Atotech Annual Report 2021

Plain-text annual report

Altech Chemicals Limited 2021 A N N U A L R E P O R T COMPANY PROFILE ABOUT ALTECH CHEMICALS LTD 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 (Al O ) through the construction and operation of a 4,500tpa high purity alumina (HPA) processing plant at Johor, Malaysia. 2 2 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. HPA is forecast to be increasingly used by lithium-ion battery manufacturers, both as a coating on the battery’s separator sheets and also as a possible nano-coating for application to battery anode materials such as graphite and silicon to improve battery performance, safety, chargeability and life. HPA remains 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. ' The global high purity alumina market is forecast to grow from US$1.6 Bn in 2021 to US$ 11.5 Bn in 2031 and to US$ 33.8 Bn by 2038. This exhibits a compound annual growth rate (CAGR) of 21.2% from 2021 to 2031. Conservative (bank case) cash ﬂow modelling of Altech's HPA project shows a pre-tax net present value (NPV) of US$505.6 million at a discount rate of 7.5%. The project is forecast to generate annual average net free cash of approximately US$76 million at full production (allowing for sustaining capital and before debt service and tax), with an attractive margin on HPA sales of approximately 63%. German engineering ﬁrm SMS group GmbH (SMS) is the appointed EPC contractor for the construction of Altech's Malaysian HPA plant. SMS has provided a US$280 million ﬁxed price turnkey contract and has proposed clear and concise guarantees to Altech for plant throughput and completion. The Company has been successful in securing senior project debt ﬁnance of US$190 million from German government-owned KfW IPEX-Bank as senior lender. In addition to the senior debt, Altech is pursuing various additional funding options including a listed Green Bond and selling a direct project interest of up to 49% in its HPA project. The Company continues to engage with a number of electric vehicle (EV) sector participants that are potential product end users that could secure future HPA supply via a direct investment in Altech’s HPA project. Altech has raised in excess of A$50 million in the last 36 months to maintain project momentum and complete stage 1 and stage 2 early works construction at the Company's HPA plant site in Malaysia. These construction works commenced in February 2019 and completed in June 2020, after which the construction site was placed on care and maintenance. In September 2020, Altech announced that it had developed an innovative method for the coating of graphite particles, typical of those used in lithium-ion batteries, with a nano layer of alumina. The development, testing and expansion of this technology to include the coating of silicon particles with alumina is ongoing at the Company's dedicated Research and Development facility, in Perth, Western Australia. In December 2020, Altech completed an agreement for the sale of 25% of its formerly 100% owned German subsidiary, Altech Industries Germany GmbH, to Frankfurt stock exchange listed Altech Advanced Materials AG. Total consideration for the 25% interest was € 5.0 million, payable in various tranches. Subsequent to the sale, AIG commenced a pre-feasibility study for the construction of a battery materials alumina coating plant in Saxony, Germany, whereby it would use Altech's proprietary alumina nano-coating technology to coat lithium-ion battery materials such as silicon and graphite. OUR VISION to be a world-leading supplier of high purity alumina (HPA) and its coating technology, for lithium-ion batteries HIGH PURITY ALUMINA (HPA) OVERVIEW HPA DEMAND High purity alumina is a high-purity form of aluminium oxide (Al O ). 2 3 High purity alumina is a high-value, high margin and highly demanded product. The use of HPA in the manufacture of lithium-ion batteries is forecast to rapidly increase, in line with battery use in in electric vehicles, and an ever increasing number of consumer goods applications. Lithium- ion battery manufacturers are already using HPA as a coating for the polymer anode/cathode separator sheets within the battery in order to reduce separator shrinkage and the likelihood of resultant battery combustion. HPA remains 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. There is no substitute for HPA in the manufacture of synthetic sapphire. HPA is a premium priced material (selling in the range of US$15 to US$50 per kg) with forecast signiﬁcant annual demand growth driven primarily by two fast-growing industries: the rapidly expanding lithium-ion battery industry; and the sapphire/LED industry. The use of 4N HPA in the production of lithium-ion batteries continues to evolve, driven by the development of more energy dense batteries to serve the surging electric vehicle (EV) and renewable energy storage markets. The use of HPA in a lithium-ion battery can improve overall battery stability, chargeability, energy retention and life. The transition by lithium-ion battery manufacturers to HPA coated separators is primarily a function of advances in battery anode and cathode technology. As a result, battery energy storage capacity is increasing and battery operating temperature during charge and discharge is higher – to the point where traditional non-coated polymer separator sheets are reaching the limit of safe application, hence the transition to HPA coated separators, which tolerate higher operating temperatures. In addition, the adoption of HPA as a preferred coating material applied to lithium-ion battery anode materials such as graphite and silicon would present a signiﬁcant opportunity for the Company. Altech has established its own dedicated research and development laboratory, which is enabling the Company to reﬁne its materials coating technology and conduct a range of lithium-ion battery test work. There continues to be discussion about the next generation of lithium-ion batteries called solid state batteries. These are batteries, where the organic combustible liquid electrolyte in the battery is replaced by non-liquid ‘solid state’ electrolyte which appreciably improves battery safety and allows for signiﬁcantly higher battery operating temperatures. Altech believes that 4N HPA will continue to be a key ingredient of future commercialised solid state lithium-ion batteries. Similarly, the amount of 4N HPA used is also likely to be higher. LITHIUM-ION BATTERY Li-ion batteries are an electricity storage method at a very high energy density that are being offered at an increasingly affordable price. As such, these batteries have historically taken market share in a number of applications and are the battery of choice for high-performance applications such as electric vehicles. Roskill, a global commodity research and market intelligence consultancy, forecasts robust growth rates for Li-ion batteries to 2030. Production of Li-ion batteries was estimated at 231GWh in 2020, increasing by 24.6% (year-on-year), compared to 43.9% in the period between 2018 and 2019. The automotive industry represented the largest end-use market for Li-ion batteries in 2020, though annual growth in capacity demand has slowed to 29.3%, compared to 61.3% in 2019. The two largest Li-ion battery markets in 2020 were the automotive and portable electronics, followed by energy storage systems, motive products and power devices. The transition towards battery-powered cars has been largely driven by stringent regulation on transport emissions, especially in Europe, which is expected to further constrain current transport air pollution limits. By 2021, all major automotive markets had pledged to move towards a decarbonised economy, implying further tightening of ecological regulation in the ﬁeld of emissions. According to Roskill, in the period to 2030, Li-ion battery demand from the automotive sector is forecast to increase by a factor of 13 and reach 2.0TWh in 2030, of which passenger vehicles will account for 79%. Increasing demand for electriﬁed vehicles is widely supported by government subsidies on one hand and plans of banning internal combustion engine (ICE) vehicle sales, that partially commence from the middle of this decade. Lithium-ion battery cell manufacturing capacity announced in Europe amounts to 600GWh annually by 2030. Forecast graphite demand is expected to peak at 600,000 tpa(worth EUR 10 billion), driven by European giga factories. Altech is positioned to support Europe's push to create a major electric vehicle (EV) battery industry and associated materials supply chain. CHAIRMAN’S LETTER Dear fellow Altech Shareholders, 2021 has been an extremely busy year for the Company. Managing Director Iggy Tan and his team were focussed on progressing funding options for the Company's proposed Malaysian HPA plant, which has included advancing a Green Bonds offering, a direct project level equity investment for up to 49% of the project, and/or additional equity investment in Altech. For the entirety of the year, the Company has been extremely fortunate to have had its German directors’, based in Europe, to assist with each of the project funding initiatives. In September 2020, Altech announced that it had developed an innovative method for the coating of graphite particles, typical of those used in lithium-ion batteries, with a nano layer of alumina. The development, testing and expansion of this technology to include the coating of silicon particles with alumina is ongoing at the Company's dedicated Research and Development facility, in Perth, Western Australia. The facility was ofﬁcially opened in July 2021, and has allowed the Company to conduct a range of research, development and test work (including battery tests) to reﬁne its coating methods and technology. Previously this work was conducted at Curtin University (WA). The Company believes that the development of its nano-coating technology could present a signiﬁcant opportunity, as lithium-ion battery producers continue to strive to improve battery performance, safety and energy density. The inclusion of alumina coated silicon particles into lithium-ion battery anodes has been identiﬁed as a possible solution to these challenges. Complementing this research and development work, during the ﬁrst quarter of 2021 Altech's 75% owned German subsidiary Altech Industries Germany GmbH (AIG) announced that it had commenced a preliminary feasibility study (PFS) for the construction of a high purity alumina (HPA) battery materials coating plant, in Saxony Germany. The PFS has assumed a plant coating capacity of 10,000tpa (35tpd) and the location would be at the Schwarze Pumpe Industrial Park in Saxony, Germany – where AIG has an option to acquire a ~14ha site. The results of the PFS are expected within coming months. Also, in July 2021 AIG announced that it had opened an ofﬁce and secured a research and development space at the Schwarze Pumpe. Since December 2020, AIG has been owned 75% by Altech and 25% by Frankfurt Stock Exchange listed Altech Advanced Materials AG, which acquired its interest from Altech via a €5 million (A$8.3 million) sale and purchase agreement. The Company continued to receive strong support from its shareholders during the year, as demonstrated by the fully subscribed pro-rata entitlement offer (rights issue) that was completed in January 2021. The issue was on the basis of two (2) new shares for each ﬁve (5) shares held at $0.04 per new share, plus one free attaching option (exercise price $0.08, expiring 31 May 2022) for each 2 new shares. The offer was underwritten by the Company's major shareholders Deutsche Balaton/Delphi and the Melewar group. $14.5 million was raised from the offer. To managing director Iggy Tan, the board and staff of Altech Chemicals in Australia, Malaysia and Germany, thank you all for your work and resilience during last year. To all of our shareholders, thank you for the support that you have shown the Company during the year. 2022 is poised to be another busy and promising year for Altech. Luke Atkins Non-Executive Chairman BOARD OF DIRECTORS LUKE ATKINS LLB - Non-Executive Chairman A highly qualiﬁed mining executive and lawyer by profession, 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 including a number of mining and exploration companies. Mr Atkins is the co-founder of ASX-listed Australian Silica Quartz Group Limited (formerly Bauxite Resourced Limited) (ASX: ASQ) and is currently the company's non- executive director. Mr Atkins brings to the board extensive experience in the areas of mining, exploration and corporate governance. IGNATIUS (IGGY) TAN B.Sc. MBA, GAICD - Managing Director Mr Tan is a highly experienced mining and chemical executive with a number of signiﬁcant achievements in commercial mining projects such as 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. He holds a Master of Business Administration from the University of Southern Cross, a Bachelor of Science from the University of Western Australia and is a Graduate of the Australian Institute of Company Directors. Mr Tan previously held managing director positions at ASX-listed Kogi Iron Limited (ASX: KFE) and Galaxy Resources Limited (ASX: GXY). PETER BAILEY Independent Non-Executive Director Mr Peter Bailey is a highly experienced and qualiﬁed engineer with over 40 years experience in the mining and industrial chemical production industry. He was previously chief executive ofﬁcer at Sherwin Alumina, an alumina reﬁnery located in Texas, USA. Prior to Sherwin, in 1998 Mr Bailey was president of Alcoa Worldwide Chemical's industrial chemicals department. He was responsible for managing the company's 13 alumina plants that were located in eight countries, with combined annual revenue of approximately US$700 million. In 1996, Mr Bailey was president of Alcoa Bauxite and Alumina and was responsible for eight (8) alumina plants outside of Australia. He was also chairman of the Alcoa Bauxite joint venture in Guinea, Africa. DANIEL TENARDI Non-Executive Director Mr Tenardi is a highly experienced global resource executive with over 40 years experience in the mining and processing sectors. During his extensive career, Mr Tenardi spent 13 years at Alcoa's alumina reﬁnery in Kwinana as well as at the company's bauxite mines in the Darling Ranges of Western Australia. Mr Tenardi was the founding managing director of Bauxite Resources Limited (since renamed Australian Silica Quartz Limited) (ASX: ASQ) where he led the rapid growth of the company from its initial exploration phase, expansion of land holdings, to the commencement of trial shipments of ore. Mr Tenardi was most recently a non-executive independent director of Australian iron ore producer, Grange Resources Limited (ASX: GRR). TUNKU YAACOB KHYRA B.Sc (Hons), CA - Non-Executive Director Tunku Yaacob Khyra 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 and 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 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 Non-Executive Director (for Tunku Yaacob Khyra) Mr Uwe Ahrens is executive director of Melewar Industrial Group Berhad and managing director of Melewar Integrated Engineering Sdn Bhd. He also sits on the board of several other private limited 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 and industrial plant supplier, KOCH Transporttechnik GmbH in Germany, now belonging to FLSmidth Group, where he held a senior management position for 12 years, working predominantly in Germany, USA and South Africa. Mr Ahrens is the alternate non-executive director for Tunku Yaacob Khyra. HANSJOERG PLAGGEMARS Non-Executive Director Mr Plaggemars was previously a member of the board of Delphi Unternehmensberatung AG and Deutsche Balaton AG (Altech major shareholder) and currently acts as their representative. Mr Plaggemars is based in Heidelberg, Germany and is an experienced company director and manager. He studied business administration at the University of Bamberg from 1990 to 1995. Mr Plaggemars has been a management consultant since June 2017 and is a board member of various companies within the scope of projects. Mr Plaggemars is currently a member of the management board of Frankfurt Stock Exchange listed Altech Advanced Materials AG. Mr Plaggemars also currently serves as a non-executive director at ASX listed Gascoyne Resources Limited, South Harz Potash Limited, Wiluna Mining Corporation, PNX Metals Limited, Kin Mining Limited and Azure Minerals Limited. MANAGING DIRECTOR’S REVIEW OF OPERATIONS Work on ﬁnalising project ﬁnancing for the Company’s proposed Malaysian high purity alumina (HPA) plant continued through the year. Details for a US$144m green bond offering as a secondary debt layer behind the US$190m of senior debt from German government owned KfW-IPEX Bank, are currently being ﬁnalised and initial soundings have been positive. The HPA plant site at Johor, Malaysia remains on care and maintenance following the successful completion of stage-1 and stage-2 early works construction in June 2020, this work was completed on time and on budget. Finally, the continued support of all shareholders during the year was demonstrated by the successful $14.5 million rights issue that completed in January 2021. SUMMARY The past year has seen some exciting new developments for the Company. In September 2020, we announced the successful laboratory based application of an innovative method for the coating of graphite particles with a nano-layer of alumina, and shortly thereafter the technology was also successfully applied to the coating of silicon particles. Both the silicon and graphite particles are typical of those used in the anode of lithium-ion batteries, where there is an evolving consideration for the use of alumina because of the positive impacts that alumina coated graphite and silicon particles may have on battery life and performance. Following the announcement of its coating technology, Altech succeeded in entering into a collaboration agreement with a leading European silicon producer, Ferrosolar SLU, and recently a collaboration agreement was executed with SGL Carbon of Germany, a world leader in the development and production of carbon based solutions. The Company believes that its nano technology, which has been used to coat battery materials anode particles such as silicon and graphite with a ﬁne layer of alumina, has the potential to present an opportunity to resolve the ﬁrst-cycle-capacity-loss and silicon particle swelling problems that are present in lithium-ion batteries. To support the further development and testing of its technology, in July 2021, Altech announced the opening of a dedicated research and development laboratory in Perth, Western Australia. With its own laboratory, we are now able to conduct a range of materials testing and development work, including battery testing to both demonstrate and reﬁne our technology with the ultimate goal being commercialisation. Complementing its work in Australia, Altech's 75% owned German subsidiary, Altech Industries Germany GmbH has commenced a preliminary feasibility study (PFS) for the construction of a battery materials high purity alumina coating plant, in Saxony Germany. The PFS will contemplate a plant with annual production capacity of 10,000tpa (35tpd), use 100% green energy and would be constructed at the Schwarze Pumpe Industrial Park, Saxony, Germany. CONFIRMATION OF HPA ALUMINA NANO COATING TECHNOLOGY BACKGROUND The success of an initial demonstration of the Company's technology to coat particles of graphite, typical of those used in anode applications within lithium-ion batteries, with a nano layer of high purity alumina (HPA) was achieved during the year. The Q4 2020 demonstration followed Altech's 23 September 2020 announcement that as a result of its ground-breaking research and development work, Altech was proceeding to an independent veriﬁcation phase of its method for the alumina coating of graphite particles. A ﬁrst phase, laboratory scale demonstration was conducted at Curtin University, Western Australia during late November 2020 and resulted in the successful application of a uniform and consistent two to three (2-3) nano-metre (nm) coating of alumina onto graphite particles. The HPA coated graphite particles were examined at the University of Western Australia under a transmission electron microscope (TEM). As seen under the microscope, a uniform and consistent alumina layer of around 2nm was observed on the outer edge of the graphite particle – this is Altech's alumina coating technology. The uniformity and consistency of an alumina coating on graphite particles is expected to be critical for improved lithium-ion battery performance. The demonstration of Altech's HPA particle coating technology is a very encouraging development for Altech. The next step will be to advance battery performance trials. These trials will aim to quantify the potential performance and lithium-ion battery life- cycle improvements using Altech's HPA coated graphite anodes. HPA is commonly applied as a coating on the separator sheets used within a lithium-ion battery, as alumina coated separators improve battery performance, durability and overall safety. However, there is evolving consideration to use alumina within the anode component of the lithium-ion battery because of the positive impacts that alumina coated graphite particles could have on battery life and performance. Lithium-ion battery anodes are typically composed of graphite. In a lithium-ion battery, lithium ion losses initially present as inactive layers that form during the very ﬁrst battery charge cycle, the losses then compound with each subsequent battery usage cycle. Typically, around 8% of lithium ions are lost during the very ﬁrst battery charge cycle. This “ﬁrst cycle capacity loss” or “ﬁrst-cycle irreversibility” is a long recognised but as yet, poorly resolved limitation that has plagued rechargeable lithium-ion batteries. GRAPHITE OR SILICON PARTICLE ALTECH ALUMINA COATING BREAKTHROUGH - ALUMINA COATING OF SILICON Following its December 2020 announcement of the successful application of its alumina nano layer coating technology to the coating of graphite particles, in mid-March 2021 Altech was pleased to announce that it had succeeded in applying its technology to the coating of silicon particles, typical of those also used in anode applications within lithium- ion batteries. Extending the application of its technology to the coating of silicon particles in a laboratory setting is a signiﬁcant breakthrough for Altech, especially in the context of a recent public statement of US electric vehicle manufacturer Tesla, that its aim is to increase the amount of silicon in its batteries to achieve step-change improvements in energy density and battery life. Silicon has a signiﬁcant advantage over graphite for use in lithium-ion battery anodes in that it has ten times the theoretical energy capacity compared to graphite. However, limitations for silicon use in battery anodes have included particle volume expansion of up to 300% when energised, and a large “ﬁrst cycle lithium loss”. Industry believes that the encapsulation of silicon particles via the application of a nano layer of alumina can resolve these issues and be a “game changer” which would pave the way for increased lithium-ion battery energy density, lifespan and reduced ﬁrst cycle lithium loss. To test its ﬁne particle alumina coating technology, Altech used silicon samples that were provided by its collaboration partner Silico Ferrosolar, a subsidiary of the Ferroglobe Group. The nano coating of alumina onto lithium-ion battery grade anode materials such as silicon, has been very difﬁcult for industry to achieve. In the case of silicon particles they have unique characteristics that required Altech's coating technology to be adjusted in order to achieve the required outcome. As seen under the microscope, Altech was able to deposit a uniform and consistent layer of alumina on the outer edge of the silicon particle, encapsulating the particle – this is Altech's alumina coating technology. Altech's general manager operations and chief scientist, Dr Jingyuan Liu said that veriﬁcation of Altech's coating technology on silicon particles is very exciting for the Company. “We are very encouraged by the excellent coating results achieved from the application of our technology, it has the potential to signiﬁcantly increase the use of silicon in lithium-ion battery anode and consequently the potential to increase battery energy density, overall performance and longevity. The next step is to further optimise the coating process”, he said. Altech alumina coated silicon Altech alumina coated graphite Current industry coated sample GREEN BONDS Progress on preparations for Altech's proposed listed green bond offering of ~US$144 million continued during the year. The objective of the green bond offering is to provide an additional layer of ﬁnancing for construction of the Company's Malaysian high purity alumina (HPA) project. For the green bond offering, Altech is working closely with London based structuring agent Bedford Row Capital PLC (Bedford Row) and Bluemount Capital (WA) Pty Ltd (Bluemount). Of the US$144m that is proposed to be raised from the bond offer, US$100m would be used as secondary debt for construction of the Company's proposed Johor HPA plant, and the balance of US$44m would be allocated to service bond interest during the HPA plant construction phase. Senior project ﬁnance of US$190m remains committed for the project from German government owned KfW IPEX-Bank. Increasingly green bonds are being used to ﬁnance new and existing projects which deliver environmental beneﬁts and a more sustainable economy. As announced on 20 May 2020, Altech's HPA project has