC-registered broker-dealer and FINRA member (web: www.globalalliancesecurities.com) in accordance with the agreement between Global Alliance and Petra Capital Pty Ltd. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, its accuracy is not guaranteed. Additional and supporting information is available upon request. This is not an offer or solicitation of an offer to buy or sell any security or to make any investment. Any opinion or estimate constitutes the preparer’s best judgement as of the date of preparation and is subject to change without notice. Petra Capital Pty Ltd or Global Alliance and their associates or affiliates, and their respective officers, directors and employees may buy or sell securities mentioned herein as agent or principal for their own account. Other International International investors are encouraged to contact their local regulatory authorities to determine whether restrictions apply in buying/selling this investment.

altech chemicals limited€¦ · project, sms group will invest us$15m in altech. the confidence by...

Documents