Atotech Annual Report 2022

Plain-text annual report

2022 A N N U A L R E P O R T COMPANY PROFILE ABOUT ALTECH CHEMICALS LTD ASX: ATC / FRA: A3Y SILUMINA ANODES BATTERY MATERIALS PROJECT TM CERENERGY BATTERIES PROJECT ® Altech Chemicals Ltd is a specialty battery technology company that has a joint venture agreement with world leading German battery institute Fraunhofer IKTS (“IKTS”) to commercialise the revolutionary CERENERGY Sodium Alumina Solid State (SAS) Battery. CERENERGY batteries are the game-changing alternative to lithium-ion batteries. CERENERGY batteries are ﬁre and explosion-proof; have a life span of more than 15 years and operate in extreme cold and desert climates. The battery technology uses table salt and is lithium-free; cobalt-free; graphite-free; and copper- free, eliminating exposure to critical metal price rises and supply chain concerns. ® ® ® The joint venture is commercialising its CERENERGY battery, with plans to construct a 100MWh production facility on Altech's land in Saxony, Germany. The facility intends to produce CERENERGY battery modules to provide grid storage solutions to the market. ® ® A LT E C H cerenergy ® “ALTECH IS UNDERGOING A TRANSITION TO BE A BATTERY ENERGY COMPANY TO MEET A BATTERY STORAGE FUTURE” - IGGY TAN CEO Altech has licenced its proprietary high purity alumina coating technology to 75% owned subsidiary Altech Industries Germany GmbH (AIG), which has commenced a deﬁnitive feasibility study for the development of a 10,000tpa silicon/graphite alumina coating plant in the state of Saxony, Germany to supply its Silumina Anodes product to the burgeoning European electric vehicle market. TM This Company recently announced its game changing technology of incorporating high- capacity silicon into lithium-ion batteries. Through in house R&D, the Company has cracked the “silicon code” and successfully achieved a 30% higher energy battery with improved cyclability or battery life. Higher density batteries result in smaller, lighter batteries and substantially less greenhouse gases, and is the future for the EV market. TM The Company's proprietary silicon graphite product is registered as Silumina Anodes . TM The Company is in the race to get its patented technology to market, and recently announced the results of a preliminary feasibility study (PFS) for the construction of a 10,000tpa Silumina Anodes material plant at AIG's 14-hectare industrial site within the Schwarze Pumpe Industrial Park in Saxony, Germany. The European graphite and silicon feedstock supply partners for this plant will be SGL Carbon and Ferroglobe. The project has also received green accreditation from the independent Norwegian Centre of International Climate and Environmental Research (CICERO). To support the development, AIG has commenced construction of a pilot plant adjacent to the TM proposed project site to allow the qualiﬁcation process for its Silumina Anodes product. AIG has executed NDAs with two German automakers as well as a European based battery company. Silumina An desTM HPA PRODUCTION PROJECT 3 2 Altech is also aiming to become a supplier 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, and has ﬁnalised Stage 1 and Stage 2 construction of its HPA plant. Feedstock for the plant will be sourced from the Company's 100%- owned near surface kaolin deposit at Meckering, Western Australia and shipped to Malaysia. The HPA project is signiﬁcantly de-risked with a bankable feasibility study completed, senior lender project ﬁnance from German government owned KfW IPEX- Bank approved, and a German EPC contractor appointed – with initial construction works at the site completed. In addition to the senior debt, conservative (bank case) cash ﬂow modelling of the HPA plant shows a pre-tax net present value of USD 505.6million at a discount rate of 7.5%. The project generates annual average net free cash of ~USD76million at full production. Altech is in the stages of project ﬁnance with a potential raising of US$100m of secondary debt via the listed green bond market. In addition, US$100m of project equity is being sought through potential project joint venture partners. Altech's Malaysian Project Planning Co-ordinator Noorhaﬁda Redzuan OUR VISION MEETING A BATTERY STORAGE FUTURE AS THE WORLD TRANSITIONS TO THE ELECTRIFICATION OF ENERGY SOLUTIONS CHAIRMAN’S REPORT Dear fellow Altech Shareholders, On 14 September 2022, Altech announced that it had executed a Joint Venture Shareholders' Agreement with world-leading German battery institute ® Fraunhofer IKTS (“IKTS”) to commercialize IKTS' revolutionary CERENERGY Sodium Alumina Solid State (SAS) Battery. Altech, inclusive of associated entity Altech Advanced Materials AG, is the majority owner at 75% of the JV company, which will commercialize a 100 MWh project to be constructed on Altech's land in Schwarze Pumpe, Germany. The SAS CERENERGY battery uses common table salt and alumina ceramic solid-state technology. ® ® Altech believes that Sodium Alumina Solid State (SAS) CERENERGY batteries are a game-changing grid storage alternative to lithium-ion batteries. CERENERGY batteries are ﬁre and explosion-proof, have a life span of more than 15 years and operate in extreme cold and desert climates. The battery technology uses table salt and nickel - is lithium-free; cobalt-free; graphite-free; and copper-free, eliminating exposure to critical metal price rises and supply chain concerns. ® Altech has what it believes to be a signiﬁcant opportunity for the Company, with continued development and commercialisation of the Silumina Anodes Battery Materials Project in Saxony, Germany. To this extent, Altech will continue with the construction of the pilot plant to produce 120kg per day of Silumina Anodes for distribution to potential customers, with the aim being to secure an offtake agreement. TM TM In conjunction with this, and with the results achieved from the outstanding Preliminary