been formally assessed as “green” by the independent Centre of International Climate and Environmental Research (CICERO) based in Oslo, Norway. Compared to conventional HPA processing, Altech's disruptive HPA production technology is estimated to deliver a ~49% reduction in the comparable carbon footprint, and use ~41% less energy. Also, the primary end-use for Altech's HPA is targeted for climate change products, such as LED lights and lithium-ion batteries. For the bond issue, a special purpose vehicle (SPV Co.) would be the issuer and would be managed by Bedford Row Capital (or its nominee). Bond proceeds would then be lent by the SPV Co. to Altech's Malaysian subsidiary (Altech Chemicals Sdn. Bhd.) to part-fund plant construction costs and/or for working capital. It is envisaged that the bond will be for an initial 5-year term, and typical for this type of funding would likely be re-ﬁnanced at a lower coupon (interest rate) towards the end of the term. The SPV Co. would take subordinate security of over project assets, behind the senior lender KfW IPEX-Bank. PRE-FEASIBILITY STUDY - BATTERY MATERIALS COATING PLANT Following the successful demonstration of its alumina coating technology, in late March 2021 Altech announced that its 75% owned German subsidiary, Altech Industries Germany GmbH (AIG) had commenced a pre-feasibility study (PFS) for the construction of a battery materials high purity alumina (HPA) coating plant in Saxony, Germany. The AIG study will assess the commercial viability of constructing a battery materials coating plant at the Schwarze Pumpe Industrial Park in Saxony, Germany, where AIG has an option to acquire an ~14Ha industrial site. The PFS study will assume a phase 1 coating plant designed with the capacity to coat 10,000tpa (35tpd), using Altech's alumina coating technology. The design capacity has been derived from a forecast of European lithium-ion battery plant production capacity that is estimated at ~500 GWh/a by 2025. Based on this forecast the total amount of graphite expected to be required for anode production in Europe is ~500,000tpa when all of the planned lithium-ion battery plants reach full production. However, in determining the size of the coating plant for the PFS, AIG has conservatively assumed that only 50% of the forecast lithium-ion battery plants will eventuate, and as such the proposed coating plant capacity of 10,000tpa would represent 4% of the overall forecast European market for anode graphite. The lay-out of the proposed coating plant at the proposed site, the Schwarze Pumpe Industrial Park in Saxony, Germany will be such that it would allow for the construction of additional materials coating capacity in the future, such as a silicon coating plant and/or additional graphite coating capacity. The study will assume the use of 100% renewable power from the local grid with some minor on-site solar generation for buildings. The design will target green project status. It is planned that once the PFS is completed, the project will be assessed for green accreditation by the Centre of International Climate and Environmental Research (CICERO), Norway. Al Feedstock HPA Precursor Production Anode Grade Graphite &Silicon Coating Plant Finalisation Altech coated Graphite/Silicon OPENING OF RESEARCH AND DEVELOPMENT LABORATORY In mid-2021, Altech announced that it had established its own research and development laboratory in Perth, Western Australia. The laboratory, which was previously occupied by an environmental consulting business, was easily converted to meet Altech's requirements. The laboratory was in a commissioning phase from May 2021, which was ﬁnalised in June 2021, with the facility fully operational since that time. With its own laboratory, Altech can now conduct a full range of research, development and test work (including battery tests) to reﬁne its graphite and silicon particle battery materials HPA coating technology, unhindered. Previously this work was being conducted at Curtin University (WA) and needed to be scheduled around laboratory availability, which did not always align with Altech's requirements. Altech staff and a part-time consultant that were previously located at its Subiaco ofﬁce in Perth are now manning the laboratory, plus a casual process engineer has been employed since that time. The ﬁrst samples of battery materials arrived at the laboratory during June 2021, and since that time various rounds of development tests have been conducted, including various half-cell battery performance tests, which have further assessed the performance of graphite and silicon particles that have been coated with alumina, using Altech's proprietary technology. OPENING OF BATTERY MATERIALS SITE WITH SUPPORT OF SAXONY STATE GOVERNMENT, GERMANY During the year, the Company and its 75% owned subsidiary, Altech Industries Germany GmbH (AIG) opened an ofﬁce and research and development (R&D) workshop at the DOCK3 Industrial Development Centre (DOCK3 IDC), Schwarze Pumpe Industrial Park, Saxony Germany. The ofﬁcial opening was conducted by Mr Roland Peine, managing director of ASG Spremberg GmbH (a services business that promotes and facilitates new businesses for DOCK3 IDC), in the presence of the head state district ofﬁcer Mr Michael Harig. Also present at the opening were the mayor of Spreetal Mr Manfred Peine, the mayoress of Spremberg Ms Christine Herntier from the states Saxony and Brandenburg respectively, together with many other high level state government and industry representatives, plus senior management from the Fraunhofer Institute IKTS. In May 2021, AIG secured via a 3-year lease, ofﬁce space including 2 bays within a 12 bay workshop-warehouse complex at DOCK3 IDC, where it intends to establish an advanced battery materials research and development facility with a focus on the nano coating of lithium-ion battery anode materials. The DOCK3 IDC is located immediately next to a ~14 hectare site at Schwarze Pumpe that AIG has an option to acquire. At the ofﬁcial opening ceremony, Mr Uwe Ahrens managing director of AIG, briefed Saxony State Government ofﬁcials on the progress of the current preliminary feasibility study (PFS) of a battery materials HPA coating plant at Schwarze Pumpe. The PFS is advancing quickly and has assumed a phase 1 coating plant designed with a capacity to coat 10,000tpa (35tpd) of anode grade materials. SALE OF 25% OF ALTECH INDUSTRIES GERMANY FOR A$8.3 MILLION In December 2020, Altech announced that it had ﬁnalised the agreements to sell 25% of Altech Industries Germany GmbH to Frankfurt Stock Exchange listed Altech Advanced Materials AG (AAM), for total consideration of €5.0 million (~A$ 8.3 million. Consideration for the sale was: Ÿ Initial Cash Consideration of €250,000 (~A$415,000) upon the signing of a Share Sale and Purchase Agreement and a Shareholder Agreement between Altech and AAM. Ÿ Deferred Consideration of €4.75 million (~A$7.92 million), payable by AAM as: Ÿ Three equal instalments of €1.583 million (~A$2.63 million) on each annual anniversary of the payment of the Initial Cash Consideration; Ÿ Interest, paid quarterly to Altech at the rate of 3% p.a. (~A$240k p.a.) on the outstanding Deferred Consideration; Ÿ AAM may pay the outstanding Deferred Consideration in full to Altech at any time without penalty; Ÿ 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 Immediate 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); and Ÿ AAM will proportionally participate in all future equity raises by AIG on the same terms as Altech for the purpose of funding its 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. $14.5 MILLION RAISED FROM SUCCESSFUL RIGHTS OFFER In November 2020, Altech initiated a pro-rata entitlement offer (Rights Offer) to raise up to $14.5 million (before costs). Available to all shareholders, the offer was on the basis of two (2) new shares for each ﬁve (5) shares held at $0.04 per new share, plus one free attaching option (exercise price $0.08, expiring 31 May 2022) for each two new shares subscribed and allotted. The offer was underwritten by the Company's major shareholders Deutsche Balaton / Delphi and the Melewar group, which on a combined basis supported the offer of $7.6 million. The offer closed on 11 December 2020, with $12.6 million subscribed and in January 2021 the Company placed the offer shortfall of ~$1.9 million to complete a fully subscribed offer of $14.5 million. Funds from the offer are being applied to the Company's various European initiatives – including listed green bonds, for ongoing work to secure the balance of project ﬁnance, to pay various amounts relating to HPA plant stage 2 construction, the deferred consideration for the acquisition of shares in AAM, and for ongoing corporate costs and working capital. JOHOR HPA PLANT SITE The Company's Johor HPA plant construction site remains on care and maintenance awaiting the completion of project ﬁnance and for Malaysia's COVID-19 restrictions to ease. Stage-2 early works, which included the completion of an electrical sub-station, were successfully completed in June 2020, on time and within budget. The EPC contractor, Metix (a wholly owned subsidiary of SMS group, Germany), successfully completed an orderly and structured demobilisation during early July 2020. At the site, 24/7 site security is in place and regular site inspections and maintenance activities (such as weed and sediment control) have been carried out on a regular basis. The site construction ofﬁce has been retained, and the site is well positioned for the rapid recommencement of construction activities once additional project funding is secured. By self- funding and successfully completing the ﬁrst two stages of early works construction at the HPA site, the Company has signiﬁcantly de-risked the construction start-up. On greenﬁeld construction sites there are always risks associated with attaining required environmental and works approvals; construction permits; site and ground conditions; contractor selection and performance; and general site access. All of these were successfully achieved during early-works, and the project is well positioned for the recommencement of construction upon the ﬁnalisation of project ﬁnancing. HALLOYSITE DISCOVERED AT KERRIGAN KAOLIN DEPOSIT In the September 2021 quarter, Altech announced the discovery of halloysite at its Kerrigan kaolin deposit in Western Australia. The halloysite was observed during the processing of samples from its 2020 air-core drilling campaign. The drilling was conducted to assess the size and quality of the Kerrigan deposit, with the possibility of a halloysite discovery not envisaged at the time. The Kerrigan kaolin deposit is located 20kms south of the central wheat belt town of Hyden, Western Australia and sits within exploration licence E70/4718-I, which covers an area of approximately 480km . The licence was granted in 2015 and is 100% owned by Altech. 2 Halloysite is a tubular form of the kaolin group of minerals where the mineral naturally occurs as nanotubes; microscopic tubes, the diameter of which is measured in nanometres (one millionth of a millimetre). The properties of halloysite nanotubes make halloysite products ideally suited to a diverse range of specialist applications, attracting a signiﬁcant premium above the average kaolin price. Halloysite has long been prized in the manufacture of high-grade porcelain and ceramics improving strength and chip-resistance. Halloysite has attracted research interest for the development of new products such as ﬁbre reinforcement in polymers and as micro-containers for controlled delivery of active agents. More recently, halloysite has been promoted as a lower cost alternative to carbon nanotubes which have many high-tech applications such as hydrogen storage and carbon capture. Initial x-ray diffraction (XRD) and scanning electron microscopy (SEM) investigations into the presence of halloysite at the Kerrigan kaolin deposit is encouraging. One of the six samples examined demonstrated abundant tubular structures consistent with halloysite. Three other samples examined demonstrated similar halloysite rod like structures and their tubular nature will be conﬁrmed with further investigation. The Company has embarked on further test work involving 31 samples which will aim to conﬁrm and determine the signiﬁcance of the initial results. The occurrence of halloysite within the Kerrigan kaolin deposit does not imply any economic beneﬁt at this stage of test work. COLLABORATION AGREEMENT WITH SGL CARBON, GERMANY In April 2021, the Company through its 75% owned German subsidiary, Altech Industries Germany GmbH (AIG), signed a collaboration agreement with SGL Carbon GmbH (SGL Carbon), a wholly-owned subsidiary of SGL Carbon SE of Germany. The agreement is to collaborate and support Altech's development of high purity alumina coated graphite materials speciﬁcally targeted for use by the lithium-ion battery industry. SGL Carbon SE is a world leader in the development and production of carbon-based solutions and reported sales of €919 million in 2020. The Company believes that Altech's coating technology can be successfully employed to coat SGL Carbon's various battery graphite powders with a uniform nano-layer of alumina. Under this collaboration agreement, Altech and SGL Carbon will test the application of Altech's technology to coat SGL Carbon's speciﬁcally designed graphite particles with high purity alumina (HPA). Both companies will fund the test work and retain their respective intellectual property. COLLABORATION AGREEMENT WITH FERROGLOBE The Company also signed a collaboration agreement with a leading silicon producer Ferroglobe, to collaborate in developing a high capacity, long cycle life silicon anode active material targeted for use in lithium-ion (Li-ion) batteries. Under the collaboration agreement, both companies will analyse the possibility of using Altech’s HPA technology to coat speciﬁcally designed silicon particles supplied by the silicon company. Altech will supply the coating technology and sole fund the test work with Ferroglobe to supply all silicon materials. ALTECH ADVANCED MATERIALS AG Altech Advanced Materials AG (AAM) completed a capital raise of €3.07 million during the year as part of its rights issue and private placement program. AAM will use the funds for working capital, for funding its portion (25%) of Altech Industries Germany's (AIG) pre-feasibility study costs for battery materials coating plant, and to fund the deferred consideration payable to Altech for AAM's purchase of 25% of AIG. The fund raising was conducted at an issue price of €1.00 per share. Major AAM shareholders, Altech Chemicals Limited and Deutsche Balaton Aktiengesellschaft subscribed to 1.075 million and 0.644 million shares respectively. Also, prior to the commencement of the AAM capital raise, Altech agreed with AAM that in the event of funding constraints the due date for AAM to pay the ﬁrst €1,583,333 instalment for its acquisition of 25% of AIG (due in December 2021), could be extended until April 2023. Also, Altech agreed that each quarterly interest payment payable by AAM in relation to the deferred settlement amounts due to Altech from its 25% purchase of AIG could also be deferred. Altech currently anticipates that following AAM's €3.07 million capital raise, that some or all of the ﬁrst payment instalment and the quarterly interest payments will be made to Altech, when due. PATENT SUBMISSION FOR ALUMINA COATING OF BATTERY MATERIALS During the year, the Company lodged a patent with IP Australia, for its invention of methods for coating anode active materials with alumina. The patent covers the alumina- containing coating which serves as an artiﬁcial solid electrolyte interface (SEI), and is expected to reduce lithium losses during each battery charge and discharge cycle, and also retard degradation of battery capacity throughout battery life. On 12 September 2020, Altech announced that as a result of its ground-breaking research and development work, it was proceeding to an independent veriﬁcation phase of its method for the alumina coating of graphite particles. These ﬁrst phase coating trials resulted in a very uniform and consistent nano- metre scale alumina coating layers on graphite anode particles. The particles were examined at the University of Western Australia under an electron microscope, where a thin continuous, regular coating of alumina was observed. Thin layers of alumina coating are critical for battery weight. A successful ﬁrst round of battery testing of Altech's alumina coated graphite has also been completed. For this test, a batch of battery electrodes were produced using non- coated standard anode grade graphite particles (the control), and a separate batch was produced that contained anode grade graphite particles coated with HPA using the Company's technology. CORPORATE INFORMATION Altech Chemicals Limited ABN 45 125 301 206 DIRECTORS Luke Atkins Ignatius Tan Daniel Tenardi Peter Bailey Tunku Yaacob Khyra Uwe Ahrens Hansjoerg Plaggemars Non-executive Director Chairman Managing Director Non-executive Director Non-executive Director Non-executive Director Alternate Director COMPANY SECRETARY Shane Volk REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS Suite 8, 295 Rokeby Road, Subiaco, Western Australia 6008 Phone: +618 6168 1555 Email: info@altechchemicals.com Website: www.altechchemicals.com AUDITORS Moore Australia Audit (WA) Level 15, Exchange Tower, 2 The Esplanade, Perth, Western Australia, 6000 SHARE REGISTRY Automic Registry Services Level 2, 267 St Georges Terrace Perth WA 6000 Telephone: 1300 288 664 (Int): +61 2 9698 5414 Facsimile: +61 2 8583 3040 STOCK EXCHANGE LISTING The Company is listed on the Australian Securities Exchange Limited (ASX) and its shares are also quoted on the Frankfurt Stock Exchange (Börse Frankfurt) (FWB) Home Exchange: Perth ASX Code: ATC Frankfurt Stock Exchange: FWB Code: A3Y COMPETENT PERSONS STATEMENT The information in this report that relates to exploration results is based on information compiled by Jeff Randell, a Competent Person, who is a Member of the Australian Institute of Geoscientists. Mr Randell is a Senior Consultant of Geos Mining and has sufﬁcient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as deﬁned in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Mr Randell consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. 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. The Green Bonds referred to this report is indicative in nature; are non- binding; and contain the general terms of a proposed transaction. Any issuance is contingent upon all internal approvals of the Company and structuring agent as well as the completion of detailed due diligence (including but not limited to legal and technical due diligence) and legally binding documentation. There is no certainty that the Green Bonds will be approved or a transaction concluded based on what is contemplated in this report. The Company makes no representations or warranties whatsoever as to the outcome of the Green Bonds process. Altech Chemicals Limited www.altechchemicals.com ABN 45 125 301 206 ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 June 2021 CONTENTS DIRECTORS’ REPORT REMUNERATION REPORT AUDITOR’S INDEPENDENCE DECLARATION CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT CORPORATE GOVERNANCE STATEMENT ADDITIONAL INFORMATION PAGE 1 8 16 17 18 19 20 21 44 45 50 57 CORPORATE DIRECTORY DIRECTORS Luke Atkins (Chairman) Ignatius Tan (Managing Director) Daniel Tenardi (Non-Executive Director) Peter Bailey (Non-Executive Director) Tunku Yaacob Khyra (Non-Executive Director) Uwe Ahrens (Alternate Director for Tunku Yaacob Khyra) Hansjoerg Plaggemars (Non-Executive Director) COMPANY SECRETARY Shane Volk AUDITORS Moore Australia Audit (WA) Level 15, Exchange Tower 2 The Esplanade Perth WA 6000 SHARE REGISTRY Automic Registry Services Level 2, 267 St Georges Terrace Perth WA 6000 Telephone: 1 300 288 664 (Int): +61 2 9698 5414 Facsimile : +61 2 8583 3040 STOCK EXCHANGE LISTING REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS Suite 8, 295 Rokeby Road, Subiaco, Western Australia 6008 Phone: Email: Website: +618 6168 1555 info@altechchemicals.com www.altechchemicals.com The Company is listed on the Australian Securities Exchange Limited (ASX) and its shares are also quoted on the Frankfurt Stock Exchange (Börse Frankfurt)(FWB) Home Exchange: ASX Code: Perth ATC Frankfurt Stock Exchange FWB Code: A3Y ii ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 The directors present their report, together with the financial statements of the Group, being the Company and its controlled entities, for the financial year ended 30 June 2021. DIRECTORS The names and details of the directors of Altech Chemicals Limited during the financial year and until the date of this report are: Ignatius (Iggy) Tan B.Sc, MBA, GAICD Managing Director Appointed: 25 August 2014 Mr Tan is a highly experienced mining and chemical executive with a number of significant achievements in commercial mining projects such as capital raisings, funding, construction, start-ups and operations. Mr Tan has over 30 years chemical and mining experience and been an executive director of a number of ASX-listed companies. He holds a Master of Business Administration from the University of Southern Cross, a Bachelor of Science from the University of Western Australia and is a Graduate of the Australian Institute of Company Directors. Mr Iggy Tan became the Company's Managing Director in August 2014. He is responsible for leading the Company as it proceeds to commercialise its Meckering kaolin deposit via the construction and operation of a high purity alumina (HPA) production plant in Johor, Malaysia. 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. Mr Tan previously held Managing Director positions at ASX listed Kogi Iron Limited (ASX: KFE) (23-08-2013 to 1-05-2014) and Galaxy Resources Limited (ASX: GXY) (11-11-2011 to 11-06- 2013). Luke Frederick Atkins LLB Non-Executive Chairman Appointed: 8 May 2007 A highly qualified mining executive and a lawyer by profession, 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 including a number of mining and exploration companies. Mr Atkins is the co-founder and is currently a Non-Executive Director of ASX-listed Australian Silica Quartz Group Limited (formally Bauxite Resources Limited) (ASX: ASQ). Mr Atkins brings to the board extensive experience in the areas of mining, exploration and corporate governance. Peter Bailey Independent Non-Executive Director Appointed: 8 June 2012 Mr Peter Bailey is a highly experienced and qualified engineer with over 40 years of experience in the mining and industrial chemical production industry. Mr Bailey spent the majority of his career in the alumina chemicals and alumina refining industries. He was previously chief executive officer at Sherwin Alumina, an alumina refinery located in Texas, USA. Prior to Sherwin, in 1998 Mr Bailey was president of Alcoa Worldwide Chemical’s industrial chemicals department. He was responsible for managing the company’s 13 alumina plants that were located in eight countries, with combined annual revenue of approximately US$700 million. In 1996, Mr Bailey was president of Alcoa Bauxite and Alumina and was responsible for 8 alumina plants outside of Australia. He was also the Chairman of the Alcoa Bauxite joint venture in Guinea, Africa. He has a solid business network throughout the global alumina industry. Mr Bailey has not held any other listed company directorships in the past 3 years. Daniel Lewis Tenardi Non-Executive Director Appointed: 17 September 2009 Mr Dan Tenardi is a highly experienced global resource executive with over 40 years of experience in the mining and processing sectors. During his extensive career, Mr Tenardi spent 13 years at Alcoa’s alumina refinery in Kwinana as well as the company’s bauxite mines in the Darling Ranges of Western Australia. Mr Tenardi was the founding Managing Director of Bauxite Resources Limited (since renamed Australian Silica Quartz Group Limited (ASX: ASQ)), where he led the rapid growth of the company from its initial exploration phase, expansion of land holdings, to the commencement of trial shipments of ore and securing supportive strategic partnerships with key Chinese investors. Having built strong networks with industry leaders in the alumina sector, Mr Tenardi provides valuable alumina-specific industry experience. Mr Tenardi previously served as a Non-Executive independent director of Australian iron ore producer, Grange Resources Limited (ASX: GRR), was - 1 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 CEO of Ngarda Civil & Mining and has also held senior executive and operational roles at CITIC Pacific, Alcoa, Roche Mining and Rio Tinto. Tunku Yaacob Khyra B.Sc (Hons), CA Non-Executive Director Appointed: 22 October 2015 Tunku Yaacob Khyra 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 and 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 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 & Wales and a member of the Malaysian Institute of Accountants. He started his career as an Auditor with Price Waterhouse, London from 1982 to 1985 and subsequently joined Price Waterhouse Kuala Lumpur from 1986 to 1987. He joined Malaysian Assurance Alliance Berhad in 1987 and retired as its Chief Executive Officer in 1999. Tunku Yaacob has not held any other Australian listed company directorships in the last 3 years. Uwe Ahrens Alternate Non-Executive Director (for Tunku Yaacob Khyra) Appointed: 22 October 2015 Mr Uwe Ahrens is executive director of Melewar Industrial Group Berhad and Managing Director of Melewar Integrated Engineering Sdn Bhd. He also sits on the board of