Altech Chemicals : - 25% Sale of Industries Germany Finalised

Altech Chemicals Limited (Altech/the Company) (ASX: ATC) (FRA: A3Y) is pleased to announce that it has now finalised the sale of 25% of its German subsidiary, Altech Industries Germany GmbH (AIG), for EUR 5.0 million (A$ 8.3 million) to Frankfurt Stock Exchange listed Altech Advanced Materials AG (AAM).

On 26 October 2020, Altech announced that it had executed a Memorandum of Understanding (MOU) with AAM for AAM to acquire 25% of the shares of AIG for EUR5.0 million, with Altech to retain ownership of the remaining 75%. Consideration for the sale is structured as follows

Initial Cash Consideration of EUR250,000 (A$415,000) upon the signing of a Share Sale and Purchase Agreement and a Shareholder Agreement between Altech and AAM.

Deferred Consideration: of EUR4.75 million (A$7.92 million), payable by AAM as: Three equal instalments of EUR1.583 million (A$2.63 million) on each annual anniversary of the payment of the Initial Cash Consideration; Interest, paid quarterly to Altech at the rate of 3% p.a. (A$240k p.a.) on the outstanding Deferred Consideration; AAM may pay the outstanding Deferred Consideration to Altech in full at any time without penalty and The Deferred consideration will be secured via the pledge by AAM of the 6,250 AIG shares (25% of AIG) (i.e. should the Deferred Consideration not be paid in full by AAM at or before the third anniversary of the Initial Cash Consideration payment date, the AIG shares held by AAM will fall back to Altech and in addition all consideration paid by AAM will be retained by Altech).

AAM will proportionally participate in all future equity raises by AIG on the same terms as Altech for the purpose of funding AIG's working capital and envisaged business development activities, such as the exercise of its option to acquire industrial land at the Schwarze Pumpe Industrial Park, Saxony, Germany.

The Share Sale and Purchase Agreement and the Shareholder Agreement between Altech and AAM have both now been executed, and the Initial Cash Consideration of EUR 250,000 (A$415,000) has been received by Altech.

Contact:

Iggy Tan

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About Altech Chemicals (ASX:ATC) (FRA:A3Y)

Altech Chemicals Limited (Altech/the Company) is aiming to become one of the world's leading suppliers of 99.99% (4N) high purity alumina (Al2O3) through the construction and operation of a 4,500tpa high purity alumina (HPA) processing plant at Johor, Malaysia. Feedstock for the plant will be sourced from the Company's 100%-owned kaolin deposit at Meckering, Western Australia and shipped to Malaysia. HPA is a high-value, high margin and highly demanded product as it is the critical ingredient required for the production of synthetic sapphire. Synthetic sapphire is used in the manufacture of substrates for LED lights, semiconductor wafers used in the electronics industry, and scratch-resistant sapphire glass used for wristwatch faces, optical windows and smartphone components. Increasingly HPA is used by lithium-ion battery manufacturers as the coating on the battery's separator, which improves performance, longevity and safety of the battery. With global HPA demand approximately 19,000t (2018), it is estimated that this demand will grow at a compound annual growth rate (CAGR) of 30% (2018-2028); by 2028 HPA market demand is forecast to be approximately 272,000t, driven by the increasing adoption of LEDs worldwide as well as the demand for HPA by lithium-ion battery manufacturers to serve the surging electric vehicle market.

German engineering firm SMS group GmbH (SMS) is the appointed EPC contractor for construction of Altech's Malaysian HPA plant. SMS has provided a USD280 million fixed price turnkey contract and has proposed clear and concise guarantees to Altech for pl ant throughput and completion. Altech has executed an off-take sales arrangement with Mitsubishi Corporation's Australian subsidiary, Mitsubishi Australia Ltd (Mitsubishi) covering the first 10-years of HPA production from the plant. Conservative (bank case) cash flow modelling of the project shows a pre-tax net present value of USD505.6million at a discount rate of 7.5%. The Project generates annual average net free cash of USD76million at full production (allowing for sustaining capital and before debt servicing and tax), with an attractive margin on HPA sales of 63%. (Refer to ASX Announcement 'Positive Final Investment Decision Study for 4,500TPA HPA project' dated 23 October 2017 for complete details. The Company confirms that as at the date of this announcement there are no material changes to the key assumptions adopted in the study). The Company has been successful in securing senior project debt finance of USD190 million from German government owned KfW IPEX-Bank as senior lender. Altech has also mandated Macquarie Bank (Macquarie) as the preferred mezzanine lender for the project. The indicative and non-binding mezzanine debt term sheet (progressing through due diligence) is for a facility amount of up to USD90 million. To maintain project momentum during the period leading up to financial close, Altech has raised A$39 million in the last 24 months to fund the commencement of Stage 1 and 2 of the plant's construction; Stage 1 construction commenced in February 2019 with Stage 2 early works completed at the end of June 2020.

Forward-looking Statements

This announcement contains forward-looking statements which are identified by words such as 'anticipates', 'forecasts', 'may', 'will', 'could', 'believes', 'estimates', 'targets', 'expects', 'plan' or 'intends' and other similar words that involve risks and uncertainties. Indications of, and guidelines or outlook on, future earnings, distributions or financial position or performance and targets, estimates and assumptions in respect of production, prices, operating costs, results, capital expenditures, reserves and resources are also forward-looking statements. These statements are based on an assessment of present economic and operating conditions, and on a number of assumptions and estimates regarding future events and actions that, while considered reasonable as at the date of this announcement and are expected to take place, are inherently subject to significant technical, business, economic, competitive, political and social uncertainties and contingencies. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company, the directors and management. We cannot and do not give any assurance that the results, performance or achievements expressed or implied by the forward-looking statements contained in this announcement will actually occur and readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are subject to various risk factors that could cause actual events or results to differ materially from the events or results estimated, expressed or anticipated in these statements.

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