Feasibility Study for the full-scale plant to produce 10,000tpa of Silumina Anodes , Altech will progress with the commercialisation of the project. Altech is currently preparing a Deﬁnitive Feasibility Study that will provide additional assurance over the project. TM In addition, work continues at the dedicated research and development laboratory in Western Australia, with Phase 2 R&D work striving to attain Silumina Anodes battery capacity retention beyond the current 30%. TM The Company also remains focused on securing the debt and equity funding that will enable it to bring about project ﬁnancial close and continue with the construction of its proposed high-purity alumina plant in Johor, Malaysia, 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. I would like to thank all shareholders for their support during the year. I would also like to extend my gratitude to Managing Director Mr Iggy Tan, as well as the Altech team in Australia, Germany and Malaysia, for their effort and commitment shown throughout the year. 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 Resources 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 Geopaciﬁc Resources Limited, Wiluna Mining Corporation, Gascoyne Resources Limited, PNX Metals Limited, South Harz Potash Limited, Kin Mining Limited and Azure Minerals Limited. MANAGING DIRECTOR’S REVIEW OF OPERATIONS SUMMARY It is with pleasure that I provide a review of the Company's operations. This year enabled Altech to aggressively move forward with its patented Silumina Anodes technology, as well as progressing with securing bond and equity project ﬁnance for its HPA production plant in Malaysia. TM In addition to this, Altech announced that it had executed a Joint Venture Shareholders' Agreement with world-leading German battery institute ® Fraunhofer IKTS (“IKTS”) to commercialize IKTS' revolutionary CERENERGY Sodium Alumina Solid State (SAS) Battery. Altech, inclusive of associated entity Altech Advanced Materials AG, will be the majority owner at 75% of the JV company, which will commercialize a 100 MWh project to be constructed on Altech's land in Schwarze Pumpe, Germany. The SAS CERENERGY battery uses common table salt and ceramic solid-state technology. ® The principal activities of the Company during the ﬁnancial year were: 1. Achievement of game changing proprietary technology by cracking the “silicon barrier” and producing the Silumina Anodes lithium-ion battery anode material with 30% higher energy retention and capacity than conventional graphite only anodes. TM 2. Commencement of construction by Küttner GmbH & Co on the Silumina 3. Finalising the Preliminary Feasibility Study, with outstanding economics, for the full-scale plant to produce 10,000tpa of Silumina Anodes in Saxony, Germany. Altech acquired an ~14Ha industrial site in Saxony, Germany that is an ideal location for the full-scale plant. TM 4. Continuing the process of securing the green bond and project level equity to ﬁnance the remaining construction for the Johor, Malaysia high-purity alumina production plant. Iggy Tan Managing Director and Chief Executive Ofﬁcer TM Anodes pilot plant that will produce 120kg per day (~37,000 kg per year) of the Silumina Anodes product for product qualiﬁcation with end users, that will assist in securing an offtake agreement for the full-scale plant. TM ® CERENERGY SODIUM ALUMINA SOLID STATE BATTERY PROJECT SAS CERENERGY BATTERIES ® Altech believes that Sodium Alumina Solid State (SAS) CERENERGY batteries are the game-changing grid storage alternative to lithium-ion batteries. CERENERGY batteries are ﬁre and explosion-proof, have a life span of more than 15 years and operate in extreme cold and desert climates. The battery technology uses table salt and nickel - is lithium-free; cobalt-free; graphite-free; and copper-free, eliminating exposure to critical metal price rises and supply chain concerns. ® ® For more information on the advantages of CERENERGY batteries watch the following YouTube video https://youtu.be/UBwxxgEJHvo ® The SAS technology has been developed by Fraunhofer IKTS over the last eight years and has revolutionized previous technology, allowing higher energy capacity and lower production costs. SAS-type batteries, in terms of capacity, have already been successfully tested in stationary battery modules. The IKTS SAS batteries are in the ﬁnal phase of product testing and ready to commercialise. IKTS has spent in the region of EUR 35 million on research & development and operates a EUR 25 million pilot plant in Hermsdorf, Germany. The ﬁnal CERENERGY battery packs are specially designed for the grid storage market and have been undergoing extensive performance testing in Germany. These modules are designed to ﬁt in racks housed in sea containers that can be deployed for grid storage. ® IKTS has been looking for an entrepreneurial partner that has German land available, has access to funding, is a builder of projects, has battery background, and has technology in alumina used in ceramics. Altech ﬁtted the criteria, and the Joint Venture Shareholders' Agreement was executed. Altech group will own 75% of the project with IKTS 25% free carried. The intellectual property will be licensed exclusively to the joint venture. The joint venture partners have elected to develop a 100 MWh SAS battery plant (Train 1) on Altech's site in Saxony, Germany. The target market for this project will speciﬁcally focus on the grid (stationary) energy storage market which is expected to grow by 28% CAGR (Compound Annual Growth Rate) in the coming decades. The global grid energy storage market is expected to grow from USD 4.4 billion in 2022 to USD 15.1 billion by 2027. Or further out, the market is expected to grow from 20 GW in 2020 to over 3,000 GW by 2050. Altech believes that SAS batteries can provide high security, at low acquisition and operating costs, for the stationary energy storage market. IKTS