several other private limited 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 and industrial plant supplier, KOCH Transporttechnik GmbH in Germany, now belonging to FLSmidth Group, where he held a senior management position for 12 years, working predominantly in Germany, USA and South Africa. Mr Ahrens has not held any other Australian listed company directorships in the past 3 years. Mr Ahrens is the Alternate Non-Executive Director for Tunku Yaacob Khyra. Hansjoerg Plaggemars Non-Executive Director Appointed: 19 August 2020 Mr Plaggemars was a previous member of the board of Delphi Unternehmensberatung AG and Deutsche Balaton AG (ATC major shareholder) and currently acts as their representative. Mr Plaggemars is based in Heidelberg, Germany and is an experienced company director and manager. He studied business administration at the University of Bamberg from 1990 to 1995. Mr Plaggemars has been a management consultant since June 2017, and is a board member of various companies within the scope of projects. Mr Plaggemars is currently a member of the management board of Frankfurt Stock Exchange listed Altech Advanced Materials AG. Mr Plaggemars also currently serves as a non-executive director of ASX listed Devenport Resources Limited, Kin Mining Limited and Azure Minerals Limited. COMPANY SECRETARY Shane Volk B.Bus (Accounting), Grad Dip (Applied Corp. Gov.), AGIA Company Secretary and Chief Financial Officer Appointed: 12 November 2014 Mr Volk is an experienced company secretary and chief financial officer having served in these positions for numerous ASX listed companies since 2007. His experience also includes senior management roles in the resources industry (gold and coal) in Indonesia, Papua New Guinea and Australia, with a variety of international resources companies. Mr Volk is a member of the Governance Institute of Australia and has in excess of 30 years of experience in the mining and resources industries. - 2 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 PRINCIPAL ACTIVITIES The principal activities of the Group during the financial year were: (a) the establishment of a research and development laboratory in Perth, Western Australia as a dedicated facility for the further development of its methods for the alumina coating of graphite and silicon particles, typical of those used within the anode of a lithium-ion battery; (b) the completion of early works construction activities (stage 1 and stage 2) at its high purity alumina (HPA) plant site in Malaysia – the plant site is currently on care and maintenance; and (c) the continuation of efforts to finalise total project financing for the balance of construction of the HPA plant and the kaolin (aluminous clay) mine at Meckering, Western Australia, which will provide feedstock for the plant. FINANCIAL POSITION & RESULTS OF OPERATIONS The financial results of the Group for the financial year ended 30 June 2021 are: Cash and cash equivalents Net Assets Revenue Net profit /(loss) after tax Profit / (Loss) per share Dividend 2021 $ 6,728,978 88,926,622 8,059,423 2,325,866 0.002 - 2020 $ 833,053 68,555,438 933,131 (3,519,384) (0.004) - DIVIDENDS No dividend has been paid since the end of the previous financial year and no dividend is recommended for the current year. REVIEW OF OPERATIONS AND ACTIVITIES During the period covered by this report, the Company announced the development of its method for coating graphite and silicon particles, typical of those used in lithium-ion battery anodes, with a non-layer of high purity alumina. Specifically, in September 2020 the Company announced the development of this new and innovative technology and its application for graphite particles. In December 2020, the particle coating technology was confirmed via the successful completion of a first-phase coating trial of graphite particle coating at Curtin University, Western Australia and examination of the trial results at the University of Western Australia. In mid-March 2021, it was announced that Altech’s nano-layer coating technology had been successfully applied to the coating of silicon particles. From these announcements, interest in the Company’s particle coating technology has been keen, and during the year the Company entered into two separate collaboration agreements aiming to advance the development and application of this technology. In November 2020, the Company signed a collaboration agreement with a leading silicon producer to collaborate in developing a high capacity, long cycle life silicon anode active material targeted for use in lithium-ion batteries, and in April 2021, Altech announced that it had signed a collaboration agreement with SGL Carbon of Germany, to collaborate and support Altech’s development of high purity alumina coating of graphite materials. Altech believes that the development of its nano-coating technology for both graphite and silicon particles represents a significant opportunity for the Company, as lithium-ion battery producers are moving to improve battery anode performance and increase battery storage capacity via increasing the amount of silicon in batteries – as publicly announced by electric vehicle and lithium-ion battery manufacturer Tesla. To expedite the technology’s development and commercialisation, in July 2021 Altech was pleased to announce that it had established a dedicated research and development laboratory in Perth, Western Australia. The laboratory provides Altech with the ability to conduct a full range of research, development and test work (including battery tests) to refine its graphite and silicon particle coating technology, unhindered. Prior to the establishment of the laboratory this work was being conducted at Curtin University and needed to be scheduled around laboratory availability, which did not always fit with Altech’s requirements. In addition to the research and development laboratory, in March 2021, Altech’s now 75% owned German subsidiary (see below), Altech Industries Germany GmbH (AIG) commenced work on a pre-feasibility study (PFS) for construction of a battery materials high purity alumina (HPA) coating plant in Saxony, Germany. The PFS will assume a phase 1 coating plant designed with the capacity to coat 10,000tpa (35tpd) of anode graphite, using Altech’s alumina coating technology. The lay-out of the proposed coating plant at the proposed site, the Schwarze Pumpe Industrial Park in Saxony, Germany will be such that it would allow for the construction of additional materials coating capacity in the future, such as a silicon coating plant and/or additional graphite coating capacity. It is envisaged the high purity alumina feedstock for any future battery materials coating plant would ultimately be supplied from the Company’s proposed Malaysian HPA plant. The PFS remains ongoing as at the date of this report. In October 2020, the Company announced the sale of 25% of its formerly wholly owned German subsidiary, Altech Industries Germany GmbH (AIG) to Frankfurt stock exchange listed Altech Advanced Materials AG (AAM), for €5 million (~A$8.3 million). Consideration for the sale comprised a €250,000 (~A$415,000) payment upon signing of the share sale agreement and shareholder agreement – both of which were completed in December 2020, then the payment of 3 equal deferred consideration instalments of €1.583 million (~A$2.63 million), payable on the 1st, 2nd and 3rd anniversary of the initial cash payment date, plus quarterly interest payable on the outstanding deferred consideration at a rate of 3% p.a.. Payment of the deferred consideration is secured via the pledge by AAM of its AIG shares, - 3 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 which would revert back to Altech if the deferred consideration and interest is not paid in full by the 3rd anniversary date. AIG was incorporated by Altech in 2019, and has secured an option to acquire a ~14Ha site at the Schwarze Pumpe Industrial Park in Saxony, Germany, plus it has secured the exclusive right to use Altech’s battery materials coating technology within the European Union. As at the date of this report AIG is 75% owned by Altech and 25% owned by AAM AG. At the site of the Company’s proposed high purity alumina (HPA) plant in Johor, Malaysia, in July 2020 the Company announced the completion of the stage-1 and stage-2 early works construction. The final part of these works involved the completion of the site electrical substation – a key long lead time item. In July 2020, the EPC contractor Metix Malaysia, a wholly owned subsidiary of Germany’s SMS group, successfully completed an orderly and structured demobilisation from the site, which has remained on care and maintenance – with 24/7 security, regular site inspections, and vegetation and sediment control in place. The site construction office has been retained, so the project is well positioned for the recommencement of construction once total project financing is concluded. During the last 12 months, the Company has continued with its efforts to finalise overall project financing for its HPA project. In August 2020, Altech announced that it had initiated a listed green bond project funding option and mandated a Perth based corporate advisor and a London based structuring agent for the planning and execution of a bond offer. The bond offering preparation process is targeting an offer amount of US$144 million. As at the date of this report preparations for the offer are close to final, with the completion of an environmental, social and governance (ESG) audit, a facility agreement and an offering document. Senior project debt provider, German government owned KfW IPEX-Bank remains committed to the provision of a US$190 million senior loan facility, subject to the customary update of the various due diligence reports and satisfaction of conditions precedent. In addition to the senior loan and secondary debt (green bond), the HPA project requires approximately US$100m of further funding to position it for financial close, as in addition to the total project capital cost estimate of US$298m published in the project Financial Investment Decision Study (ASX announcement 23 October 2017), the senior lender requires pre-funding of a contingency reserve account of US$28 million, a debt service reserve account of a similar amount, pre-funded working capital of US$21m and various bank fees and lending charges need to be funded. During the year, Altech was pleased to announce the appointment of experienced German based non-executive director Mr Hansjoerg Plaggemars to its Board. Mr Plaggemars is based in Heidelberg, Germany and is an experienced company director and manager. He was a previous member of the boards of Delphi Unternehmensberatung AG and Deutsche Balaton AG (major shareholders of Altech) and currently acts as their representative. He was appointed to the Altech board in August 2020. Capital Raising In November 2020, the Company initiated a pro-rata entitlement offer to raise up to $14.5 million (before costs). Available to all shareholders, the offer was on the basis of two (2) new shares for each five (5) shares held at $0.04 per new share, plus one free attaching option (exercise price $0.08, expiring 31 May 2022) for each two new shares subscribed and allotted. The offer was underwritten by the Company’s major shareholders Deutsche Balaton / Delphi and the Melewar group, which on a combined basis supported the offer for $7.6 million. The offer closed on 11 December 2020, with $12.6 million subscribed and in January 2021 the Company placed the offer shortfall of ~$1.9 million to complete a fully subscribed offer of $14.5 million. Funds from the offer are being applied to the Company’s various European initiatives – including listed green bonds, for ongoing work to secure the balance of project finance, to pay various amounts relating to HPA plant stage 2 construction, the deferred consideration for the acquisition of shares in AAM, and for ongoing corporate costs and working capital. By mutual agreement between the Company and Specialty Materials Investment LLC (SMI), a Share Purchase Subscription Agreement that was established in April 2020, was terminated on 21 December 2020. In January 2021, the Company closed-out the remaining share issue obligation that it had with SMI via the issue of 14,810,375 fully paid ordinary shares, in satisfaction for funds previously advanced to the Company by SMI. There are no outstanding share issue or other obligations to SMI as at the date of this report. And, in April 2021 the Company announced that it had completed its final utilisation of the Controlled Placement Agreement (CPA) that it had established with Acuity Capital in February 2020. Altech received $2.25 million from the offset of the remaining collateral shares at the close-out of the facility. Risk Management Due to its size and scope of operations, the Group does not have a dedicated Risk Management Committee. Rather, the Company’s board as a whole is responsible for the oversight of the Group’s risk management and control framework. Responsibility for control and risk management is delegated to the appropriate level of management within the Group, with the Managing Director having ultimate responsibility to the board for the risk management and control framework. The Managing Director highlights areas of significant business risk and the board has arrangements in place whereby it monitors risk management, including the periodic reporting to the board in respect of operations and the financial position of the Company. The Company does not have a dedicated internal audit function, however it works closely with its external auditors and management for the evaluation and continual improvement of the effectiveness of its risk management and internal control procedures. EMPLOYEES The Company had 9 permanent employees and one casual employee as at 30 June 2021 (2020: 9 permanent employees). - 4 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Whilst the Group remains primarily focussed on securing the balance of project finance (mezzanine debt and equity) that will enable it to draw-down on the project finance senior debt that has been committed by KfW IPEX-Bank, thereby enabling it to ramp-up to full-scale construction at its Malaysian HPA plant site, during the year it also announced the development of its method for coating graphite and silicon particles (nano-coating technology), typical of those used in lithium-ion battery anodes, with a non-layer of high purity alumina. Altech believes that the development of its nano-coating technology for both graphite and silicon particles represents a significant opportunity for the Company, as lithium-ion battery producers are moving to improve battery anode performance and increase battery storage capacity via increasing the amount of silicon in batteries – as publicly announced by electric vehicle and lithium-ion battery manufacturer Tesla. To expedite the technology’s development and commercialisation, during the year Altech announced that it had signed collaboration agreements with a leading silicon producer and a separate agreement with SGL Carbon of Germany, each for collaboration and support of Altech’s development of high purity alumina coating technology. in addition, in July 2021 it announced that Altech had established a dedicated research and development laboratory in Perth, Western Australia, providing it the ability to conduct a full range of research, development and test work (including battery tests) to refine its graphite and silicon particle coating technology, relatively unhindered. In the opinion of the directors, there were no other significant changes in the state of affairs of the Group that occurred during the financial year under review. EVENTS SUBSEQUENT TO BALANCE DATE There has not arisen since the end of the financial year any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years apart from: • In July 2021, Altech subscribed to 1.075 million shares in Altech Advanced Materials AG at €1.00 per share for total consideration of A$1,713,806 pursuant to its capital raise. Also, prior to the commencement of the AAM capital raise, Altech agreed with AAM that in the event of funding constraints the due date for AAM to pay the first €1,583,333 instalment for its acquisition of 25% of AIG (due in December 2021), could be extended until April 2023. Altech also agree that each quarterly interest payment payable by AAM in relation to the deferred settlement amounts due to Altech could also be deferred. Altech currently anticipate that following AAM’s €3.07 million capital raise, that some or all of the first payment instalment and the quarterly interest payments will be made to Altech, when due. OPTIONS OVER UNISSUED CAPITAL Since 30 June 2020 and up until the date of this report the Company had issued 181,667,319 options with an exercise price of $0.08 per option and an expirty date of 31 May 2022. As at the date of this report 181,664,719 ordinary shares of the Company remain under option. PERFORMANCE RIGHTS OVER UNISSUED CAPITAL As at the date of this report unissued ordinary shares of the Company subject to performance rights are: Performance Right Series Rights outstanding Exercise Price Rights Vested Rights not Vested Managing Director Managing Director Non-executive Directors Employees Employees Employees & consultants Employees Employees Total 10,000,000 5,000,000 6,000,000 3,400,000 200,000 1,400,000 1,000,000 700,000 27,700,000 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 10,000,000 5,000,000 6,000,000 3,400,000 200,000 1,400,000 1,000,000 700,000 27,700,000 Expiry Date 18/11/21 11/6/25 26/11/25 1/1/22 1/2/23 4/8/23 27/9/25 27/9/25 Details of performance rights issued to the directors and Key Management Personnel of the Company during the period of this report are contained in the Remuneration Report. The above performance rights represent unissued ordinary shares of the Company under option as at the date of this report. These performance rights do not entitle the holder to participate in any share issue of the Company. The holders of performance rights are not - 5 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 entitled to any voting rights until the performance rights are exercised into ordinary shares, which is only possible if the vesting conditions attached to the performance rights have been attainted. The names of all persons who currently hold performance rights granted are entered in a register kept by the Company pursuant to Section 168(1) of the Corporations Act 2001 and the register may be inspected free of charge. CORPORATE STRUCTURE Altech Chemicals Limited (ACN 125 301 206) is a Company limited by shares that was incorporated on 8 May 2007 and is domiciled in Australia. FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES The near term focus for the Group is to secure the necessary debt and equity funding that will enable it to bring about project financial close and continue with the construction of its proposed Malaysian HPA plant beyond the completed Stage 1 and Stage 2 early works, and to enable the Group to construct the associated kaolin mine and loading facility at Meckering, Western Australia. The group has also identified what it believes to be a significant opportunity for the Company – the continued development, with the ultimate aim being commercialisation, of its high purity alumina nano-coating technology for both graphite and silicon particles. Altech’s 75% owned German subsidiary has commenced a preliminary feasibility study for construction of a battery materials coating plant in Saxony, Germany and in July 2021 Altech announced that it had established a dedicated research and development laboratory in Perth, Western Australia, providing it the ability to conduct a full range of research, development and test work (including battery tests) to refine its graphite and silicon particle coating technology, relatively unhindered. Also, the Group continues to support the capital raising endeavors of Altech Advanced Materials AG (AAM AG) of Germany, which purchased an option to acquire up to a 49% equity interest in the Company’s HPA project for an amount of US$100 million. In July 2021 Altech subscribed to 1.075 million AAM AG shares as part of its capital raising. Also, AAM AG has until 1 July 2022 to exercise its right to acquire up to a 49% interest in Altech’s HPA project and the Group currently expects that AAM AG will exercise this right to the extent available to it. Business Strategy and Reasoning HPA is a high-value, high margin and highly demanded product as it is the critical ingredient required for the production of synthetic sapphire substrates which are used in the manufacture of light emitting diode (LED) lighting, for the manufacture of alumina semiconductors and for the manufacture of scratch resistant synthetic sapphire glass. Increasingly, HPA is used as a coating on the separator sheets in lithium-ion batteries. HPA is a premium priced material (selling for up to US$40 per kg – 4N quality) with forecast significant annual demand growth driven primarily by the rapidly expanding lithium-ion battery and LED industries. There is currently no substitute for HPA for the manufacture of synthetic sapphire. 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); 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. The successful construction and operation of its proposed HPA plant would see the Company positioned as the world’s largest single producer of HPA (based on 2014 annual HPA production data), and with annual HPA demand expected to increase to approximately 272,000 tonnes by 2024, the HPA market is expected to more than fully absorb the planned additional HPA supply from the Company’s plant. Current HPA producers predominantly use an expensive and highly processed feedstock material such as aluminium metal to produce HPA. The Company’s proposed plant will produce HPA directly from kaolin clay via hydrogen chloride (HCl) leaching, using a production process that will employ conventional “off-the-shelf” plant and equipment. HPA production costs from the Company’s plant are anticipated to be considerably lower than established HPA producers. Development Risk The proposed mining, beneficiation and HPA plant construction and operation activities are all high-risk undertakings. The Company is on a proposed development path and in 2015 completed a bankable feasibility study (BFS) that determined the technical and commercial viability for the construction and operation of a 4,000tpa high purity alumina (HPA) processing plant at Tanjung Langsat, Johor, Malaysia, and an associated kaolin quarry and container loading facility at Meckering, Western Australia to provide feedstock for the HPA plant. The BFS was updated in March 2016 and this update confirmed the technical and commercial viability of the project compared to the original study. In October 2017, the Company published a final investment decision study (FIDS) for the project based on an increased plant output of 4,500tpa, and in February 2018 announced that it had executed definitive terms for a US$190 million senior project finance debt facility with German government owned KfW IPEX-Bank. However, there is no certainty that the financing, mining, construction and operation of the abovementioned operations and facilities will be able to proceed as envisaged, and if they do proceed as envisaged – that the operations will function as expected in the FIDS (or any subsequent study update) and deliver the results that were foreshadowed. Amongst other things, equity and additional debt financing at terms acceptable to the Company and the senior lender (KfW IPEX-Bank) must be secured, capital cost and operating cost estimates and assumptions must be confirmed and various design, operational, processing, supply chain, market, regulatory, industrial and development risks, amongst others, will need to be identified and successfully managed to deliver - 6 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 the development and operating outcomes envisaged in the FIDS and any subsequent study updates. Inescapably, the FIDS and subsequent study updates are detailed studies of what is possible based on a combination of detailed information on hand at the time, and a series of professional judgements, assumptions and estimates at the time; inevitably situations and circumstances change, judgements, assumptions and estimates are different from what actually transpires, debt and equity markets constantly change and as a result actual outcomes will almost certainly vary from those contemplated in a FIDS and any subsequent study updates. MINERAL RESOURCE STATEMENT AND MINERAL RESOURCE ORE RESERVE ESTIMATION GOVERNANCE STATEMENT Altech Chemicals Limited ensures that its Mineral Resource and Ore Reserve estimates are subject to appropriate levels of governance and internal controls. Mineral Resource and Ore Reserve estimation procedures are well established and are subject to periodic systematic peer and technical review by competent and qualified professionals. Altech reviews and reports its Mineral Resource and Ore Reserve estimates at a minimum on an annual basis and in accordance with the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (the JORC Code) 2012 Edition. The most recent annual review for the year ended 30 June 2021 has not identified any material issues. The table below sets out the Mineral Resources and Ore Reserves comparatives as at 30 June 2021 and 30 June 2020. Meckering kaolin (aluminous clay) deposit Mineral Resource estimate (JORC 2012) as at 30 June 2021 Mineral Resource estimate (JORC 2012) as at 30 June 2020 In Fraction < 300µ Classification Measured Indicated Inferred Tonnes 1,500,000 3,300,000 7,900,000 Al2 O3 % 30.0 30.0 29.1 Fe2O3 % 1.01 0.97 1.0 Total Mineral Resources* 12,700,000 29.5 0.99 TiO2 % 0.62 0.61 0.63 0.62 Yield % 69 69 69 Tonnes 1,500,000 3,300,000 7,900,000 69 12,700,000 In Fraction < 300µ Al2 O3 % Fe2O3 % TiO2 % 30.0 30.0 29.1 29.5 1.01 0.97 1.0 0.99 0.62 0.61 0.63 0.62 Yield % 69 69 69 69 * rounded to the nearest one hundred thousand tonnes Notes: 1. 2. The minus 45 micron percentage was measured by wet screening Brightness is the ISO brightness of the minus 45 micron material Mineral Reserve estimate (JORC 2012) as at 30 June 2021 Mineral Reserve estimate (JORC 2012) as at 30 June 2020 Classification Proven Probable Tonnes 454,000 770,000 Total Proven & Probable* 1,224,000 * rounded to the nearest one thousand tonnes Al2 O3 % Fe2O3 % TiO2 % 30.1 30.0 30.0 0.9 0.9 0.9 0.6 0.6 0.6 K2O % 0.5 0.4 0.4 Yield % 69 71 70 Tonnes 454,000 770,000 1,224,000 Al2 O3 % Fe2O3 % TiO2 % 30.1 30.0 30.0 0.9 0.9 0.9 0.6 0.6 0.6 K2O % 0.5 0.4 0.4 Yield % 69 71 70 Competent Persons Statement – Meckering kaolin deposit Mineral Resource estimate The information in this report that relates to Mineral Resources for the Company’s Meckering kaolin (aluminous clay) deposit is based on information compiled by Ms Sue Border, who is a Fellow the AusIMM and of AIG and is a consultant to the Company and is employed by Geos Mining mineral consultants. Ms Border has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that she is undertaking to qualify as a Competent Person as defined in the 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. The information contained in this report pertaining to the Mineral Resource estimate as at 30 June 2021 is extracted from the ASX announcement entitled “Altech updates kaolin resource for its Meckering Mining Lease” dated 8 July 2016, and for the Mineral Resource estimate as at 30 June 2021 is extracted from the ASX announcement entitled “Maiden Ore Reserve at Altech’s Meckering Kaolin Deposit” dated 11 October 2016. Both announcements are available to view on the Company web site www.altechchemicals.com. The Company confirms that there are no material changes to the Company’s Mineral Resources since its ASX announcement of 11 October 2016. Competent Persons Statement – Meckering kaolin deposit Mineral Reserve estimate The information in this report that relates to Mineral Reserves for the Company’s Meckering kaolin (aluminous clay) deposit is based on information compiled by Mr Carel Moormann who is employed by Orelogy Consulting Pty Ltd as a Principal Consultant. Orelogy Consulting Pty Ltd is an independent mine planning consultancy based in Perth, Western Australia. Orelogy was requested by Altech Chemicals Ltd to prepare a reserve estimate for the Meckering kaolin deposit to provide feedstock for high purity alumina production. Mr Moormann is a Fellow of the Australasian Institute of Mining and Metallurgy and a Competent Person as defined by the 2012 JORC Code. Mr Moorman has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 JORC Code. The information contained in this report pertaining to the Mineral Reserve estimate as at 30 June 2021 is extracted from the ASX announcement entitled “Maiden Ore Reserve at Altech’s Meckering Kaolin Deposit” dated 11 October 2016. The announcement is available to view on the Company web site www.altechchemicals.com. The Company confirms that there are no material changes to the Company’s Mineral Reserve estimate and the assumptions underpinning the Mineral Reserve estimate since its ASX announcement of 11 October 2016. - 7 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 ENVIRONMENTAL REGULATION AND PERFORMANCE The Company holds an exploration licence and a mining licence that regulate its exploration and future mining activities in Western Australia. These licences include conditions and regulations with respect to the rehabilitation of areas disturbed during the course of its exploration or future mining activities. So far as the directors are aware, there has been no known breach of the Company’s licence conditions and all exploration activities comply with relevant environmental regulations. DIRECTORS’ SHARE HOLDINGS, OPTION HOLDINGS AND PERFORMANCE RIGHTS HOLDINGS As at the date of this report the directors’ interests in shares and unlisted options of the Company are as follows: Director Ignatius Tan Luke Atkins Daniel Tenardi Peter Bailey Tunku Yaacob Khyra Uwe Ahrens Hansjoerg Plaggemars Interest in Ordinary Shares 7,817,000 10,857,438 5,594,915 3,774,710 135,034,675 1,000,000 - Interest in Listed options - 250,000 - - 29,408,101 - - Interest in Unlisted Options - - - - - - - Interest in Performance Rights 15,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 DIRECTORS’ MEETINGS The number of meetings of the Company’s directors held in the period each director held office during the financial year and the numbers of meetings attended by each director were: Director Luke Atkins Ignatius Tan Daniel Tenardi Peter Bailey Tunku Yaacob Khyra Uwe Ahrens (alternate director) Hansjoerg Plaggemars Board of Director Meetings Meetings Attended 7 7 7 7 - 7 5 Meetings held whilst a director 7 7 7 7 7 7 6 REMUNERATION REPORT Remuneration Committee Recommendation 8.1 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th edition) states that the board should establish a Remuneration Committee. The board has formed the view that given the number of directors on the board, this function could be performed just as effectively with full board participation. Accordingly it has been determined that there is no separate board sub-committee for remuneration purposes. Use of Remuneration Consultants The board did not engage a remuneration consultant to make any recommendations in relation to its remuneration policies for any of the key management personnel for the Company during the financial year covered by this report. However, the board did benchmark key management personnel and board remuneration against independently prepared remuneration reports during the year. Voting and comments made at the Company’s 2020 Annual General Meeting The Company received 6,069,157 proxy votes (9.46%) against its 2020 remuneration report (from the 166,870,291 proxy votes received and eligible to vote on the resolution) tabled at the 2020 Annual General Meeting. The Company did not receive any specific feedback at the Annual General Meeting or throughout the year on its remuneration practices. This report details the amount and nature of remuneration of each director of the Company and executive officers of the Company during the year. - 8 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 REMUNERATION REPORT (continued) Overview of Remuneration Policy The board of directors is responsible for determining and reviewing compensation arrangements for the directors and executive management. The board remuneration policy is to ensure that remuneration properly reflects the relevant person’s duties and responsibilities, and that the remuneration is competitive in attracting, retaining and motivating people of the highest quality. The board believes that the best way to achieve this objective is to provide the non-executive directors, executive director and the executive management with a remuneration package consisting of both fixed and variable components that together reflects the positions, responsibilities, duties and personal performance. An equity based remuneration arrangement for the board and executive management is in place. The remuneration policy is to provide a fixed remuneration component and a specific equity related component, with appropriate vesting (performance) conditions. The board believes that this remuneration policy is appropriate given the stage of development of the Company and the activities that it undertakes, and is appropriate in aligning director and executive objectives with shareholder and business objectives. The remuneration policy in regard to setting the terms and conditions for the non-executive directors has been developed by the board taking into account market conditions and comparable salary levels for companies of a similar size and operating in similar sectors. All remuneration paid to directors is valued at cost to the Company and expensed. Performance rights are valued using the Black-Scholes methodology. In accordance with current accounting policy the value of these performance rights are expensed over the relevant vesting period. Non-Executive Directors The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at a General Meeting, and has been set not to exceed $500,000 per annum. Actual remuneration paid to the Company’s non-executive directors is disclosed below. Cash remuneration fees paid to non-executive directors are not linked to the performance of the Company. However, to align directors interests with shareholder interests, the directors are encouraged to hold shares in the Company and the directors are awarded performance rights that are subject to vesting conditions, with the approval of Shareholders. Board fees (per year) Chairman Other non-executive directors (excluding alternate director) 2021 $95,000 $70,000 2020 $95,000 $70,000 The Chairman’s board fees are paid monthly, other non-executive director board fees are paid quarterly, in arrears. Mr Uwe Ahrens, the alternate director for non-executive director Tunku Yaacob Khyra, has been paid a consulting fee of $5,000 per month for non-board related services provided to the Company, these services are performed in Germany and Malaysia. Executive management The remuneration of the executive management is stipulated in individual services agreements. The Company aims to reward executives with a level of remuneration commensurate with their position and responsibilities within the Company so as to: ● ● ● Reward executives for Company and individual performance against targets set by reference to appropriate benchmarks; Reward executives in line with the strategic goals and performance of the Company; and Ensure that total remuneration is competitive by market standards. Structure Remuneration consists of the following key elements: ● ● ● fixed remuneration; short term incentive scheme; and performance rights Fixed remuneration Fixed remuneration consists of a fixed monthly salary, which is set so as to provide a base level of remuneration that is both appropriate to the position and is competitive in the market. Remuneration packages for the staff that report directly to the Managing Director are based on the recommendation of the Managing Director, subject to the approval of the board. - 9 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 REMUNERATION REPORT (continued) Short term incentive scheme Executives and employees of the Company participate in a short-term incentive scheme that makes available an annual cash incentive (bonus) to individuals based on the attainment of overall Company and group objectives, which are set annually. The scheme is structured to encourage executives and employees to work as a team for the attainment of the Company’s overall objectives, as opposed to prescriptive individual performance objectives. Under the scheme, executives and employees can be awarded a cash bonus up to a maximum of between 40% and 10% of individual annual base salary, depending upon their role in the Company. The board, on the recommendation of the Managing Director, sets annual bonus objectives, and the board also on the recommendation of the Managing Director, approves annual bonus awards. The board has complete discretion over the short-term incentive scheme. During the period covered by this report there we no short-term incentives awarded by the board to executives for the attainment of pre- determined milestones. (2020: Nil). The board does not participate in the short term incentive scheme. Performance rights The board considers equity based incentive compensation to be an integral component of the Company’s remuneration platform enabling it to offer market-competitive remuneration arrangements, the award of performance rights is intended to enable recipients to share in any increase in the Company’s value (as measured by share price) beyond the date of allocation of the performance rights, provided the specific performance conditions (milestones) are met. The performance conditions that were chosen for the performance rights issued to the directors, executive management, employees and key consultants of the Company are on the basis that the achievement of each milestone will represent a significant and challenging performance outcome which will require the performance rights recipients to devote effort, time and skill above and beyond what would normally be expected for their respective fixed compensation. The attainment of each vesting condition (milestone) is not certain, but if achieved could be expected to see an increase in the value of the Company (as measured by share price), enabling the individuals to participate in this increase in value. Each milestone is transparently measurable, with the vesting condition either achieved or not achieved, with the achievement publicly announced to the ASX. The respective recipients must be employed or otherwise retained by the Company at the time of vesting for the performance rights to vest, subject to a milestone being achieved. During the financial year, 1,000,000 performance rights for each of Tunku Yaacob Khyra (director) and Mr Uwe Ahrens (alternate director) were cancelled, and 1,000,000 replacement performance rights were awarded to each of Mr Khyra and Mr Ahrens, plus 1,000,000 performance rights were issued to each other non-executive director, for a total of 6,000,000 performance rights. The issue of these performance rights were approved by shareholders at the Company’s 2020 Annual General Meeting, held on 27 November 2020. The objectives of the award of performance rights are to provide a remuneration mechanism, through share ownership, to motivate, retain and reward the performance of employees, key consultants and Company directors. All performance rights vest based on pre-determined vesting conditions. No performance rights held by directors or key management personnel that were outstanding as at 30 June 2021 or awarded since that date, have vested. - 10 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 REMUNERATION REPORT (continued) Details of remuneration The following tables show details of the remuneration received by Altech Chemicals Limited key management personnel for the current and previous financial year. Primary Compensation Base Salary/Fees $ Short Term Incentive $ Post- Employment Superannuation Contributions $ Equity Compensation Performance Rights $ 2020/21 Directors I Tan – managing director L Atkins – non-executive chairman D Tenardi – non-executive P Bailey – non-executive(i) Tunku Yaacob Khyra - non-executive U Ahrens - alternate director (ii) H Plaggemars – non-executive(iii) Executives 435,000 95,000 70,000 70,000 70,000 60,000 60,915 S Volk – CFO & company secretary TOTAL 259,840 1,120,755 - - - - - - - - - 41,325 9,025 6,650 - - - - 24,685 81,685 Total $ 565,997 125,290 97,915 91,265 91,265 81,265 82,180 89,672 21,265 21,265 21,265 21,265 21,265 21,265 - 217,262 284,525 1,419,702 (i) Directors’ fees were all paid to Waylen Bay Capital Pty Ltd. (ii) Services were provided in Germany and Malaysia pursuant to a consultancy agreement with the Company, effective from 1 January 2019. (iii) Appointed 19 August 2020. Note: The fair value of performance rights is estimated at each balance date taking into account, amongst other factors, the likelihood that the various tranches of performance rights will vest to the respective participants by the vesting date. At 30 June 2021, in the case of all participants, it was deemed likely that the vesting conditions pertaining to the respective tranches of performance rights would be achieved by the vesting dates and accordingly a pro-rata portion of the deemed value of the rights has been expensed to the Profit and Loss account and accordingly has been disclosed as deemed income for each key management personnel. 2019/20 Directors Primary Compensation Base Salary/Fees $ Short Term Incentive $ Post- Employment Superannuation Contributions $ Equity Compensation Performance Rights $ I Tan – managing director L Atkins – non-executive chairman D Tenardi – non-executive P Bailey – non-executive(i) Tunku Yaacob Khyra - non-executive U Ahrens - alternate director (ii) Executives 411,667 95,000 70,000 70,000 70,000 60,000 S Volk – CFO & company secretary TOTAL 277,695 1,054,362 - - - - - - - - 39,108 9,025 6,650 - - - 26,381 81,164 Total $ 649,364 49,832 22,457 (11,289) 85,335 75,335 198,589 (54,193) (54,193) (81,289) 15,335 15,335 6,565 46,150 310,641 1,181,676 (i) Directors’ fees were all paid to Waylen Bay Capital Pty Ltd. (ii) Services were provided in Germany and Malaysia pursuant to a consultancy agreement with the Company, effective from 1 January 2019. Note: The fair value of performance rights is estimated at each balance date taking into account, amongst other factors, the likelihood that the various tranches of performance rights will vest to the respective participants by the vesting date. At 30 June 2021, in the case of all participants, it was deemed likely that the vesting conditions pertaining to the respective tranches of performance rights would be achieved by the vesting dates and accordingly a pro-rata portion of the deemed value of the rights has been expensed to the Profit and Loss account and accordingly has been disclosed as deemed income for each key management personnel. - 11 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 REMUNERATION REPORT (continued) The proportion of remuneration linked to performance and the fixed proportion are as follows: Name Directors I Tan – managing director L Atkins – non-executive Chairman D Tenardi – non-executive P Bailey – non-executive Tunku Yaacob Khyra - non-executive U Ahrens - alternate director H Plaggemars – non-executive Executives Fixed remuneration 2020 2021 At risk remuneration 2020 2021 84% 83% 78% 77% 77% 74% 74% 69% 209% 341% -620% 82% 80% - 98% 16% 17% 22% 23% 23% 26% 26% - 31% -109% -241% 720% 18% 20% - 2% S Volk – CFO & company secretary 100% Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. The service agreements specify the components of remuneration, benefits and notice periods. Participation in the STI and LTI plans is subject to the board’s discretion. Other major provisions of the services agreements are set out below. Name Ignatius Tan Managing Director Term of agreement and notice period * No fixed term 6 months notice Base salary (including superannuation) $476,325 p.a. Shane Volk Chief Financial Officer & Company Secretary No fixed term 1 month notice $284,525 p.a. Termination payments ** 6 months, plus 3 months if terminated because of a change in control of the Company 1 month, plus 3 months if terminated because of a change in control of the Company Non-executive director service arrangements are detailed on the first page of the remuneration report. * The notice period applies equally to either party ** Termination benefit is payable if the Company terminates employees with notice, and without cause (e.g. for reasons other than unsatisfactory performance or gross misconduct). Details of share based compensation During the financial year, 1,000,000 performance rights for each of Tunku Yaacob Khyra (director) and Mr Uwe Ahrens (alternate director) were cancelled, and 1,000,000 replacement performance rights were awarded to each of Mr Khyra and Mr Ahrens, plus 1,000,000 performance rights were issued to each other non-executive director, for a total of 6,000,000 performance rights. The issue of these performance rights were approved by shareholders at the Company’s 2020 Annual General Meeting, held on 27 November 2020 (2020: nil performance rights were issued to directors and other key management personnel). Details of performance rights (subject to vesting conditions), awarded to directors and other key management personnel as part of remuneration in current and prior periods and held as at 30 June 2021, are set out below: Name Directors Record Date No. of Performance Rights Issue price Fair Value at issue date $ Vested & Exercised at 30/06/21 Mr Iggy Tan Mr Iggy Tan Mr Luke Atkins Mr Dan Tenardi Mr Peter Bailey Tunku Yaacob Khyra Mr Uwe Ahrens Mr H Plaggemars 19/11/14 12/6/18 27/11/20 27/11/20 27/11/20 27/11/20 27/11/20 27/11/20 10,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Executives Mr Shane Volk 30/4/15 1,000,000 1,500,000 820,313 45,000 45,000 45,000 45,000 45,000 45,000 90,000 - - - - - - - - - nil nil nil nil nil nil nil nil nil - 12 - Un-vested at 30/06/21 Final date for vesting 10,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 18/11/21 11/6/25 26/11/25 26/11/25 26/11/25 26/11/25 26/11/25 26/11/25 1,000,000 29/4/22 ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 REMUNERATION REPORT (continued) The assessed fair value of the performance rights at issue date to recipients is allocated equally over the period from the grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at issue date and at each subsequent reporting date are determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free rate for the term of the option. Equity instruments held by key management personnel (KMP) The tables below show the number of: shares in the Company; (i) options over ordinary shares in the Company (both listed and unlisted options); and (ii) rights over ordinary shares in the Company (iii) that were held during the financial year by the directors and key management personnel of the Company directly, indirectly or beneficially. KMP Holdings of Ordinary Shares 30 June 2021 Directors I Tan L Atkins D Tenardi P Bailey Tunku Yaacob Khyra U Ahrens H Plaggemars Executives S Volk 30 June 2020 Directors I Tan L Atkins D Tenardi P Bailey Tunku Yaacob Khyra U Ahrens Executives S Volk Balance at Beginning of year Vested as Remuneration during year Acquired/(disposed) during year Other changes during year Balance at End of Year 7,817,000 10,357,438 7,794,915 3,774,710 69,438,811 1,000,000 - - - - - - - 500,000 (2,200,000) - - - - - - 65,595,864 - - - - - 7,817,000 10,857,438 5,594,915 3,774,710 135,034,675 1,000,000 - 1,307,727 - - - 1,307,727 Balance at Beginning of year Vested as Remuneration during year Acquired/(disposed) during year Other changes during year Balance at End of Year 7,817,000 10,049,746 7,794,915 3,774,710 51,005,631 1,000,000 - - 307,692 - - - - - 18,433,180 - - - - - - - - - 7,817,000 10,357,438 7,794,915 3,774,710 69,438,811 1,000,000 1,997,727 - (690,000) - 1,307,727 KMP Holdings of Performance Rights 30 June 2021 Directors I Tan L Atkins D Tenardi P Bailey Tunku Yaacob Khyra U Ahrens H Plaggemars Executives S Volk Balance at beginning of year Awarded or Acquired during year Expired unexercised / Cancelled during year Exercised during year Balance at end of Year Vested and exercisable at year end Unvested and unexercisable at year end 15,000,000 - - - 1,000,000 1,000,000 - - 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 - - - - (1,000,000) (1,000,000) - 15,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 - 1,000,000 - - - - - - - - - - - - 15,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 - - - 1,000,000 - 1,000,000 - 13 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 REMUNERATION REPORT (continued) KMP Holdings of Performance Rights (continued) 30 June 2020 Directors I Tan L Atkins D Tenardi P Bailey Tunku Yaacob Khyra U Ahrens Executives S Volk Balance at beginning of year Awarded or Acquired during year Expired unexercised during year Exercised during year Balance at end of Year Vested and exercisable at year end Unvested and unexercisable at year end 15,000,000 1,000,000 1,000,000 1,500,000 1,000,000 1,000,000 - - - - - - - (1,000,000) (1,000,000) (1,500,000) - - - - - - - - 15,000,000 - - - 1,000,000 1,000,000 - - - - - - 15,000,000 - - - 1,000,000 1,000,000 1,000,000 - - - 1,000,000 - 1,000,000 KMP Holdings of Listed Options 30 June 2021 Directors I Tan L Atkins D Tenardi P Bailey Tunku Yaacob Khyra U Ahrens H Plaggemars Executives S Volk 30 June 2020 Directors I Tan L Atkins D Tenardi P Bailey Tunku Yaacob Khyra U Ahrens Executives S Volk Balance at beginning of year Awarded or Acquired during year Expired unexercised / Cancelled during year Exercised during year Balance at end of Year Vested and exercisable at year end Unvested and unexercisable at year end - - - - - - - - - 250,000 - - 29,408,101 - - - - - - - - - - - - - - - - - - - - 250,000 - - 29,408,101 - - 250,000 - - 29,408,101 - - - - - - - - - - - - - Balance at beginning of year Awarded or Acquired during year Expired unexercised during year Exercised during year Balance at end of Year Vested and exercisable at year end Unvested and unexercisable at year end - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _________________________________________________________________________________________________________ This concludes the remuneration report, which has been audited - 14 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2021 INDEMNIFYING OFFICERS AND AUDITOR During the year, the Company paid an insurance premium to insure certain officers of the Company. The officers of the Company covered by the insurance policy include the directors and the company secretary named in this report. The Directors and Officers Liability insurance provides cover against all costs and expenses that may be incurred in defending civil or criminal proceedings that fall within the scope of the indemnity and that may be brought against the officers in their capacity as officers of the Company. The insurance policy does not contain details of the premium paid in respect of individual officers of the Company. The insurers do not permit the premium amount paid by the Company for this insurance to be disclosed. The Company has not provided any insurance for an auditor of the Company. AUDITORS’ INDEPENDENCE DECLARATION Section 370C of the Corporations Act 2001 requires the Group’s auditors Moore, to provide the directors of the Company with an Independence Declaration in relation to the audit of the financial report. This Independence Declaration is attached and forms part of this Directors’ Report. NON-AUDIT SERVICES There were no non-audit services provided by the external auditors during the year. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not party to any such proceedings during the year. CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the directors of the Company support and have adhered to the principles of corporate governance for a Company of the current size. The Company’s corporate governance statement is contained in the Annual Report. Signed in accordance with a resolution of the directors. Iggy Tan Managing Director DATED at Perth this 29th day of September 2021 - 15 - Moore Australia Audit (WA) Level 15, Exchange Tower, 2 The Esplanade, Perth, WA 6000 PO Box 5785, St Georges Terrace, WA 6831 T +61 8 9225 5355 F +61 8 9225 6181 www.moore-australia.com.au AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF ALTECH CHEMICALS LIMITED AND CONTROLLED ENTITIES I declare that, to the best of my knowledge and belief, during the year ended 30 June 2021, there have been: a) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit, and b) no contraventions of any applicable code of professional conduct in relation to the audit. NEIL PACE PARTNER MOORE AUSTRALIA AUDIT (WA) CHARTERED ACCOUNTANTS Signed at Perth this 29th day of September 2021. 16 Moore Australia Audit (WA) – ABN 16 874 357 907. An independent member of Moore Global Network Limited - members in principal cities throughout the world. Liability limited by a scheme approved under Professional Standards Legislation. ALTECH CHEMICALS LIMITED CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2021 Notes 2(a) 2(a) 2(b) 13(e) Revenue from ordinary activities Interest Income Other income Total Income Expenses Employee benefit expense (incorporating director fees) Depreciation Other expenses Share-based payments Share in profit/(loss) of associate - Altech Advanced Materials AG Impairment - investment in associate (AAM AG) Profit/(loss) before income tax expense Income tax expense Net profit/(loss) from continuing operations Other comprehensive loss Items that will not be reclassified to profit and loss Items that may be reclassified subsequently to profit and loss 30-Jun-21 30-Jun-20 $ $ 117,619 7,941,804 8,059,423 (1,345,086) (230,623) (3,094,837) (242,436) (200,006) (620,569) 2,325,866 - 18,046 915,085 933,131 (1,282,556) (21,584) (1,480,735) (129,238) (202,328) (1,336,074) (3,519,384) - 2,325,866 (3,519,384) - - - - Total comprehensive loss attributable to members of the parent entity 2,325,866 (3,519,384) Basic profit (loss) per share ($'s per share) Diluted profit (loss) loss per share ($'s per share) 4 4 0.002 0.002 (0.004) (0.004) The above consolidated statement of Profit & Loss and Comprehensive Income should be read in conjunction with the accompanying notes. - 17 - ALTECH CHEMICALS LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2021 Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets Property, plant and equipment Right of Use Assets Exploration and evaluation expenditure Development expenditure Investments in Associates Other non-current receivable Total Non-Current Assets TOTAL ASSETS Current Liabilities Lease liabilities Trade and other payables Provisions Total current liabilities Non-Current Liabilities Lease liabilities Provisions Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed Equity Reserves Accumulated losses TOTAL EQUITY 30-Jun-21 30-Jun-20 Notes $ $ 5(a) 6 6,728,978 246,918 6,975,896 833,053 368,556 1,201,609 7 8 9 10 16 17 11 12 12 13 14 18 36,039,267 36,126,435 88,132 604,821 36,463,669 2,085,439 7,509,881 82,791,209 89,767,105 30,878 427,089 228,461 686,428 53,352 100,703 154,055 840,483 - 566,692 36,628,368 2,891,364 - 76,212,859 77,414,468 - 8,567,021 228,085 8,795,106 - 63,924 63,924 8,859,030 88,926,622 68,555,438 107,509,911 7,346,777 89,707,030 7,104,340 (25,930,066) (28,255,932) 88,926,622 68,555,438 The above consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. - 18 - ALTECH CHEMICALS LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2021 Contributed Equity $ Accumulated losses Reserves Total $ $ $ At 1 July 2020 89,707,030 (28,255,932) 7,104,340 68,555,437 Profit (Loss) after income tax for the year Total comprehensive profit (loss) for the year - - 2,325,866 2,325,866 - - 2,325,866 2,325,866 Transactions with owners in their capacity as owners: Issue of share capital (net of issue costs) Share based payments (net movement) 17,802,881 - - - - 17,802,881 242,437 242,437 At 30 June 2021 107,509,911 (25,930,066) 7,346,777 88,926,622 Contributed Equity $ Accumulated losses $ Reserves $ Total $ At 1 July 2019 81,167,075 (24,736,548) 6,975,102 63,405,628 Profit (Loss) after income tax for the year Total comprehensive profit (loss) for the year - - (3,519,384) (3,519,384) Transactions with owners in their capacity as owners: Issue of share capital (net of issue costs) Share based payments (net movement) 8,539,955 - - - - - - 129,238 (3,519,384) (3,519,384) 8,539,955 129,238 At 30 June 2020 89,707,030 (28,255,932) 7,104,340 68,555,437 The above consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. - 19 - ALTECH CHEMICALS LIMITED CONSOLIDATED STATEMENT OF CASHFLOWS For the year ended 30 June 2021 Cash Flows from Operating Activities Payments to suppliers, contractors and employees Interest received Deposits Refunded Deposits Paid 30-Jun-21 30-Jun-20 Notes $ $ (3,801,433) (2,559,581) 117,619 - (15,929) 18,046 471 - Net cash flows used in operating activities 5(b) (3,699,743) (2,541,064) Cash Flows from Investing Activities Purchase of land, property, plant and equipment Payments for development expenditure Payments for exploration expenditure Proceeds from sale of 25% of Altech Industries Germany Gmbh Investment in Associate (Altech Advanced Materials AG) Net cash used in investing activities Cash Flows from Financing Activities Payments for KfW IPEX-Bank lloan facility Net proceeds from issue of shares Oroceeds from share placement not yet converted to equity Net cash flows from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the financial period 5(a) (95,515) (5,077,643) (38,129) 403,819 (1,981,363) (3,729) (9,892,451) (164,728) 815,085 (821,018) (6,788,831) (10,066,841) (273,773) 16,658,272 - 16,384,499 5,895,925 833,053 6,728,978 (2,331,492) 6,955,418 550,000 5,173,926 (7,433,979) 8,267,032 833,053 The above consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. - 20 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 GENERAL INFORMATION The financial statements cover Altech Chemicals Limited as a consolidated entity consisting of Altech Chemicals Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Altech Chemicals Limited’s functional and presentation currency. Altech Chemicals Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Suite 8, 295 Rokeby Road Subiaco Western Australia 6008 The financial statements were authorised for issue, in accordance with the resolution of directors. The directors have the power to amend and reissue the financial statements. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. The principal accounting policies adopted in preparing the financial report of the Company, Altech Chemicals Limited (“ATC” or “Company”), are stated to assist in a general understanding of the financial report. These policies have been consistently applied to all the years presented, unless otherwise indicated. Altech Chemicals Limited is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the official list of the Australian Securities Exchange (ASX). The financial statements are presented in Australian dollars, which is the Group’s functional currency. (a) Basis of Preparation These general purpose financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and International Financial Reporting Standards as issued by the International Accounting Standards Board. The financial report is presented in Australian dollars. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. (b) Use of Estimates and Judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. (c) Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred asset or liability is recognised in relation to those temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and future tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. (d) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. Interest income Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. - 21 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 (e) Cash and Cash Equivalents Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short term deposits with an original maturity of three months or less. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, which are readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis. (f) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. Property Freehold land and buildings are recorded at cost of acquisition, less accumulated depreciation for buildings. If re-valued, increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation surplus in equity. Decreases that offset previous increases of the same asset are recognised against revaluation surplus directly in equity; all other decreases are recognised in profit or loss. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Plant and equipment Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of the recoverable amount is made when impairment indicators are present (refer to Note 1(q) for details of impairment). The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which they are incurred. Land Land is recorded at the total cost of acquisition. The value of land in Australia (Meckering) is not amortised. Land in Malaysia (Johor HPA plant site) is recorded at the total cost of acquisition and is amortised on a straight-line basis over the 30-year term of the land lease. The carrying amount of land is reviewed annually to ensure that it is not in excess of the recoverable amount from its disposal. In the event that the carrying amount of any land is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss account or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of the recoverable amount is made when impairment indicators are present (refer to Note 10 for details of impairment). Leased Asset The Company leases its research and development laboratory at Unit 2, 91 Leach Highway, Kewdale WA 6105. This lease has a 3 year term (expiring 31 March 2024), and the Company has an option to renew the lease for an additional 3 year term. Lease payments are made monthly and there is an annual 3% increase in the amount payable on the first and second anniversary of the lease. Variable outgoings are also paid to the building body corporate on a monthly basis, and adjusted against actual outgoings expenses annually. The Company’s wholly owned Malaysian subsidiary, Altech Chemicals Sdn Bhd leases an office space in Tanjung Langsat, Johor, Malaysia. This lease has a 1 year term (expiring 31 August 2021), and the Company has an option to renew the lease for an additional 1 year term. The Company accounts for all leases in accordance with the requirements specified in AASB 16, and has consequently recognised a Right of use asset in the balance sheet as summarised in Note 8. - 22 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 (f) Property, Plant and Equipment (continued) Depreciation The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a straight-line basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Plant & equipment Depreciation Rate 33% to 66% The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. (g) Employee Benefits Short-term employee benefits Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The Group’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as a part of current trade and other payables in the statement of financial position. The Group’s obligations for employees’ annual leave and long service leave entitlements are recognised as provisions in the statement of financial position. Other long-term employee benefits Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long-term employee benefits are measured at the present value of the expected future payments to be made to employees. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on government bonds that have maturity dates that approximate the terms of the obligations. Any re-measurements for changes in assumptions of obligations for other long-term employee benefits are recognised in profit or loss in the periods in which the changes occur. The Group’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial position, except where the Group does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case the obligations are presented as current provisions. Share-based payment transactions The Group currently operates a performance rights plan and also awards Performance Rights to its directors outside of the plan but on the same terms and conditions, which provides benefits to directors, consultants, executives and employees. The Group may also award performance rights or other equity instruments outside of the performance rights plan to directors, consultants, executives and employees. The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Any underlying assumptions are detailed in Note 13(e). The cost of equity-settled transactions is recognised as a share based payment expense in the profit and loss account with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. - 23 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 (g) Employee Benefits (continued) If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Where the Group grants equity instruments (i.e. fully paid ordinary shares, or options to acquire fully paid ordinary shares of the Group) to service providers’ as consideration for services provided to the Group, the consideration is classified as a share-based payment transaction, and the fair value of the equity instruments granted is measured at grant date by using a Black-Scholes valuation model. The value of equity securities (as measured by the Black-Scholes model) is taken to the profit and loss account or the balance sheet as applicable, together with a corresponding increase in equity. (h) Exploration and Development Expenditure Exploration, evaluation and development expenditures incurred are capitalised in respect of each identifiable area of interest. These costs are only capitalised to the extent that they are expected to be recovered through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit or loss in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to capitalise costs in relation to that area. Costs of site restoration are provided for over the life of the project from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with local laws and regulations and clauses of the permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted for on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. (i) Research and Development Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project is expected to deliver future economic benefits and these benefits can be measured reliably. Development costs have a finite life and are amortised on a systematic basis based on the future economic benefits over the useful life of the project. An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following are demonstrated: • • • • • the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and the ability to measure reliably the expenditure attributable to the intangible asset during its development. • Capitalised development costs will be amortised over their expected useful life once commercial sales commence. The value of research and development tax incentives received in relation to research and development assets is recognised by deducting the actual rebate/incentive received from the carrying value of the asset. (j) Going Concern This report has been prepared on the going concern basis, which contemplates the continuation of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business for a period of 12 months from the date of issuing the financial statements. The Group has incurred net cash outflows from operating and investing activities for the year ended 30 June 2021 of $10,488,574, (2020: $12,607,905). Notwithstanding this as at 30 June 2021, the Group had net current assets of $6,289,468 (30 June 2020: net current liabilities of $7,593,497) and cashflow forecasts indicate that it will have sufficient cash to remain as a going concern for at least the next 12 months. - 24 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 (k) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (“ATO”). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables are stated with the amount of GST included. GST incurred is claimed from the ATO when a valid tax invoice is provided. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. (l) (m) The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows. Payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Issued Capital Contributed Equity Issued capital is recognised as the fair value of the consideration received by the Group. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. Earnings per Share Basic earnings per share (“EPS”) are calculated based upon the net loss divided by the weighted average number of shares. Diluted EPS are calculated as the net loss divided by the weighted average number of shares and dilutive potential shares. (n) Leases At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability is recognised by the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (lease with remaining lease term of 12 months or less) and leases of low-value assets are recognised as an operating expense on a straight-line basis over the term of the lease. Initially, the lease liability is measured at the present value of the lease payments still to be paid at the commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate. Lease payments included in the measurement of the lease liability are as follows: • • • • fixed lease payments less any lease incentives; variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; the amount expected to be payable by the lessee under residual value guarantees; the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; - - lease payments under extension options if lessee is reasonably certain to exercise the options; and payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. Subsequently, the lease liability is measured by a reduction to the carrying amount of any payments made and an increase to reflect any interest on the lease liability. The right-of-use assets is an initial measurement of the corresponding lease liability less any incentives and initial direct costs. Subsequently, the measurement is the cost less accumulated depreciation (and impairment if applicable). Right-of-use assets are depreciated over the lease term or useful life of the underlying asset whichever is the shortest. Where a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. (o) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (p) Financial risk management The board of directors has overall responsibility for the establishment and oversight of the risk management framework, to identify and analyse the risks faced by the Group. These risks include credit risk, liquidity risk and market risk from the use of financial instruments. The Group has only limited use of financial instruments through its cash holdings being invested in short term interest bearing securities. The primary goal of this strategy is to maximise returns while minimising risk through the use of accredited Banks with a minimum credit rating of A1 from Standard & Poors. Working capital is maintained at its highest level possible and regularly reviewed by the full board. - 25 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 (q) Impairment of Assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (e.g. in accordance with the revaluation model in AASB 116). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash- generating unit to which the asset belongs. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. (r) Critical accounting estimates and judgements The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are: Share based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option pricing model, using the assumptions detailed in Note 13(e). Exploration and evaluation assets Determining the recoverability of exploration and evaluation expenditure capitalised in accordance with the Group’s accounting policy (refer Note 1 0), requires estimates and assumptions as to future events and circumstances, in particular, whether successful development and commercial exploitation, or alternatively sale, of the respective areas of interest will be achieved. The Group applies the principles of AASB 6 and recognises exploration and evaluation assets when the rights of tenure of the area of interest are current, and the exploration and evaluation expenditures incurred are expected to be recouped through successful development and exploitation of the area. If, after having capitalised the expenditure under the Group’s accounting policy in Note 11, a judgment is made that recovery of the carrying amount is unlikely, an impairment loss is recorded in profit or loss in accordance with the Group’s accounting policy in Note 10. The carrying amounts of exploration and evaluation assets are set out in Note 9. Development expenditure and Malaysian HPA Plant (works in progress) Judgment is applied by management in determining when development and other capital expenditure relating to the Malaysian HPA plant is commercially viable and technically feasible. Any judgments may change as new information becomes available. If, after having commenced the development activity, a judgment is made that the asset under development is impaired, the appropriate amount will be written off to the Statement of Profit or Loss & Other Comprehensive Income. Whilst the current economic climate and the impacts of the COVID-19 pandemic in the medium to longer term are still uncertain, impairment assessments are undertaken based on the best available current information. (s) New and Amended Accounting Policies Adopted by the Group The Group has considered the implications of new or amended Accounting Standards which have become applicable of the current financial reporting period. There have been no new or amended accounting standards for the current financial reporting period. (t) New Accounting Standards for Application in Future Periods A number of new standards and amendments to standards have been issued and are effective for future accounting periods, however the Group has not yet adopted these and does not expect any standard or amendment not yet effective, to have a significant impact on the financial statements of the Group in future periods. (u) Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent, Altech Chemicals Limited and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 27. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Company from the date on which control is obtained by the Company. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Company. Equity interests in a subsidiary not attributable, directly or indirectly, to the Company are presented as “non-controlling interests”. The Company initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income. Financial Instruments (v) - 26 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 Initial recognition and measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions to the instrument. For financial assets, this is the date that the Group commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments (except for trade receivables) are initially measured at fair value plus transaction costs, except where the instrument is classified "at fair value through profit or loss", in which case transaction costs are expensed to profit or loss immediately. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Trade receivables are initially measured at the transaction price if the trade receivables do not contain a significant financing component or if the practical expedient was applied as specified in AASB 15.63. Classification and subsequent measurement Financial liabilities Financial instruments are subsequently measured at: – – amortised cost; or fair value through profit or loss. A financial liability is measured at fair value through profit and loss if the financial liability is: a contingent consideration of an acquirer in a business combination to which AASB 3: Business Combinations applies; held for trading; or initially designated as at fair value through profit or loss. – – – All other financial liabilities are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest expense in profit or loss over the relevant period. The effective interest rate is the internal rate of return of the financial asset or liability. That is, it is the rate that exactly discounts the estimated future cash flows through the expected life of the instrument to the net carrying amount at initial recognition. A financial liability is held for trading if: – – – it is incurred for the purpose of repurchasing or repaying in the near term; part of a portfolio where there is an actual pattern of short-term profit taking; or a derivative financial instrument (except for a derivative that is in a financial guarantee contract or a derivative that is in an effective hedging relationship). Any gains or losses arising on changes in fair value are recognised in profit or loss to the extent that they are not part of a designated hedging relationship are recognised in profit or loss. The change in fair value of the financial liability attributable to changes in the issuer's credit risk is taken to other comprehensive income and are not subsequently reclassified to profit or loss. Instead, they are transferred to retained earnings upon derecognition of the financial liability. If taking the change in credit risk in other comprehensive income enlarges or creates an accounting mismatch, then these gains or losses should be taken to profit or loss rather than other comprehensive income. A financial liability cannot be reclassified. Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are initially measured at fair values (and if not designated as at fair value through profit or loss and do not arise from a transfer of a financial asset) and subsequently measured at the higher of: – – the amount of loss allowance determined in accordance with AASB 9.3.25.3; and the amount initially recognised less the accumulative amount of income recognised in accordance with the revenue recognition policies. Financial assets Financial assets are subsequently measured at: – – – amortised cost; fair value through other comprehensive income; or fair value through profit or loss. Measurement is on the basis of two primary criteria: – – the contractual cash flow characteristics of the financial asset; and the business model for managing the financial assets. A financial asset that meets the following conditions is subsequently measured at amortised cost: – – the financial asset is managed solely to collect contractual cash flows; and the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. - 27 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 (v) Financial Instruments (continued) A financial asset that meets the following conditions is subsequently measured at fair value through other comprehensive income: – the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates; the business model for managing the financial assets comprises both contractual cash flows collection and the selling of the financial asset. – By default, all other financial assets that do not meet the measurement conditions of amortised cost and fair value through other comprehensive income are subsequently measured at fair value through profit or loss. The Group initially designates a financial instrument as measured at fair value through profit or loss if: – it eliminates or significantly reduces a measurement or recognition inconsistency (often referred to as “accounting mismatch”) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; it is in accordance with the documented risk management or investment strategy, and information about the groupings was documented appropriately, so that the performance of the financial liability that was part of a group of financial liabilities or financial assets can be managed and evaluated consistently on a fair value basis; – it is a hybrid contract that contains an embedded derivative that significantly modifies the cash flows otherwise required by the contract. The initial designation of the financial instruments to measure at fair value through profit or loss is a one-time option on initial classification and is irrevocable until the financial asset is derecognised. Equity instruments At initial recognition, as long as the equity instrument is not held for trading and not a contingent consideration recognised by an acquirer in a business combination to which AASB 3:Business Combinations applies, the Group made an irrevocable election to measure any subsequent changes in fair value of the equity instruments in other comprehensive income, while the dividend revenue received on underlying equity instruments investment will still be recognised in profit or loss. Regular way purchases and sales of financial assets are recognised and derecognised at settlement date in accordance with the Group's accounting policy. Derecognition Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of financial position. Derecognition of financial liabilities A liability is derecognised when it is extinguished (i.e. when the obligation in the contract is discharged, cancelled or expires). An exchange of an existing financial liability for a new one with substantially modified terms, or a substantial modification to the terms of a financial liability is treated as an extinguishment of the existing liability and recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non- cash assets transferred or liabilities assumed, is recognised in profit or loss. Derecognition of financial assets A financial asset is derecognised when the holder's contractual rights to its cash flows expires, or the asset is transferred in such a way that all the risks and rewards of ownership are substantially transferred. All of the following criteria need to be satisfied for derecognition of financial asset: – – – the right to receive cash flows from the asset has expired or been transferred; all risk and rewards of ownership of the asset have been substantially transferred; and the Group no longer controls the asset (i.e. the Group has no practical ability to make a unilateral decision to sell the asset to a third party). On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. On derecognition of a debt instrument classified as at fair value through other comprehensive income, the cumulative gain or loss previously accumulated in the investment revaluation reserve is reclassified to profit or loss. On derecognition of an investment in equity which was elected to be classified under fair value through other comprehensive income, the cumulative gain or loss previously accumulated in the investment revaluation reserve is not reclassified to profit or loss, but is transferred to retained earnings. Derivative financial instruments The Group enters into various derivative financial instruments (i.e. foreign exchange forward contracts and interest rate swaps) to manage its exposure to interest rate and foreign exchange rate risks. Derivative financial instruments are initially and subsequently measured at fair value. All gains and losses subsequent to the initial recognition are recognised in profit or loss. - 28 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 (v) Financial Instruments (continued) Hedge accounting At the inception of a hedge relationship, the Group identifies the appropriate risks to be managed by documenting the relationship between the hedging instrument and the hedged item, along with risk management objectives and the strategy for undertaking various hedge transactions. The Group documents whether the hedging instrument is effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk. That is, whether the hedging relationships meet all of the following hedge effective requirements: – – – there is an economic relationship between the hedged item and the hedging instrument; the effect of credit risk does not dominate the value changes that result from that economic relationship; and the hedged ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group uses to hedge the quantity of hedged item. When the hedging relationship ceases to meet the hedging ratio requirement, the Group rebalances the hedge so that it meets the qualifying criteria again. Discontinuation of hedge is not voluntary and is only permitted if: – – – the risk management objective has changed; there is no longer an economic relationship between the hedged item and the hedging instrument; or the credit risk is dominating the hedge relationship. Qualifying items Each eligible hedged item must be reliably measurable and will only be designated as a hedge item if it is made with a party which is not part of the Group and is from one of the following categories: – – – a recognised asset or liability (financial or non-financial); an unrecognised firm commitment (binding agreement with specified quantity, price and dates); or a highly probable forecast transaction. Fair value hedges At each reporting date, except when the hedging instrument hedges an equity instrument designated as at fair value through other comprehensive income, the carrying amount of the qualifying hedge instruments will be adjusted for the fair value change and the attributable change is recognised in profit or loss, at the same line as the hedged item. When the hedged item is an equity instrument designated as at fair value through other comprehensive income, the hedging gain or loss remains in other comprehensive income to match the hedging instrument. Cash flow hedges The effective portion of the changes in fair value of the hedging instrument is not recognised directly in profit and loss, but to the extent the hedging relationship is effective, it is recognised in other comprehensive income and accumulated under the heading Cash Flow Hedging Reserve, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion (balancing figure) is recognised immediately in profit or loss. Hedge accounting on cash flow hedge instruments is discontinued prospectively when the hedge relationship no longer meets the qualifying criteria. Amounts recognised in the cash flow hedging reserve that are related to the discontinued hedging instrument will immediately be reclassified to profit or loss. Preference shares Preferred share capital is classiﬁed as equity if it is non-redeemable or redeemable only at the discretion of the Parent Entity, and any dividends are discretionary. Dividends thereon are recognised as distributions within equity upon declaration by the directors. Preferred share capital is classiﬁed as a liability if it is redeemable on a set date or at the option of the shareholders, or where the dividends are mandatory. Dividends thereon are recognised as interest expense in proﬁt or loss. Compound ﬁnancial instruments Compound instruments (convertible preference shares) issued by the Group are classiﬁed as either ﬁnancial liabilities or equity in accordance with the substance of the arrangements. An option that is convertible and that will be settled by the exchange of a ﬁxed amount of cash or another ﬁnancial asset for a ﬁxed number of the Group’s own equity instruments will be classified as equity. The fair value of the liability component is estimated on date of issue. This is done by using the prevailing market interest rate of the same kind of instrument. This amount is recognised using the effective interest method as a liability at amortised cost until conversion or the end of life of the instrument. The equity portion is calculated by deducting the liability amount from the fair value of the instrument as a whole. The equity portion is not remeasured after initial recognition. Equity will remain as such until the option is exercised. When the option is exercised a corresponding amount will be transferred to share capital. If the option lapses without the option being exercised the balance in equity will be recognised in profit or loss. Costs of the transaction of the issue of convertible instruments are proportionally allocated to the equity and liability. Transaction costs in regards to the liability are included in the carrying amount of the liability and are amortised over its life using the effective interest method. Transaction cost in equity is directly recognised in equity. - 29 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 (v) Financial Instruments (continued) Impairment The Group recognises a loss allowance for expected credit losses on: – – – – – financial assets that are measured at amortised cost or fair value through other comprehensive income; lease receivables; contract assets (e.g. amounts due from customers under construction contracts); loan commitments that are not measured at fair value through profit or loss; and financial guarantee contracts that are not measured at fair value through profit or loss. Loss allowance is not recognised for: – – financial assets measured at fair value through profit or loss; or equity instruments measured at fair value through other comprehensive income. Expected credit losses are the probability-weighted estimate of credit losses over the expected life of a financial instrument. A credit loss is the difference between all contractual cash flows that are due and all cash flows expected to be received, all discounted at the original effective interest rate of the financial instrument. The Group uses the following approaches to impairment, as applicable under AASB 9: Financial Instruments: – – – – the general approach the simplified approach the purchased or originated credit impaired approach; and low credit risk operational simplification. General approach Under the general approach, at each reporting period, the Group assesses whether the financial instruments are credit-impaired, and if: – the credit risk of the financial instrument has increased significantly since initial recognition, the Group measures the loss allowance of the financial instruments at an amount equal to the lifetime expected credit losses; or there is no significant increase in credit risk since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. – Simplified approach The simplified approach does not require tracking of changes in credit risk at every reporting period, but instead requires the recognition of lifetime expected credit loss at all times. This approach is applicable to: – trade receivables or contract assets that result from transactions within the scope of AASB 15: Revenue from Contracts with Customers and which do not contain a significant financing component; and lease receivables. – In measuring the expected credit loss, a provision matrix for trade receivables was used taking into consideration various data to get to an expected credit loss (i.e. diversity of customer base, appropriate groupings of historical loss experience, etc.). Purchased or originated credit-impaired approach For a financial asset that is considered credit-impaired (not on acquisition or origination), the Group measures any change in its lifetime expected credit loss as the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. Any adjustment is recognised in profit or loss as an impairment gain or loss. Evidence of credit impairment includes: – – – – – significant financial difficulty of the issuer or borrower; a breach of contract (e.g. default or past due event); a lender granting to the borrower a concession, due to the borrower's financial difficulty, that the lender would not otherwise consider; high probability that the borrower will enter bankruptcy or other financial reorganisation; and the disappearance of an active market for the financial asset because of financial difficulties. Low credit risk operational simplification approach If a financial asset is determined to have low credit risk at the initial reporting date, the Group assumes that the credit risk has not increased significantly since initial recognition and accordingly it can continue to recognise a loss allowance of 12-month expected credit loss. In order to make such a determination that the financial asset has low credit risk, the Group applies its internal credit risk ratings or other methodologies using a globally comparable definition of low credit risk. A financial asset is considered to have low credit risk if: there is a low risk of default by the borrower; – the borrower has strong capacity to meet its contractual cash flow obligations in the near term; – adverse changes in economic and business conditions in the longer term may, but not necessarily will, reduce the ability of the borrower – to fulfil its contractual cash flow obligations. A financial asset is not considered to carry low credit risk merely due to existence of collateral, or because a borrower has a risk of default lower than the risk inherent in the financial assets, or lower than the credit risk of the jurisdiction in which it operates. - 30 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 (v) Financial Instruments (continued) Recognition of expected credit losses in financial statements At each reporting date, the Group recognises the movement in the loss allowance as an impairment gain or loss in the statement of profit or loss and other comprehensive income. The carrying amount of financial assets measured at amortised cost includes the loss allowance relating to that asset. Assets measured at fair value through other comprehensive income are recognised at fair value, with changes in fair value recognised in other comprehensive income. Amounts in relation to change in credit risk are transferred from other comprehensive income to profit or loss at every reporting period. For financial assets that are unrecognised (e.g. loan commitments yet to be drawn, financial guarantees), a provision for loss allowance is created in the statement of financial position to recognise the loss allowance. (w) Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit or loss net of any reimbursement. Provisions are measured at management’s best estimate of the expenditure required to settle the present obligation at the reporting date. (x) Foreign Currency Functional and presentation currency Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is the Company’s functional and presentation currency. Transactions and Balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of • financial position; income and expenses for each consolidated statement of profit and loss and other comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and • all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. Foreign exchange gains and losses that relate to borrowings are presented in the consolidated statement of profit and loss and other comprehensive income, within finance costs. All other foreign exchange gains and losses are presented in the consolidated statement of profit and loss and other comprehensive income on a net basis within other income or other expenses. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for- sale financial assets are recognised in other comprehensive income. - 31 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 2. Loss for the year includes the following specific income and expenses 30-Jun-21 30-Jun-20 (a) Revenue Interest income Sale of 25% equity of Altech Industries Germany GmbH Other Income (b) Other expenses Accounting and audit fees ASX and share registry fees Corporate & consulting Insurance expense Occupancy Legal fees Investor relations and marketing Office & administration Foreign exchange translation $ 117,619 7,941,108 696 8,059,423 (50,268) (74,759) (1,095,422) (255,015) (123,054) (127,256) (218,669) (258,943) (891,451) $ 18,046 - 915,085 933,131 (48,748) (73,645) (387,138) (213,818) (114,314) (72,234) (379,514) (187,555) (3,769) (3,094,837) (1,480,735) - 32 - 30-Jun-21 30-Jun-20 $ (138,820) - (138,820) $ - - - 2,325,866 650,249 (3,519,384) (1,055,815) (2,064,688) 82,973 (138,820) 63,033 812,665 - 430,278 25,490 (138,820) 241,168 560,318 801,486 - - - 38,771 1,016,474 (55,270) 50,000 5,840 - 20,724 1,486,349 1,507,073 (801,486) (1,507,073) - - (103,684) (697,802) (801,486) 801,486 - - - (94,366) (1,412,707) (1,507,073) 1,507,073 - 97,476 34,523 1,594,407 1,018,787 - 1,594,407 5,102 1,155,888 ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 3. Income Tax Income tax expense Current income tax expense Deferred income tax expense Total income tax expense Tax reconciliation Accounting profit (loss) before tax from continuing operations At statutory tax rate of 26% Adjustment for: Non-assessable income R&D spend Expenditure subject to the R&D tax offset Share based payments to employees Other non-deductible expenses Other deductible expenses Deferred tax assets not recognised Tax rate differential Deferred tax assets Provisions, accruals and other Tax losses Offset by deferred tax liabilities Deferred tax liabilities Capitalised mineral exploration and evaluation expenditure Development expenditure Offset by deferred tax assets Deferred tax assets not recognised Share issue costs Intangible Assets Tax losses Capital losses - 33 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 4. Earnings per share Basic profit (loss) per share Diluted profit (loss) per share 30-Jun-21 30-Jun-20 $ 0.002 0.002 $ (0.004) (0.004) The weighted average number of ordinary shares used in the calculation of basic earnings per share was: Number Number 1,018,048,889 792,498,609 Options or rights to purchase ordinary shares not exercised at 30 June 2021 have not been included in the determination of basic earnings per share. 5. Cash and cash equivalents (a) Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: Cash at bank and on hand 30-Jun-21 30-Jun-20 $ 6,728,978 6,728,978 $ 833,053 833,053 (b) Reconciliation of the loss from ordinary activities after income tax to the net cash flows used in operating activities: - Deferred Consideration Receivable - sale of 25% Altech Industries Germany GmbH (7,537,290) Profit/(Loss) from ordinary activities after income tax Non-cash items: - Depreciation expense (Operations) - Share based payments - Loss on disposal of assets - Impairment - investment in associate (AAM AG) - Share in profit/(loss) of associate (AAM AG) Change in operating assets and liabilities: - Increase / (decrease) in Operating trade and other payables - (Increase) / decrease in Operating trade and other receivables - Increase / (decrease) in Operating provisions - Malaysian GST Refund Received Net cash outflows from Operating Activities 6. Trade and other receivables CURRENT RECEIVABLES Sundry debtors GST receivable Payroll Tax receivable Deposits paid Altech Advanced Materials AG Other receivable - 34 - 30-Jun-21 30-Jun-20 $ $ 2,325,866 (3,519,384) 230,623 333,000 464 620,569 200,006 (192,196) 228,709 90,506 - 21,584 452,774 866 1,336,074 202,328 - (731,262) (16,654) 20,234 (307,624) (3,699,743) (2,541,064) 30-Jun-21 $ 30-Jun-20 $ 4,240 24,976 - 24,754 184,950 7,998 246,918 228,460 8,397 11,687 25,688 90,679 3,645 368,556 ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 7. Property, Plant and Equipment OFFICE EQUIPMENT At cost Less: accumulated depreciation Total plant and office equipment LAND At cost Less: amortisation Total land PLANT AND EQUIPMENT At cost Less: accumulated depreciation Total land MALAYSIAN HPA PLANT (works in progress) At cost Total HPA Plant Total Property, Plant and Equipment Reconciliation Reconciliation of the carrying amounts for each class of plant and equipment are set out below: OFFICE EQUIPMENT Carrying amount at the beginning of the year Additions Loss on Disposals Depreciation expense (profit & loss account) Depreciation expense (development expenditure) Carrying amount at the end of the year LAND Carrying amount at the beginning of the year Additions Less: amortisation Carrying amount at the end of the year PLANT AND EQUIPMENT Carrying amount at the beginning of the year Additions Loss on Disposals Less: depreciation Carrying amount at the end of the year MALAYSIAN HPA PLANT (works in progress) Carrying amount at the beginning of the year Additions Less: depreciation Carrying amount at the end of the year - 35 - 30-Jun-21 30-Jun-20 $ 260,646 (158,924) 101,722 $ 192,921 (126,422) 66,499 8,302,180 (619,005) 7,683,175 8,294,660 (444,594) 7,850,066 37,384 (11,527) 25,857 16,161 (9,111) 7,050 28,228,513 28,228,513 28,202,820 28,202,820 36,039,267 36,126,435 30-Jun-21 30-Jun-20 $ 66,499 54,534 - (19,311) - 101,722 7,850,066 7,520 (174,411) 7,683,175 7,050 25,652 (116) (6,729) 25,857 $ 97,800 3,020 (866) (21,584) (11,871) 66,499 8,046,690 247,970 (444,594) 7,850,066 7,998 140 - (1,088) 7,050 28,202,820 25,693 - 18,502,736 9,700,084 - 28,228,513 28,202,820 ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 8. Right-of-use Assets At cost Accumulated depreciation Net carrying amount Reconciliation Reconciliation of the carrying amount of right-of-use assets at the beginning and end of the current period are set out below: Right-of-use assets At beginning of the period net of accumulated depreciation Application during the period Depreciation charge for the period At 30 June 2021 net of accumulated depreciation 9. Exploration and Evaluation expenditure Carrying amount at the beginning of period Exploration and evaluation expenditure incurred during the period (at cost) Carrying amount at the end of the year 10. Development expenditure Carrying amount at the beginning of the period Development expenditure incurred during the period (at cost) Carrying amount at the end of the year 11. Trade and other payables CURRENT PAYABLES (Unsecured) Trade creditors Accrued expenses Acquisition of Altech Advanced Materials equity (deferred portion) Equity issue obligation to Specialty Materials Investment LLC Payroll Tax payable Other creditors and accruals Total trade and other payables 12. Provisions CURRENT Provision for annual leave NON CURRENT Provision for long service leave Total provisions - 36 - 30-Jun-21 30-Jun-20 $ 142,933 (54,801) 88,132 $ - - - 30-Jun-21 30-Jun-20 $ - 142,933 (54,801) 88,132 30-Jun-21 $ 566,692 38,129 604,821 $ - - - - 30-Jun-20 $ 566,692 - 566,692 30-Jun-21 $ 30-Jun-20 $ 36,628,368 36,628,368 (164,699) - 36,463,669 36,628,368 30-Jun-21 30-Jun-20 $ $ 209,008 51,991 - - 5,982 160,108 427,089 4,854,880 886,502 1,966,715 617,500 - 241,424 8,567,021 30-Jun-21 30-Jun-20 $ $ 228,461 228,085 100,703 329,164 63,924 292,009 ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 13. Contributed Equity (a) Ordinary shares Contributed equity at the beginning of the period Shares issued during the period Transaction costs relating to shares issued Contributed Equity at the end of the reporting period Movements in ordinary share capital Ordinary shares on issue at the beginning of reporting period Shares issued during the period: 19-Jul-19 at nil (Performance Rights Vest) 31-Jul-19 at nil (Performance Rights Vest) 16-Aug-19 at $0.08415 (Purchase of shares in YAG) 18-Nov-19 at $0.1085 (Placement to MAAG) 11-Dec-19 at $0.0975 (Placement) 9-Jan-20 at 0.0975 (Share Purchase Plan) 27-Feb-20 at nil (Collateral Shares - Controlled Placement Facility) 22-Apr-20 at nil (Collateral Shares - SMI funding) 22-Apr-20 at $0.0498 (SMI funding fee shares) 1-May-20 at $0.045 (Placement - Acuity Capital) 1-May-20 at $0.0405 (Placement - Consultant) 3-Jun-20 at $0.039 (Placement SMI) 31-July-20 at $0.035 (Placement SMI Tranche 2) 14-Aug-20 at $0.035 (Placement SMI Tranche 3) 25-Sep-20 at $0.035 (Placement SMI Tranche 4) 12-Oct-20 at $0.035 (Placement SMI Tranche 5) 18-Dec-20 at $0.04 (Entitlement Offer) 20-Jan-21 at $0.032 (Placement SMI Tranche 6) 22-Jan-21 at $0.04 (Entitlement Offer Shortfall) 30-Jun-21 30-Jun-20 $ $ 89,707,030 18,770,923 81,167,075 9,024,956 (968,042) (485,001) 107,509,911 89,707,030 30-Jun-21 30-Jun-20 870,451,255 722,120,669 - - - - - - - - - - - - 4,285,714 8,571,429 8,571,429 16,457,143 315,721,720 14,810,375 47,613,068 1,000,000 500,000 19,513,204 18,433,180 18,635,062 29,189,612 40,000,000 4,800,000 4,219,409 6,665,000 246,914 5,128,205 - - - - - - - Ordinary shares on issue at the end of the reporting period 1,286,482,133 870,451,255 (b) Performance Rights The Company issued 6,000,000 performance rights during the reporting period pursuant to the Altech Chemicals Limited performance rights plan ("the Plan"). 