has estimated that the total cost of production for CERENERGY batteries will be 40%-50% cheaper than lithium-ion batteries. ® The joint venture partners have commenced the planning process for the Bankable Feasibility Study required for the commercialisation process. Once the Train 1 (100 MWh) plant is built and operating, the longer-term vision for the joint venture is to construct additional trains or a Gigawatt battery facility. CHALLENGES WITH LITHIUM-ION BATTERIES Fire and Explosion Issues One of the signiﬁcant drawbacks of lithium-ion batteries is the risk of thermal runaway, ﬁre, and explosion which have been largely in the news recently. Today's lithium-ion battery contains ﬂammable liquid electrolyte and plastic separators which is the major contributing problem to ﬁre risk. Thermal runaway is a chain reaction within a battery cell that can be very difﬁcult to stop once it has started. It occurs when the temperature inside a battery reaches the point that causes a chemical reaction (producing oxygen) to occur inside the battery. It is often caused by overheating, physical damage, and overcharging. Narrow Operating Temperature Range The other drawback of lithium-ion batteries is that they are required to operate in a relatively narrow temperature range which is between +15°C to +35°C. At lower temperatures, the liquid electrolyte in the battery becomes more viscous which slows the lithium transfer and reactions. A lithium battery at 0°C will reduce a typical battery capacity down to 70%. At higher temperatures, the battery is prone to overheating and requires external cooling to maintain battery efﬁciency. This makes the application of lithium-ion batteries in cold and desert climates extremely challenging. Lithium-ion Battery Lifespan Thirdly, the life of lithium-ion batteries is still limited to between 7-10 years depending on applications. Lithium ions degrade with each charge and discharge cycle. This deterioration is often due to detrimental side reactions, dendrite growth, and the breakdown of anode and cathode structures. This degradation is much faster when the battery is operated outside the ideal temperature range. For electric vehicles (EVs), manufacturers will guarantee a battery for around 8 years when the capacity of the battery drops below 70%. For grid storage batteries, a life span of 7-10 years can be expected. There is still an expectation in the market for a longer battery life span which will help lower the overall long-term unit storage costs in grid storage. Lithium Costs and Availability The global market for the alkali metal lithium is growing rapidly. The price of lithium, which is the most critical component of a lithium-ion battery, has risen six-fold since the start of the year. Lithium prices have spiked sky high, putting upward pressure on the production costs associated with lithium-ion batteries. The production of lithium is concentrated in four countries, namely Australia, Chile, China, and Argentina. There is a real concern that there aren't enough mines and production capacity being developed to meet the forecast demand for both EVs as well as the stationary energy storage market. Lithium prices have spiked sky-high Price of battery-grade lithium carbonate per metric ton in U.S. dollars 70000 10000 2010 Source: US Geological Survey 2022 Cobalt Supply Chain and Ethical Concerns Cobalt is key for boosting energy density and battery life in lithium-ion batteries because it keeps the cathode’s layered structure stable during lithium migration and battery operation. Cobalt is considered the highest material supply chain risk for electric vehicles (EVs) in the short and medium term. EV batteries can have up to 20 kg of cobalt in every 100 kilowatt-hours KWh) pack. The Democratic Republic of Congo (DRC) produces about 70 percent of global cobalt and the LIB industry is exposed to precarious supply chain issues. Stories of the harsh and dangerous working conditions, child labour, and human rights abuses in the DRC have caused ethical concerns about cobalt supply. Graphite Geo-political Risk Graphite is thus considered indispensable to the global shift towards electric vehicles. It is also the largest component in lithium-ion batteries by weight, with each battery containing 20-30% graphite. But due to losses in the manufacturing process, it takes 30 times more graphite than lithium to make the batteries. The graphite deﬁcit has started as demand for EV battery anode ingredient exceeds supply, resulting in price increases. Today, China produces 90% of the world’s graphite anode material which represents a concerning geo-political risk to the industry. Copper Crunch Copper is mainly used as the current collector on the anode part of a lithium-ion battery. Copper is looming as the biggest worry, with the biggest driver of scarcity being the energy transition and increased EV demand. A recent report (Future of Copper) notes: “The 2050 climate objectives will not be achieved without a signiﬁcant ramp-up in copper production in the near and medium term, which will be very challenging.” An electric vehicle battery requires 2.5 times more copper than a standard ICE vehicle. The report notes that there simply aren't enough copper mines being built or expanded to provide all the copper needed to produce the 27 million EVs that S&P Global has forecast to be sold annually by 2030. Copper could rival oil as a national energy security concern for some countries. The Ideal Battery? Based on the above challenges facing lithium-ion batteries and the increasing prices of the critical materials and metals used in these batteries, the industry has been searching for a battery technology that resolves these problems. A battery that is ﬁre and explosion proof, has a lifespan of more than 15 years, and operates in cold and desert climates. A battery technology where it is lithium free, cobalt free, graphite free and ﬁnally copper free, which limits the exposure to critical materials prices rises and supply chain concerns. Altech believes that SAS CERENERGY batteries resolve some of the biggest problems and challenges facing lithium-ion batteries today. SAS CERENERGY batteries are not designed to replace the successful lithium-ion batteries, but provide an ideal alternative for the stationary storage market. ® ® SAS Batteries are Fire and Explosion Proof SAS Battery Life Span ü E F I L S R A E Y 5 1 > Unlike lithium-ion batteries, there is no sodium ion degradation with each charge and discharge. There is no ﬁrst cycle loss, no detrimental side reactions, no dendrite growth, or breakdown of anode and cathode structures. The absence of liquid electrolyte replaced with solid ceramic means there is virtually no sodium deterioration in the battery. The life span of an SAS battery is beyond 15 years. In a recent study by ITP Renewables, the SAS type battery did not show any deterioration in estimated state of health in the ﬁrst 700 cycles of testing, compared with the normal deterioration in LFP and NMC lithium-ion batteries. SAS type batteries have been reported with lifetimes of over 2,000 cycles and twenty years has been demonstrated with full-sized batteries, and over 4,500 cycles and ﬁfteen years with 10 and 20-cell modules. ü F O O R P E R I F ü E G N A R P M E T E G R A L SAS batteries are totally ﬁre and explosion proof and are not prone to thermal runaway - one of the biggest advantages over lithium-ion batteries. Firstly, SAS batteries do not contain ﬂammable liquid electrolyte or plastic separators; the electrolyte is a solid inﬂammable ceramic tube that allows sodium ions to transfer through it. Secondly, the battery, due to its chemistry does not contain oxides nor generate oxygen at the cathode like a lithium-ion battery does during thermal runaway. Being a much safer battery, it is ideal in indoor industrial and commercial energy storage installations. The battery is totally safe and does not react with water and is highly sought after for sensitive environments e.g. areas subject to ﬂooding, where lithium-ion batteries are banned from these applications. Large Operating Temperature Range - Cold and Desert climates SAS batteries can operate efﬁciently between minus 20°C to +60 °C range and guarantee high performances and durability regardless of the ambient temperature. Because the SAS battery has no liquid electrolyte (instead solid ceramic electrolyte), ambient temperature does not adversely affect the performance of the battery. In addition, the SAS batteries are internally high temperature batteries (operates at 270-350°C) but are fully insulated so the external of the battery module is at touch temperature. The core temperature of the battery is self-sustaining and does not require cooling like lithium-ion batteries. They are ideal grid energy storage for cold and desert climates which is the main disadvantage of the lithium-ion batteries. For this reason, the SAS battery has its own speciﬁc market without any competition from lithium-ion. Lithium Free Battery SAS batteries do not contain lithium but use sodium ions from common table salt. In fact, the cathode consists of common salt (sodium chloride) and nickel. Sodium is the next reactive alkali metal on the periodic table under lithium (Li is -3.05 V whilst Na is -2.7 V) and is equally ideal for energy storage in batteries. Salt is not a critical element, is many times cheaper than lithium and is readily available everywhere. SAS technology is different from sodium-ion batteries or sodium sulphur batteries. SAS batteries are not exposed to rising lithium prices and potential supply constraints of lithium globally. Cobalt Supply Chain and Ethical Concerns No cobalt is used in an SAS battery. As mentioned previously, the cathode consists of salt and nickel in a sodium aluminium chloride medium. Due to the chemistry of the battery, there is no requirement for a cathode layered structure like lithium-ion batteries so there is no requirement for cobalt. SAS batteries have no exposure to cobalt's ethical or supply chain issues. SAS batteries have excellent speciﬁc energy of 110-130 Wh/kg compared to LFP lithium-ion battery of 90-160 Wh/kg. Graphite and Copper Supply Risks The other unique feature of the SAS battery is that it does not contain any graphite or copper in the anode side of the battery. In fact, there is no anode in the SAS battery. The anode only forms during the charging process as a molten sodium ﬁlm between the steel electrode and outer edge of the ceramic electrolyte. Similarly, the molten sodium anode dissolves during the discharging process of the battery. Instead of copper as the negative collector in the lithium- ion battery, a steel canister acts as the negative electrode in a SAS battery. The SAS battery is graphite-free and copper-free. ü E E R F M U I H T I L ü E E R F R E P P O C ü E E R F R E P P O C / E T I H P A R G WHAT IS A CERENERGY BATTERY? ® ® A CERENERGY battery consists of a ceramic tube (conductive to sodium ions but insulator for electrons) with a positive terminal in the center of it. The solid ceramic tube (solid state technology) performs the same function as a liquid electrolyte in a lithium- ion battery, allowing sodium ions to transfer through it. IKTS has developed solid-state technology to produce these large solid ceramic tubes with micro-structures that allow fast sodium ion transfer. The ceramic tube is ﬁlled with cathode granules consisting of common table salt and nickel. To ensure contact between the solid cathode granules and the ceramic electrolyte tube, the tube is ﬂooded with a sodium aluminium chloride medium. The ceramic tube is housed in a steel canister which acts as the negative terminal. The positive and negative terminal tabs are installed at the top of the cell for electrons transfer and connection to other cells. The technology highlights