2,000,000 performance rights were cancelled during the period. At 30 June 2021, the Company had the following unlisted performance rights on issue: performance rights - managing director (exercise price: nil) performance rights - employee's & consultants (exercise price: nil) performance rights - non-executive directors (exercise price: nil) Total performance rights on issue at 30 June 2021 At 30 June 2020, the Company had the following unlisted performance rights on issue: performance rights - managing director (exercise price: nil) performance rights - employee's & consultants (exercise price: nil) performance rights - non-executive directors (exercise price: nil) Total performance rights on issue at 30 June 2021 15,000,000 6,700,000 6,000,000 27,700,000 15,000,000 6,700,000 2,000,000 23,700,000 Each performance Right converts to one fully paid ordinary share of the Company and the conversion of each performance right is subject to the holder attaining certain pre-determined vesting conditions. - 37 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 13. Contributed Equity (continued) (c) Listed Options The Company issued 181,667,319 listed options as part of an entitlement offer during the reporting period. (2020: Nil) At 30 June 2021, the Company had 181,667,319 listed options on issue (2020: Nil) (d) Unlisted Options The Company did not issue any unlisted options during the reporting period (2020: nil). At 30 June 2021, the Company did not have any unlisted options on issue (2020: nil). (e) Share Based Payments Consultants During the period the Company transferred 733,333 fully paid ordinary shares @A$0.045 each (total value $33,000) from the 40,000,000 collateral shares issued to Acuity Capital on 27 February 2020, to a consultant in satisfaction of advisory services rendered. $30,000 was recorded in the profit and loss account as consulting fees and $3,000 in the balance sheet as GST paid. During the period the Company also issued 7,500,000 ordinary shares @ $0.04 each(total value $300,000) for services rendered in underwriting and arranging the placement of shares pursuant to the December 2020 pro-rate entitlement offer. This amount was recorded in the balance sheet as transaction costs relating to share issues. Performance Rights The Company issued 6,000,000 performance rights during the period (2020: nil), and 2,000,000 performance rights were cancelled (2020: nil). During the period a share based payments expense, associated with performance rights already issued, of $242,436 (2020: $129,238) was recorded in the profit and loss account. Fair Value of Performance Rights The fair value of the performance rights awarded during the period at the award date was calculated using the Black Scholes pricing model that took into account the term, the underlying value of the shares, the exercise price, the expected dividend yield, the impact of dilution and the risk-free interest rate. Inputs used for each series granted included: Variable Exercise price for the performance right Market price for the shares at date of valuation / issue Volatility of company share price Dividend yield Risk free rate Expiry from date of grant (number of years) Number of Rights issued Performance Rights - Valuation Assumptions Directors $0.00 $0.045 53.0% 0% 4.30% 5.00 6,000,000 The fair value of performance rights is estimated at the date of grant using a Black-Scholes valuation model taking into account the terms and conditions upon which the performance rights were awarded, and the fair value of performance rights is re-assessed each balance date by reference to the fair value of the performance rights at the time of award, adjusted for the probability of achieving the vesting conditions, which may change from balance date to balance date and consequently impact the amount to be expensed via profit and loss account in future periods. Vesting of the performance rights are subject to the attainment of the applicable performance milestones. - 38 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 13. Contributed Equity (continued) Performance Rights Plan The establishment of the Altech Chemicals Limited employee Performance Rights Plan (“the Plan”) was approved by ordinary resolution at a General Meeting of shareholders on 5 November 2014 and re-approved by shareholders in General Meeting on 12 June 2018. All eligible directors, executive officers, employees and consultants of Altech Chemicals Limited, who have been continuously employed by the Company are eligible to participate in the Plan. The Plan allows the Company to issue rights to eligible persons for nil consideration. The rights can be granted free of charge, vesting is subject to the attainment of certain pre-determined conditions, and exercise is at a pre-determined fixed price calculated in accordance with the Plan. The fair value of any performance rights issued by the Company during the reporting period is determined at the date of grant using a Black- Scholes valuation model taking into account the terms and conditions upon which the performance rights are awarded. At each balance date the fair value of all performance rights is re-assessed by reference to the fair value of the performance rights at the time of award, adjusting for the probability of achieving the vesting conditions, which may change from balance sheet date and consequently impact the amount that is expensed or reversed in the profit and loss account for the relevant reporting period. During the financial year, performance rights for 2 non-executive directors (2,000,000 Performance Rights) were cancelled and a total of 6,000,000 new performance rights were awarded to the non-executive directors, 1,000,000 to each non-executive director). Details of performance rights that vested during the reporting period are shown in note 13(b), above 14. Reserves Share based payments reserve Carrying amount at the end of the year Movements: Share based payments reserve Balance at the beginning of the period Fair value of performance rights issued Balance at end of period 15. Financial Instruments 30-Jun-21 30-Jun-20 $ 7,346,777 7,346,777 $ 7,104,340 7,104,340 7,104,340 242,437 7,346,777 6,975,102 129,238 7,104,340 The Company's activities expose it to a variety of financial risks and market risks. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. (a) Interest rate risk The Company’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market, interest rates and the effective weighted average interest rates on those financial assets, is as follows: Weighted Average Effective Interest % Funds Available at a Floating Interest Rate $ Fixed Interest Rate $ Assets/ (Liabilities) Non Interest Bearing $ Total $ Notes 5(a) 6 0.50% 11 0.00% 2021 Financial Assets Cash and cash equivalents Other receivables Total Financial Assets Financial Liabilities Payables Total Financial Liabilities Net Financial Assets/(Liabilities) - - - - - - - 6,728,978 246,918 246,918 246,918 6,975,896 457,967 457,967 457,967 457,967 (211,049) 6,517,929 6,728,978 - 6,728,978 - - 6,728,978 - 39 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 15. Financial Instruments (continued) Weighted Average Effective Interest % Funds Available at a Floating Interest Rate $ Fixed Interest Rate $ Assets/ (Liabilities) Non Interest Bearing $ Total $ Notes 5(a) 6 0.50% 11 0.00% 2020 Financial Assets Cash and cash equivalents Other receivables Total Financial Assets Financial Liabilities Payables Total Financial Liabilities Net Financial Assets/(Liabilities) 833,053 - 833,053 - - 833,053 - - - - - - - 833,053 368,556 368,556 368,556 1,201,609 8,567,021 8,567,021 8,567,021 8,567,021 (8,198,465) (7,365,412) (b) Credit Risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date, is the carrying amount, net of any provisions for doubtful debts, as disclosed in the balance sheet and in the notes to the financial statements. The Company does not have any material credit risk exposure to any single debtor or group of debtors, under financial instruments entered into by it. (c) Commodity Price Risk & Liquidity Risk At the present state of the Company’s operations it has minimal commodity price risk and limited liquidity risk due to the level of payables and cash reserves held. The Company’s objective is to maintain a balance between continuity of development funding and flexibility through the use of available cash reserves. (d) Net Fair Values For assets and other liabilities, the net fair value approximates their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised form. The Company has no financial assets where the carrying amount exceeds net fair values at balance date. The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the balance sheet and in the notes to the financial statements. 16. Investment in Associate (Altech Advanced Materials AG) 30-Jun-21 30-Jun-20 Carrying amount at the beginning of the period Acquisition of shares in Altech Advanced Materials AG (AAM AG) Share of associate's loss for the period since acquisition Impairment based on the market value of AAM AG shares at balance date Carrying amount at the end of the year 17. Other non-current receivables Deferred consideration sale of 25% AIG to AAM AG Carrying amount at the end of the period $ 2,891,365 14,650 (200,006) (620,570) $ - 4,429,767 (202,328) (1,336,074) 2,085,439 2,891,365 30-Jun-21 30-Jun-20 $ 7,509,881 7,509,881 $ - - - 40 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 18. Accumulated losses Carrying amount at the beginning of the period Profit (loss) for the period Carrying amount at the end of the year 19. Auditors' remuneration Audit - Moore Australia Audit (WA) Audit and review of the financial reports 20. Related Parties Key management personnel compensation Short-term employee benefits Post-employment benefits Share-based payments 30-Jun-21 30-Jun-20 $ $ (28,255,932) (24,736,547) 2,325,866 (3,519,384) (25,930,066) (28,255,932) 30-Jun-21 30-Jun-20 $ $ 46,011 47,869 30-Jun-21 30-Jun-20 $ 860,915 57,000 217,265 1,135,180 $ 776,667 54,783 39,585 871,035 During the financial year there were no loans made or outstanding at year end (2020: nil) Other transactions with key management personnel The mother of Luke Atkins (non-executive chairman) is the owner of the office premises that the Company rents for its registered office and principal place of business. During the year the Company paid $100,000 (2020:$100,000) rent and outgoings on normal commercial terms and conditions. Other related party transactions In October 2020, the Company announced the sale of 25% of its formerly wholly owned German subsidiary, Altech Industries Germany GmbH (AIG) to Frankfurt stock exchange listed Altech Advanced Materials AG (AAM), for €5 million (~A$8.3 million). Consideration for the sale comprised a €250,000 (~A$415,000) payment upon signing of the share sale agreement and shareholder agreement – both of which were completed in December 2020, then the payment of 3 equal deferred consideration instalments of €1.583 million (~A$2.63 million), payable on the 1st, 2nd and 3rd anniversary of the initial cash payment date, plus quarterly interest payable on the outstanding deferred consideration at a rate of 3% p.a.. Payment of the deferred consideration is secured via the pledge by AAM of its AIG shares, which would revert back to Altech if the deferred consideration and interest is not paid in full by the 3rd anniversary date. 21. Expenditure commitments (a) Exploration The Company has certain obligations to perform minimum exploration work on the various mineral leases that it holds. These obligations may vary over time, depending on the Company's exploration programs and priorities. As at 30 June 2021, total exploration expenditure commitments on tenements held by the Company have not been provided for in the financial statements and those which cover the following twelve month period amount to $152,000 (2020: $114,000). These obligations are also subject to variations, may be subject to farm-out arrangements, sale of relevant tenements or via application for expenditure exemptions from prior-year commitments from the relevant government department. (b) Capital commitments EPC contracts for the construction of the Malaysian HPA plant and the Australian kaolin loading facility have been executed with SMS group GmbH and Simulus Engineering Pty Ltd for prices of US$280 million and US$2.5 million respectively. Commitment to the contracted expenditure is subject to a number of conditions being met including the securing of the total targeted project funding. As at 30 June 2021, the Company had no capital commitments in relation either contract (2020: Nil). All works completed as stage 1 or stage 2 early works construction during the period under the US$280 million SMS group GmbH contract had been billed to the Company and paid as at 30 June 2021. As at 30 June 2021, no early works had been completed under the Simulus Engineering Pty Ltd contract. - 41 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 22. Segment Information The Group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The financial statements presented above are the same as the reports the directors review. The Group operates predominantly in one segment, which is the development of high purity alumina (HPA) manufacturing, and mineral exploration. Although the Group has established a wholly owned subsidiary in Malaysia, the operations of the Group for the year ended 30 June 2021 were largely centred in one geographic segment, being Australia. The board of directors anticipate including a second geographic segment (being Malaysia) when the proposed construction of the HPA plant in Malaysia is at an advanced stage. 23. Employee entitlements and superannuation commitments Employee Entitlements There are the following employee entitlements at 30 June 2021: Annual Leave Provision $228,461 (2020: $228,085) and Long Service Leave Provision $100,703 (2020: $63,924). Directors, officers, employees and other permitted persons performance rights Plan Details of the Company's Performance Rights Plan are disclosed in the Remuneration Report. Superannuation commitments The Company contributes to individual employee accumulation superannuation plans at the statutory rate of the employees’ wages and salaries, in accordance with statutory requirements, to provide benefits to employees on retirement, death or disability. Accordingly no actuarial assessment of the plans is required. Funds are available for the purposes of the plans to satisfy all benefits that would have been vested under the plans in the event of: ▪ termination of the plans;  ▪ voluntary termination by all employees of their employment; and  ▪ compulsory termination by the employer of the employment of each employee. During the year employer contributions (including salary sacrifice amounts) to superannuation plans totalled $173,715.42 (2020: $183,628). 24. Contingent liabilities There were no material contingent liabilities not provided for in the financial statements of the Group as at 30 June 2021 other than: Native Title and Aboriginal Heritage Native title claims have been made with respect to areas which include tenements in which the Group has an interest. The Group is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or not and to what extent the claims may significantly affect the Group or its projects. Agreement is being or has been reached with various native title claimants in relation to Aboriginal Heritage issues regarding certain areas in which the Group has an interest. 25. Events subsequent to balance date There has not arisen, since the end of the financial year, any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company to affect substantially the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent financial years apart from: • In July 2021, Altech subscribed to 1.075 million shares in Altech Advanced Materials AG at €1.00 per share for total consideration of A$1,713,806 pursuant to its capital raise. Also, prior to the commencement of the AAM capital raise, Altech agreed with AAM that in the event of funding constraints the due date for AAM to pay the first €1,583,333 instalment for its acquisition of 25% of AIG (due in December 2021), could be extended until April 2023. Altech also agree that each quarterly interest payment payable by AAM in relation to the deferred settlement amounts due to Altech could also be deferred. Altech currently anticipate that following AAM’s €3.07 million capital raise, that some or all of the first payment instalment and the quarterly interest payments will be made to Altech, when due. - 42 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 26. Parent entity disclosure STATEMENT OF FINANCIAL POSITION ASSETS Current assets Non-Current assets TOTAL ASSETS LIABILITIES Current liabilities Non-Current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Accumulated losses Share based payments reserve TOTAL EQUITY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Net profit / (loss) Total comprehensive loss for the year 27. Controlled entities Investments in controlled entities comprise: Name Altech Chemicals Ltd Wholly owned and/or controlled entities: Altech Chemicals Sdn Bhd (Malaysia) Altech Industries Germany GmbH Altech Meckering Pty Ltd Altech Chemicals Australia Pty Ltd Canning Coal Pty Ltd 30-Jun-21 30-Jun-20 $ $ 6,654,844 866,308 87,026,385 70,798,766 93,681,229 71,665,074 535,855 154,055 689,910 1,343,774 63,924 1,407,698 92,991,319 70,257,376 107,509,911 89,707,030 (21,865,368) (26,553,994) 7,346,777 7,104,340 92,991,319 70,257,376 4,688,626 (1,884,868) 4,688,626 (1,884,868) Beneficial percentage held by economic entity 2021 % 2020 % 100 75 100 100 100 100 100 100 100 100 Principal activities Parent entity HPA Plant Option to acquire industrial site in Germany Kaolin Mine Intellectual Property/Patent Holder Mineral exploration Altech Chemicals Sdn Bhd is incorporated in Malaysia, and Altech Industries GmbH is incorporated in Germany, all other controlled entities are incorporated in Australia. Altech Chemicals Limited is the head entity of the consolidated group, which includes all of the controlled entities. - 43 - ALTECH CHEMICALS LIMITED DIRECTORS’ DECLARATION For the year ended 30 June 2021 The Directors of the Company declare that: 1. The financial statements and note, as set out on pages 1-43, are in accordance with the Corporations Act 2001: (a) comply with Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards (IFRS); and (b) give a true and fair view of the financial position as at 30 June 2021 and of the performance for the year ended on that date of the consolidated group. 2. The Managing Director and Chief Financial Officer have given the declaration required by s295A of the Corporations Act 2001. 3. In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the board of directors and is signed by authority for and on behalf of the directors by: Iggy Tan Managing Director DATED at Perth this 29th day of September 2021 - 44 - Moore Australia Audit (WA) Level 15, Exchange Tower, 2 The Esplanade, Perth, WA 6000 PO Box 5785, St Georges Terrace, WA 6831 T +61 8 9225 5355 F +61 8 9225 6181 www.moore-australia.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ALTECH CHEMICALS LIMITED Report on the Audit of the Financial Report Opinion We have audited the financial report of Altech Chemicals Limited (the Company) and its subsidiaries (the “Group”), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the “Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. Key Audit Matters We have determined the matters described below to be the key audit matters to be communicated in our report. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Moore Australia Audit (WA) – ABN 16 874 357 907. An independent member of Moore Global Network Limited - members in principal cities throughout the world. Liability limited by a scheme approved under Professional Standards Legislation. 45 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ALTECH CHEMICALS LIMITED (CONTINUED) Key Audit Matters (continued) Carrying value of Property, Plant and Equipment & Capitalised Development Expenditure (relating to the High Purity Alumina HPA Project) Refer to Notes 1(f & i), Notes 7 Property Plant Equipment & 10 Development Expenditure Property, plant and equipment (PPE) totaling $36.04 million as disclosed in Note 7 and capitalised development expenditure (DE) totaling $36.46 million as disclosed in Note 10 represent significant balances recorded in the consolidated statement of financial position. These assets are predominantly related to the freehold land hosting the Meckering Kaolin deposit and the site lease, preliminary and design costs, stage one and two development costs of the Company’s High Purity Alumina (HPA) Project which comprises the proposed construction and operation of a HPA processing plant located in Malaysia. As detailed in the Directors’ Report, the final Investment Decision Study results for the HPA project were published in October 2017 and the Company is currently at an advanced stage of final components of project securing funding. the The evaluation of the recoverable amount of these assets requires significant judgment in determining the key assumptions supporting the expected future cash flows of the business and the utilisation of the relevant assets. Our procedures included, amongst others: • Critically evaluating management’s methodologies and their documented basis for key assumptions utilised in the their HPA Bankable valuation models adopted Feasibility Study (BFS) and the final Investment Decision Study, including consideration of impacts, if any, of recent changes to market conditions. in • Assessing and challenging: ̶ the identification of cash generating units, including any property, plant and equipment which are critical to the HPA Project and for the purposes of assessing the recoverable amount of the projected cash generating units; ̶ key assumptions for long-term growth rates in the forecast cash flows by comparing them to economic and industry forecasts; ̶ other key inputs that are material to the BFS NPV model such as anticipated commodity pricing and direct operating costs against available industry data; and ̶ the discount rate applied. • Testing HPA Project related expenditures capitalised during the year on a sample basis against supporting documentation such as supplier invoices and various cost agreements and ensuring such expenditures are appropriately recorded in accordance with applicable Accounting Standards. • Discussed and addressed, where identified, indicators of possible impairment with management and the directors. This included assessing the market capitalisation of the Group ($55.0 million) against its net asset position ($88.9 million) at balance date to gauge whether there are any indicators the total capitalised PPE and DE costs relating to the HPA Project were impaired. • Capitalised PPE and DE costs were formally impairment tested by management at 30 June 2021. We reviewed and discussed this impairment assessment. • Assessing the appropriateness of the relevant disclosures included in Notes 7 & 10 to the financial report. 