for CERENERGY® batteries are high speciﬁc energy; excellent performance and cycle life in harsh operating environments; ultra-long battery life span and low environmental impact. Negative Terminal - + Positive Terminal Ceramic Electrolyte Cathode Salt & Nickel Cell Canister GRID STORAGE MARKET Grid energy storage (also called large-scale energy storage) is a collection of methods used for energy storage on a large scale within an electrical power grid. Electrical energy is stored during times when electricity is plentiful and inexpensive (especially from intermittent power sources such as renewable electricity from wind power, tidal power, and solar power) or when demand is low, and later returned to the grid when demand is high, and electricity prices tend to be higher. Developments in battery storage have enabled commercially viable projects to store energy during peak production and release it during peak demand, and for use when production unexpectedly falls giving time for slower responding resources to be brought online. Altech's CERENERGY® batteries are targeted to supply this grid energy storage market which is expected to grow by a 28% compound annual growth rate in the coming decades. The global grid energy storage market is expected to grow from USD 4.4 billion in 2022 to USD 15.1 billion by 2027. Or further out, growth is expected from 20 GW in 2020 to over 3,000 GW by 2050. There are several deployments of battery energy storage systems for large-scale grid applications. One example is the Hornsdale Power Reserve, a 100 MW/129 MWh lithium-ion battery installation, the largest lithium-ion grid storage in the world, which has been in operation in South Australia since December 2017. The Hornsdale Power Reserve provides two distinct services; energy arbitrage; and contingency spinning reserve. The facility can bid 30 MW and 119 MWh of its capacity directly into the market for energy arbitrage, while the rest is withheld for maintaining grid frequency during unexpected outages until other, slower generators can be brought online (AEMO 2018). In 2017, after a large coal plant tripped ofﬂine unexpectedly, the Hornsdale Power reserve was able to inject several megawatts of power into the grid within milliseconds, arresting the fall in grid frequency until a gas generator could respond. By arresting the fall in frequency, the facility was able to prevent a likely cascading blackout. SILUMINA ANODES PROJECT TM TM The Silumina Anodes project involves combining silicon and graphite, and then coating this composite product with a nanometre layer of high-purity alumina, for inclusion in lithium battery anodes to increase lithium battery capacity. Altech advanced this technology during the year and has now progressed with commercialisation of the product. Achievement of game changing proprietary technology by cracking the “silicon barrier” Altech established a dedicated research and development laboratory in Perth, Australia, and has produced the Silumina Anodes lithium-ion battery anode material with 30% higher energy retention and capacity than conventional graphite only anodes. TM Extending the application of the graphite coating technology to the coating of silicon particles is a signiﬁcant breakthrough for Altech, especially in the context of a recent public statement by US electric vehicle manufacturer Tesla, that its aim is to increase the amount of silicon in its batteries to achieve step-change improvements in battery energy density and 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 include particle volume expansion of up to 300% when energised, a large “ﬁrst cycle lithium loss” and capacity fade. The expansion on lithiation leads to silicon fracture and subsequent delamination of the anode from the copper collector. Particle size reduction of silicon down to 150 nm overcomes this expansion problem, however, this is costly and uneconomical. After almost 12 months of challenging work, Altech “cracked the silicon barrier” and successfully produced and tested a series of lithium-ion battery anode materials that have ~30% higher retention capacity compared to conventional lithium-ion battery anodes. To achieve its breakthrough, Altech successfully combined silicon particles that had been treated with its innovative proprietary technology, with regular battery grade graphite, to produce a lithium-ion battery electrode containing a composite graphite / silicon anode. When energised, these materials held 30% more capacity compared to conventional graphite only anode material. The materials were then subjected to a series of tests over a period of time, including charge and discharge cycling. The previously unresolved obstacles for using silicon in lithium-ion battery anodes, which were: silicon particle swelling; prohibitive ﬁrst-cycle-capacity-loss of up to 50%; and rapid battery degradation, appears to be improved signiﬁcantly during the laboratory testing of Altech's composite graphite/silicon batteries. Altech continues to work on increasing the battery capacity, with phase two R&D striving to attain capacity retention beyond the current 30%. 100% y t i c a p a C 80% 60% Coated Si Graphite Silicon + Gra p h it e Extended Life of Battery Number of Cycles Theoretical increased energy density & extra battery life Altech's Perth, Australia based research and development staff in the laboratory Silumina An desTM SILUMINA ANODES PROJECT PILOT PLANT CONSTRUCTION TM Altech has now moved to commercialise its Silumina Anodes project in Saxony, Germany, and has executed an Engineering, Procurement and Construction Contract with Küttner GmbH & Co to build a Silumina Anodes pilot plant that will produce 120kg per day (~37,000 kg per year) of the Silumina Anodes product for product qualiﬁcation with end users, to assist in securing an offtake agreement. TM TM TM The pilot plant will also provide optimised inputs for the full-scale 10,000tpa commercial plant design, and will produce customer samples for testing and qualiﬁcation. The pilot plant is being installed in the Dock3 facility adjacent to Altech's designated ~14Ha industrial site at the Schwarze Pumpe Industrial Park in Saxony, Germany. Altech has secured approximately 300m2 of ﬂoorspace within the Dock3 where the pilot plant will be located. Also, an on-site analytical laboratory is planned for the pilot plant. The laboratory will allow for the rapid assessment of pilot plant product purity and monitor physical parameters which will enable changes in processing parameters and operational setpoints to be modiﬁed quickly, as required. The Dock3 space is already connected to all required utilities and includes ofﬁce space for the project and operations team. Küttner is a German-based industrial plant engineering and EPC contractor, with strong experience in design, procurement, project and construction management and plant commissioning across a range of industries. They have previously completed metallurgical plant, water and off-gas treatment projects in Germany. Küttner bringing valuable local knowledge to the execution of the project. A strategic partnership has also been entered into with world class German battery TM research and development institute Fraunhofer IKTS for Silumina Anodes qualiﬁcation. The independent performance testing and qualiﬁcation of the Silumina Anodes product by Fraunhofer IKTS will fast track and assist with early market entry. TM Altech is well funded to complete the pilot plant. The pilot plant is estimated to cost A$7.177 million, of which A$5.382 million will be funded by Altech (75% owner) and A$1.794 million will be funded by Altech Advanced Materials AG (25% owner). MD Iggy Tan of Altech signing the construction contract with Jan Meier-Kortwig, MD of Kuttner SILUMINA ANODES FULL SCALE PLANT DEVELOPMENT TM Whilst the pilot plant is being constructed, Altech continues to move forward with the development of its full-scale plant to be constructed in Germany to produce Silumina TM Anodes . An outstanding Preliminary Feasibility Study (“PFS”) for a full-scale plant to produce 10,000tpa of Silumina Anodes was completed during the year. The PFS included a low capital cost of US$95 million, a pre-tax Net Present Value of US$507 million and an attractive Internal Rate of Return (IRR) of 40%. A summary of the key ﬁnancial metrics within the PFS is set out in the table below. TM US Per Annum Annual Production 10,000 tonnes Exchange Rate 0.83 EUR/USD Project Capex Opex p.a. NPV Discount Rate Payback (real) IRR Revenue p.a. EBITDA p.a. 95 122 507 8.0 3.1 40 185 63 million million million % years % million million Altech has acquired an ~14Ha industrial site in Saxony, Germany, to house a full-scale plant for its Silumina Anodes project. Altech believes that the site is the ideal location for a 10,000tpa HPA battery materials coating plant, as it is strategically located to supply the European lithium-ion battery and EV markets. TM Altech's General Manager (Operations & Marketing) Dr. Jingyuan Liu, research assistant Penny Pang, and director Hansjorg Plaggemars. The battery materials coating plant project was awarded the “Medium Green” rating from the independent Centre of International Climate and Environmental Research (CICERO), based on the project achieving an environmentally sustainable design, as well as lower CO emissions of between ~19% and ~52%. This positive project evaluation, formally termed a “Green Bond Second Opinion”, conﬁrms that the project would be suitable for future green bond ﬁnancing. 2 CICERO were engaged by Altech as part of its PFS to conduct the independent evaluation of the proposed battery materials coating plant. The plant is being designed with a speciﬁc focus on minimising environmental impact, and in accordance with prevailing German, European and International environmental standards. In determining the overall project framework rating of “Medium Green”, CICERO assessed the proposed governance procedures and transparency as “Good” and conﬁrmed that the project aligns with all green bond principles. In assessing the proposed plant design and coating process, CICERO noted “The plant has near zero Scope 1 and 2 emissions as the plant's processes, including steam generation, are fully electriﬁed, and it will use renewable electricity sourced from on- site solar panels and renewable energy certiﬁcates”. CICERO's independent assessment of Altech's proposed battery materials coating plant, and its suitability for possible future green bond ﬁnancing, is an important inclusion for the current preliminary feasibility study – and certainly adds credibility to this proposed project. Altech has secured feedstock supplies from world leading European suppliers of high- quality materials, being SGL Carbon for graphite and Ferroglobe for silicon. During the recent crisis in Europe forcing supply chain pressures and rising energy prices, it has demonstrated the importance of European material supply for European battery and EV makers. The manufacturing supply risks are becoming increasingly evident, and more focus will be placed on European supply. Following the ofﬁcial opening of the Company's battery materials site, Altech initiated its European development strategy. During the year, Altech commenced working with various Saxony State authorities to gain an improved understanding of the administrative, legislative as well as ﬁnancial support that may be available for the future potential development of the full-scale HPA battery materials coating plant in Saxony. During the year, Altech also executed a Non-Disclosure Agreement with two German automakers and one European battery maker. Altech's German Chief Operating Ofﬁcer Carsten Baumeister. director Tunku Yaacob Khyra and director Uwe Ahrens JOHOR HPA PROJECT Altech continues to work with London based structuring agent Bedford Row