46 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ALTECH CHEMICALS LIMITED (CONTINUED) Key Audit Matters (continued) Group’s ability to continue as a Going Concern Refer to Note 1(j) The financial statements are prepared on a going concern basis in accordance with AASB 101 Presentation of Financial Statements. The Group continues to incur significant operating losses in its ongoing efforts to advance the commercialisation and development of its HPA Project. As the directors’ assessment of the Group’s ability to continue as a going concern is subject to significant judgement, we identified going concern as a significant risk requiring special audit consideration. Accounting for Share Based Payments Refer to Note 1(g) and 13 consultants, As detailed in Note 1(g), the Company currently operates a Performance Rights Plan (PRP) which provides benefits to stakeholders including directors, and employees. The total share based payment (SBP) expense during the financial year ended 30 June 2021 was $242,436 as detailed in the Statement of Profit or Loss and Other Comprehensive Income. executives The fair value of the SBP is determined by using the Black Scholes model which takes into account the terms and conditions upon which the instruments were granted and a number of key underlying assumptions. Given the significance of the expense and the level of judgment and estimation in determining the valuation of the SBP, the accounting for share based payments was considered a key audit matter. Our audit procedures following: included, amongst others, the • An evaluation of the directors’ assessment of the Group’s ability to continue as a going concern. In particular, we reviewed budgets and cashflow forecasts for at least the next 12 months and reviewed and challenged the directors’ assumptions. • Reviewed plans by the directors to defer certain payments and secure additional funding through either the issue of further shares and/or debt funding or a combination thereof. • An evaluation of the directors plans for future operations and actions in relation to its going concern assessment, taking into account any relevant events subsequent to the year end, through discussion with the directors. • Review of disclosure in the financial statements to ensure appropriate. Based on our work, we agree with the directors’ assessment that the going concern basis of preparation is appropriate. Our audit procedures following: included, amongst others, the • Critically valuation evaluating management’s methodology and their documented basis for key assumptions utilised in the Black Scholes valuation model. This also included: • Assessing and evaluating: ̶ the assessment of the key assumptions used in the valuation model such as the share price volatility, dividend yield and risk free interest rate against available market data. ̶ the proper expensing of SBP on a proportionate basis across the relevant financial period from grant date to vesting date. • Performing our own internal re-computation to ensure the total reported SBP expense is not materially misstated. 47 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ALTECH CHEMICALS LIMITED (CONTINUED) Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located on the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar2_2020.pdf This description forms part of our auditor’s report. 48 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ALTECH CHEMICALS LIMITED (CONTINUED) Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report as included in the directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Altech Chemicals Limited, for the year ended 30 June 2021 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. NEIL PACE PARTNER MOORE AUSTRALIA AUDIT (WA) CHARTERED ACCOUNTANTS Signed at Perth this 29th day of September 2021. 49 ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2021 The board of directors of Altech Chemicals Limited (“ATC”) is committed to conducting the Company’s business in accordance with the highest standards of corporate governance. The board is responsible for the Company’s Corporate Governance and the governance framework, policy and procedures, and charters that underpin this commitment. The board ensures that the Company complies with the corporate governance requirements stipulated in the Corporations Act 2001 (Cth), the ASX Listing Rules, the constitution of the Company and any other applicable laws and regulations. The table below summarises the Company’s compliance with the ASX Corporate Governance Councils Corporate Governance Principles and Recommendations (4th Edition), in accordance with ASX Listing Rule 4.10.3. Principles and Recommendations Disclosure Compliance Principle 1 – Lay solid foundations for management and oversight 1.1 A listed entity should disclose: These matters are disclosed in the Company’s Board Charter, which is available on the Company’s website Complies (a) the respective roles and responsibilities of its board and management; and (b) those matters expressly reserved to the board and those delegated to management 1.2 A listed entity should: (a) undertake appropriate checks before appointing a director or senior executive or putting someone forward for election as a director; and (b) provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re- elect a Director 1.3 A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment. 1.4 The company secretary of a listed entity should be accountable directly to the board, through the chair; on all matters to do with the proper functioning of the board. 1.5 A listed entity should: (a) have and disclose a diversity policy; (b) through its board or a committee of the board set measurable objectives for achieving gender diversity in the composition of its board, senior executives and workforce generally; and (c) disclose in relation to each reporting period: (1) (2) the measurable objectives set for that period to achieve gender diversity; the entity’s progress towards achieving those objectives; and (3) either: (A) the respective proportions of men and women on the board, in senior executive positions and across the whole workforce (including how the entity has defined “senior executive” for these purposes); or if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators”, as defined in and published under the Act. (B) When a requirement arises for the selection, nomination and appointment of a new directs, the board forms a sub-committee that is tasked with this process, and includes undertaking appropriate checks and any potential candidates. When directors retire and nominate for re-election, the board does not endorse a director who has not satisfactorily performed their role. The company executes a letter of appointment with each director and services agreements with senior executives. The Company Secretary reports to the chair of the board on all matters to do with the proper function of the board. Complies Complies Complies Complies Due to its size and limited scope of operations, the Company does not currently have a diversity policy. Does not comply As the Company's activities increase in size, scope and/or nature, the board will consider the appropriateness of adopting a diversity policy. - 50 - ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2021 Principles and Recommendations 1.6 A listed entity should: (a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and (b) disclose for each reporting period whether a performance evaluation has been undertaken in accordance with that process during or in respect of that period. 1.7 A listed entity should: (a) have and disclose a process for evaluating the performance of senior executives at least once every reporting period; and (b) disclose for each reporting period whether a performance evaluation has been undertaken in accordance with that process during or in respect of that period. Disclosure Currently, the board does not formally evaluate the performance of the board and individual directors, however the board Chairman provides informal feedback to individual board members on their performance and contribution to board meetings, on an ongoing basis. Compliance Does not comply The performance of all senior executives is evaluated on an annual basis by the Managing Director and in the case of the Managing Director, by the board. Complies Principle 2 – Structure the board to be effective and add value 2.1 The board of a listed entity should: Does not comply (a) have a nomination committee which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent Director; and disclose: (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate skills, knowledge, experience, independence and diversity to enable it to discharge it duties and responsibilities effectively. 2.2 A listed entity should have and disclose a board skills matrix setting out the mix of skills that the board currently has or is looking to achieve in its membership. 2.3 A listed entity should disclose: (a) the names of the directors considered by the board to be independent directors; (b) if a director has an interest, position or relationship of the type described in Box 2.3 but the board is of the opinion that it does no compromise the independence of the director, the nature of the interest, position or relationship in question and an explanation of why the board is of that opinion; and (c) the length of service of each director. Due to its size and limited scope of operations, the Company does not currently have a nomination committee, however board sub-committees are formed, as required, to manage matters that would normally be dealt with by a formally constituted nomination committee, as was the case with the search and appointment of the current Managing Director. As the Company's activities increase in size, scope and/or nature, the board will consider the appropriateness of a nomination committee. A copy of the board skill matrix is appended to this Corporate Governance Statement. Complies Mr Peter Bailey is considered by the board to be an independent director and this is disclosed on the Company web site and in its annual and half- yearly director reports. Complies The length of service of each director is disclosed in the Company’s annual and half yearly director reports and in notices of meetings when directors are nominated for re-election. - 51 - ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2021 Principles and Recommendations Disclosure Compliance 2.4 A majority of the board of a listed entity should be independent directors. Mr Peter Baily is the only independent member of the Company’s board. 2.5 The chair of the board of a listed entity should be an independent director and, in particular; should not be the same person as the CEO of the entity. Mr Luke Atkins is the Chairman and is not an independent Non-Executive Director. 2.6 A listed entity should have a program for inducting new directors and for periodically reviewing whether there is a need for existing directors to undertake professional development to maintain the skills and knowledge needed to perform their role as directors effectively. The Company Secretary and Managing Director ensure the comprehensive induction of all new directors to the Company, this includes site visits, presentations and meetings with executives. All directors are afforded opportunities for ongoing professional development at Company expense. Principle 3 – Instil a culture of acting lawfully, ethically and responsibly Does not comply however the board is of the view that the skills and experience of the directors allow the board to act in the best interests of shareholders and is appropriate for the size of the Company. Does not comply, however the board is of the view that this is appropriate for the Company, considering its size and stage of development. Complies 3.1 A listed entity should articulate and disclose its values 3.2 A listed entity should: (a) have and disclose a code of conduct for its directors, senior executives and employees; and (b) ensure that the board or a committee of the board is informed of any material breaches of that code. 3.3 A listed entity should: (a) have and disclose a whistleblower policy; and (b) ensure that the board or a committee of the board is informed of any material incidents reported under that policy 3.4 A listed entity should: (a) have and disclose an anti-bribery and corruption policy; and (b) ensure that the board or a committee of the board is informed of any material breaches of that policy The Board is committed to the development of a statement of values. Does not Comply The Company code of conduct is available on the Company web site. Complies The Company’s Whistleblower Policy is available on the Company web site. Complies An anti-bribary and corruption policy is available on the Company web site. Complies - 52 - ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2021 Principles and Recommendations Disclosure Compliance Principle 4 – Safeguard the integrity of corporate reports Due to its size and limited scope of operations, the Company does not currently have an audit committee, however the auditors do meet with the full board, without management present to its audit report and any other matters that have arisen during its audit work. Does not comply, however the auditors have met with the board Chairman without management present and the results of this meeting have been conveyed by the Chairman to the full board. As the Company's activities increase in size, scope and/or nature, the board will consider the appropriateness of an audit committee. 4.1 The board of a listed entity should: (a) have an audit committee which: (1) has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and is chaired by an independent director; who is not the chair of the board, (2) and disclose: (3) (4) (5) the charter of the committee the relevant qualifications and experience of the members of the committee; and in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. 4.2 The board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. 4.3 A listed entity should disclose its process to verify the integrity of any periodic corporate report it releases to the market that is not audited or reviewed by an external auditor. Principle 5 – Make timely and balanced disclosure The board does receive a statement signed by the Managing Director and the Chief Financial Officer. Complies This process is currently being documented. Once this documentation is complete, a copy of the process will be available on the Company web site. Does not Comply 5.1 A listed entity should have and disclose a written policy for complying with its continuous disclosure obligations under listing rules 3.1 The Company does have a Continuous Disclosure policy, which is available on the Company web site. 5.2 A listed entity should ensure that its board receives copies of all material market announcements promptly after they have been made 5.3 A listed entity that gives a new and substantive investor or analyst presentation should release a copy of the presentation materials on the ASX Market Announcements Platform ahead of the presentation The board does receive copies of all market announcement, whether material or not, immediately after lodgement with the market. All new and substantive investor or analyst presentations are released to ASX ahead of presentation. Complies Complies Complies - 53 - ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2021 Principles and Recommendations Disclosure Compliance The company does provide information about its governance on the Company’s web site. Complies The Company has implemented an investor relations program targeting retail investors and encourages all investors or potential investors to communicate with the Company via its web site. The Company Shareholder Communication Policy is available on the Company web site. All resolution at the Company’s 2021 annual general meeting of shareholders were determined by poll Security holder can elect to receive communications from the Company electronically either by contacting the Company’s share registrar, or the Company directly. Complies Complies Complies Complies Does not comply Due to its size and limited scope of operations, the Company does not currently have a risk committee, however management does present and discuss risk with the full board at scheduled board meetings. As the Company's activities increase in size, scope and/or nature, the board will consider the appropriateness of a risk committee. The board reviews and manages risk on an ongoing basis, however it does not formally set and review the management framework annually nor disclose this in each periodic report. Does not comply The Company does not have an internal audit function. Does not comply Principle 6 – Respect the rights of security holders 6.1 A listed entity should provide information about itself and its governance to investors via its website. 6.2 A listed entity should have an investor relations program that facilitates effective two-way communication with investors. 6.3 A listed entity should disclose how it facilitates and encourages participation at meetings of security holders. 6.4 A listed entity should ensure that all substantive resolutions at a meeting of security holders are decided by a poll rather than by a show of hands. 6.5 A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. Principal 7 – Recognise and manage risk 7.1 The board of a listed entity should: (a) have a committee or committees to oversee risk, each of which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director and disclose: (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendance of the members at those meetings; or (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management framework. 7.2 The board or a committee of the board should: (a) review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound and that the entity is operating with due regard to the risk appetite set by the board; and (b) disclose, in relation to each reporting period, whether such a review has taken place. 7.3 A listed entity should disclose: (a) if it has an internal audit function, how the function is structured and what role it performs; or (b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its governance, risk management and internal control processes. - 54 - ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2021 Principles and Recommendations Disclosure Compliance 7.4 A listed entity should disclose whether it has The Company does make these disclosures Complies Due to its size and limited scope of operations, the Company does not currently have a remuneration committee. Does not comply As the Company's activities increase in size, scope and/or nature, the board will consider the appropriateness of a remuneration committee. any material exposure to environmental or social risks and, if it does, how it manages or intends to manage those risks. Principle 8 – Remunerate fairly and responsibly 8.1 The board of a listed entity should: (a) have a remuneration committee which:: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director and disclose (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendance of the members at those meetings; or (b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive. 8.2 A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives. 8.3 A listed entity which has an equity-based remuneration scheme should: (a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it Complies Complies The Company discloses its practices in relation to the remuneration of non-executive directors, executive directors and senior executives in its annual remuneration report. The company’s Security Trading Policy obliges all directors, officers and employees of the Company to advise the Company, via the company secretary, or any securitisation of Company securities. A copy of the policy is available on the Company’s web site. As at the date of this statement the company secretary has not been advised by an officer or employee of the Company of any securitisation of Company securities that they own. As the Company's activities increase in size, scope and/or nature, the Company's corporate governance principles will be reviewed by the board and amended as appropriate. Further details of the Company's corporate governance policies and practices are available on the Company's website at www.altechchemicals.com. - 55 - ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2021 Board experience, skills and attributes matrix Experience, skills and attributes Total directors Experience Corporate leadership International experience Resources Industry experience Other board level experience Capital projects experience Equity and debt raising / capital markets Alumina and/or chemicals industry experience Knowledge and skills Legal Minerals and/or chemicals processing Engineering and project development Finance and Accounting Tertiary qualifications Law Engineering Commerce/Business Altech Chemicals Limited board 7 7 6 4 7 5 5 3 1 3 4 3 1 1 3 - 56 - ALTECH CHEMICALS LIMITED ADDITIONAL INFORMATION For the year ended 30 June 2021 The shareholder information set out below was applicable as at 28 September 2021. TWENTY LARGEST HOLDERS OF LISTED SECURITIES The names of the twenty largest holders of each class of listed securities are listed below: Ordinary Shares Name DEUTSCHE BALATON AKTIENGESELLSCHAFT MAA GROUP BERHAD DELPHI UNTERNEHMENSBERATUNG AKTIENGESELLSCHAFT SMS INVESTMENTS S A HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM CITICORP NOMINEES PTY LIMITED MELEWAR EQUITIES (BVI) LIMITED MR YUSUF KUCUKBAS BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD LAKE MCLEOD GYPSUM PTY LTD MR JOHN ALEXANDER DUTHIE MR IAN EWART HALFORD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR LINDSAY GEORGE DUDFIELD & MRS YVONNE SHEILA DOLING DUDFIELD MR PETER JOSEPH BOURKE & MRS KERRIE LEEANNE JONES NATIONAL NOMINEES LIMITED MR JOHN SMITH & MS BARBARA SMITH LJ & K THOMSON PTY LTD BNP PARIBAS NOMS PTY LTD Total Top 20 Others Total Ordinary Shares on Issue No of Ordinary Shares Held 161,771,263 90,995,691 80,423,391 57,418,528 55,050,430 47,156,622 43,185,695 20,310,170 14,100,000 12,133,097 11,608,202 10,000,000 8,951,127 7,687,053 7,645,497 7,573,000 7,121,212 6,160,000 5,600,000 5,253,044 660,144,022 626,340,711 1,286,484,733 Percentage % of Issued Shares 12.57% 7.07% 6.25% 4.46% 4.28% 3.67% 3.36% 1.58% 1.10% 0.94% 0.90% 0.78% 0.70% 0.60% 0.59% 0.59% 0.55% 0.48% 0.44% 0.41% 51.31% 48.69% 100.00% - 57 - No of Ordinary Shares Held Percentage % of Issued Shares 44,231,629 19,753,016 13,519,296 9,655,085 4,183,557 3,400,000 3,375,000 2,803,030 2,693,066 2,500,000 2,352,708 2,200,000 2,154,445 2,000,000 1,461,111 1,300,000 1,280,000 1,250,000 1,157,509 1,000,000 1,000,000 123,269,452 58,395,267 181,664,719 24.35% 10.87% 7.44% 5.31% 2.30% 1.87% 1.86% 1.54% 1.48% 1.38% 1.30% 1.21% 1.19% 1.10% 0.80% 0.72% 0.70% 0.69% 0.64% 0.55% 0.55% 67.86% 32.14% 100.00% ALTECH CHEMICALS LIMITED ADDITIONAL INFORMATION For the year ended 30 June 2021 Options Name DEUTSCHE BALATON AKTIENGESELLSCHAFT MAA GROUP BERHAD DELPHI UNTERNEHMENSBERATUNG AKTIENGESELLSCHAFT MELEWAR EQUITIES (BVI) LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD ACUITY CAPITAL INVESTMENT MANAGEMENT PTY LTD NATIONAL NOMINEES LIMITED MR RONALD FRANCIS WADSWORTH HAVENRANCH PTY LIMITED BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM SIMS INVESTMENTS PTY LTD CITICORP NOMINEES PTY LIMITED C&S LINEY PTY LTD DR MICHAEL WILKS & MRS KATRINA MARIE WILKS SYMMETRY ONE PTY LTD MR ROBERT LEVI LEDGER MR SCIPIO MARK LUTTMER BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD CAREY ENTERPRISES PTY LTD MR GREGORY JOHN KEIR Total Top 20 Others Total Ordinary Shares on Issue DISTRIBUTION OF EQUITY SECURITIES Analysis of numbers of security holders by size of holding as at 28 September 2021: Ordinary Shares Distribution Number of Shareholders Number of Shares 1 1,001 5,001 10,001 100,001 Totals – – – – – 1,000 5,000 10,000 100,000 and over 160 126 544 2,225 1,144 4,199 12,561 474,789 4,761,668 95,534,538 1,185,701,177 1,286,484,733 % of Issued Shares 0.00% 0.04% 0.37% 7.43% 92.17% 100.00% There were 395 holders of less than a marketable parcel of ordinary shares. - 58 - ALTECH CHEMICALS LIMITED ADDITIONAL INFORMATION For the year ended 30 June 2021 SUBSTANTIAL SHAREHOLDERS The names of the substantial shareholders listed in the holding Company's register as at 28 September 2021 are: Substantial Shareholder DEUTSCHE BALATON AKTIENGESELLSCHAFT/ DELPHI UNTERNEHMENSBERATUNG AKTIENGESELLSCHAFT MELEWAR EQUITIES (BVI) LIMITED & MAA GROUP BERHAD SMS INVESTMENTS SA UNQUOTED SECURITIES Number of Shares % of Issued Shares 161,771,263 135,034,675 80,423,391 12.57% 10.50% 6.25% The names of the holders holding more than 20% of each class of unlisted securities are listed below: 1 Performance Rights Holder Employee Performance Rights Jane Carew-Reid Jingyuan Liu Shane Volk Roger Pover Mark Griffiths Managing Director Performance Rights Iggy Tan Non-Executive Director Performance Rights Luke Atkins Peter Bailey Daniel Lewis Tenardi Tunku Yaacob Khyra Uwe Ahrens Hansjoerg Plaggemars VOTING RIGHTS Number 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 15,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Subject to any rights or restrictions for the time being attached to any shares or class of shares of the Company, each member of the Company is entitled to receive notice of, attend and vote at a general meeting. Resolutions of members will be decided by a show of hands unless a poll is demanded. On a show of hands each eligible voter present has one vote. However, where a person present at a general meeting represents personally or by proxy, attorney or representative more than one member, on a show of hands the person is entitled to one vote only despite the number of members the person represents. On a poll each eligible member has one vote for each fully paid share held and a fraction of a vote for each partly paid share determined by the amount paid up on that share. ON-MARKET BUY BACK There is currently no on-market buyback program for any of Altech Chemicals Limited’s listed securities. - 59 - ALTECH CHEMICALS LIMITED ADDITIONAL INFORMATION For the year ended 30 June 2021 EXPLORATION AND MINING INTERESTS As at 30 June 2021, the Company has an interest in the following tenements: Tenement ID Registered Holder Location M70/1334 E70/4718-1 Altech Meckering Pty Ltd Canning Coal Pty Ltd WA Australia WA Australia Project Meckering Kerrigan ATC Interest 100% 100% Grant Date 19/05/16 1/12/15 - 60 -

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