Capital Plc (Bedford Row) and Perth based Bluemount Capital (WA) Pty Ltd (Bluemount), to ﬁnalise its green bond offering. Project ﬁnancial, legal, environmental, social & governance (ESG) due diligence has successfully concluded, and legal counsel from various jurisdictions have also completed their respective reviews of documentation. An initial bond offering “reach out” phase to potential subscribers has been completed, and more than 80 groups registered interest to receive the offering documents. Access to the project data room has been provided to a number of these groups for detailed due diligence and potential subscriber due diligence is ongoing. Detailed presentations and individual discussions are being scheduled on request, and these are expected to continue for some time. Altech is aiming to raise US$144m from the bond issue (Series 2021-F3 Notes), of which US$100m will be used as secondary debt for construction of its Johor HPA plant, with the balance of US$44m to service bond interest during the HPA plant's construction phase. The bonds would be issued by Sustainable Capital Plc, a company incorporated in United Kingdom as a dedicated green bond issuance platform. In parallel with the bond offering, Altech is continuing with its endeavours to secure commitments for a project equity investment of US$100M. US Based global investment bank DelMorgan & Co. has advanced several leads and potential investors in relation to this. Presentations by Altech and detailed discussions with interested parties are ongoing. Managing director Iggy Tan, accompanied by executive management, completed a visit to Germany during the year. The visit included a meeting with German government owned KfW IPEX-Bank, during which the bank was briefed on the status of Altech's secondary project ﬁnance initiatives – the US$144m green bond offer and the US$100m project level equity funding initiative. KfW IPEX-Bank conﬁrmed its continued support for the project, and its commitment to the senior loan facility of US$190m. Importantly, Euler Hermes, the German government export credit agency, has renewed the US$170m export credit cover (guaranteed) for the KfW IPEX Bank senior loan facility. Both KfW IPEX-Bank and Euler Hermes acknowledged the headwinds facing project ﬁnance close from disruptions caused by the pandemic in the last few years as well as the current market uncertainty exacerbated by the Ukraine crisis in Europe. Whilst headwinds in the current equity and ﬁnancial markets are challenging, management remains committed to the project ﬁnance process, and for a positive project ﬁnance outcome. In relation to the Australian kaolin deposits held by Altech, it was pleasing to discover halloysite at the Kerrigan kaolin deposit. Halloysite nanotubes could replace carbon nanotubes in high-tech applications. In addition, a recent drilling program yielded fresh kaolin resource data at Kerrigan tenement, which increase the deposit to an Inferred Resource of 125 million tonnes of kaolin. This represents a 47% increase in the kaolin tonnage compared to previous estimates. In Malaysia, the HPA plant site within the Tanjung Langsat Industrial Complex remains in sound condition. Regular site maintenance work is undertaken and permanent site security is in place. The already constructed maintenance workshop, electrical substation and storm water management infrastructure remain in as- constructed condition. CAPITAL RAISING During the year, the Company raised $10.3 million from a share placement combined with a share purchase plan. This has allowed for the next stage of Altech's battery materials development, including the funding of the pilot plant, land purchase in Germany for the full-scale plant, and ﬁnalisation of the Preliminary Feasibility Study for the Silumina Anodes full-scale plant. TM In addition to this, the Company received total additional combined funds of $2.1 million as a result of the Company's largest shareholder, Deutsche Balaton Aktiengesellschaft converting 15,000,000 listed options with an expiry date of 31 May 2022 and conversion price of $0.08 each, as well as another signiﬁcant shareholder, Delphi Unternehmensberatung Aktiengesellschaft, converting 11,519,296 listed options. Altech was delighted with the support shown by the Company's signiﬁcant shareholders. NEW WEBSITE Altech has delivered on a new website. Shareholders and interested parties are invited to access the web site at www.altechchemicals.com 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 CHIEF FINANCIAL OFFICER & COMPANY SECRETARY Martin Stein 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 AUDITOR 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 2022 CONTENTS DIRECTORS’ 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 PAGE 1 16 17 18 19 20 21 47 48 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 Hansjoerg Plaggemars Non-Executive Director Uwe Ahrens Alternate Director (for Tunku Yaacob Khyra) COMPANY SECRETARIES Martin Stein Shane Volk AUDITOR Moore Australia Audit (WA) Level 15, Exchange Tower 2 The Esplanade Perth, WA 6000 SHARE REGISTRY Automic Pty Ltd Level 5, 191 St Georges Terrace Perth, WA 6000 Telephone: 1300 288 664 +61 2 9698 5414 STOCK EXCHANGE LISTING REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS Suite 8, 295 Rokeby Road, Subiaco, Western Australia, 6008 Phone: Email: Website: +61 8 6168 1555 info@altechchemicals.com www.altechchemicals.com Securities of the Company are quoted 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: ATC (shares) Perth FWB Code: A3Y ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 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 2022. 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 Tan became the Company's Managing Director in August 2014. 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 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 Chemicals’ 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 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 CEO of Ngarda Civil & Mining and has also held senior executive and operational roles at CITIC Pacific, Alcoa, Roche Mining and Rio Tinto. - 1 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 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. 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. Uwe Ahrens Alternate Non-Executive Director (for Tunku Yaacob Khyra) Appointed: 22 October 2015 Mr 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. COMPANY SECRETARIES Martin Stein Chartered Accountant, B. Bus, Chartered Secretary Chief Financial Officer and Company Secretary Appointed: Chief Financial Officer 1 November 2021 and Company Secretary 9 March 2022 Mr Stein is a finance and corporate executive with over 20 years’ of international experience. Mr Stein has held the positions of Chief Financial Officer and Company Secretary in several ASX listed companies. In these roles, Mr Stein has been responsible for all aspects of capital raising, financial management, shareholder liaison and corporate governance. Prior to this, Mr Stein held senior positions with Anvil Mining Limited as well as with PwC at its London office. Whilst with PwC, Mr Stein provided corporate services for companies listed on the LSE, NYSE and AIM, including Colgate-Palmolive, Sony, Heinz, DHL Express and Bosch. Shane Volk B.Bus (Accounting), Grad Dip (Applied Corp. Gov.), AGIA Company Secretary 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 2022 PRINCIPAL ACTIVITIES The principal activities of the Group during the financial year were: - Achievement of game changing proprietary technology by cracking the “silicon barrier” and producing the Silumina AnodesTM Lithium- ion battery anode material with 30% higher energy retention and capacity than conventional graphite only anodes. - Finalising the Preliminary Feasibility Study, with outstanding economics, for the Silumina AnodesTM Battery Materials Project to produce 10,000tpa of Silumina AnodesTM in Saxony, Germany. Altech acquired an ~14Ha industrial site in Saxony, Germany that is an ideal location for the full-scale plant. - Commencement of construction by Küttner GmbH & Co to build a Silumina AnodesTM Pilot Plant in Germany that will produce 120kg per day (~37,000 kg per year) of the Silumina AnodesTM product for product qualification with end users, that will assist in securing an offtake agreement for the full-scale plant. - Continuing the process of securing the remaining green bond and project level equity to finance the remaining construction for the Johor, Malaysia high-purity alumina production plant. FINANCIAL POSITION & RESULTS OF OPERATIONS The financial results of the Group for the financial year ended 30 June 2022 are: Cash and cash equivalents Net Assets Revenue Net profit /(loss) after tax Profit / (Loss) per share Dividend 2022 $ 10,912,939 97,537,643 468,659 (5,802,429) (0.004) - 2021 $ 6,728,978 88,926,622 8,059,423∗ 2,325,866 0.002 - ∗ Includes $7,941,108 in relation to the sale of 25% equity of Altech Industries Germany GmbH. 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 The year ended 30 June 2022 enabled the Company to continue to successfully move forward with its patented Silumina AnodesTM technology, as well as continuing to secure bond and equity project finance for its HPA production plant in Malaysia. Silumina AnodesTM Project In relation to the Silumina AnodesTM project, which involves combining silicon and graphite and coating this composite product with a nanometre layer of high-purity alumina for inclusion in lithium battery anodes, Altech advanced this technology and achieved the following results. - - - - - - Establishment of a dedicated Research and Development laboratory in Western Australia. Achievement of game changing proprietary technology by cracking the “silicon barrier” and producing the Silumina AnodesTM Lithium- ion battery anode material with 30% higher energy retention and capacity than conventional graphite only anodes. Achievement of stable battery and sound cycling performance. Phase 2 R&D will strive to attain capacity retention beyond the current 30%. “Silumina AnodesTM” registered as name for Altech's composite anode material. Patent protection for Silumina AnodesTM battery materials technology in place. Altech has now moved to commercialise the Silumina AnodesTM project in Saxony, Germany, and has achieved the following exciting milestones in relation to the construction of a pilot plant for the product. - - Executing an Engineering, Procurement and Construction Contract with Küttner GmbH & Co to build the Silumina AnodesTM Pilot Plant that will produce 120kg per day (~37,000 kg per year) of Silumina AnodesTM product for product qualification with end users, that will assist in securing an offtake agreement. Pilot plant to provide optimised inputs for 10,000tpa commercial plant design, and produce customer samples for testing and qualification. - 3 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 - - Strategic partnership entered into with world class German battery research and development institute Fraunhofer IKTS for Silumina AnodesTM qualification. The independent performance testing and qualification of Silumina AnodesTM product by Fraunhofer IKTS will assist early market entry. Engaging and building relationships with Saxony State authorities for support. Whilst the pilot plant is being constructed, Altech continues to move forward with the development of a full-scale plant to be constructed in Germany to produce the Silumina AnodesTM product. Key achievements in this regard are outlined below. - - - - - Outstanding Preliminary Feasibility Study for the Silumina AnodesTM Battery Materials Project to produce 10,000tpa of Silumina AnodesTM, including a low capital cost of US$95 million, a pre-tax Net Present Value of US$507 million and an attractive Internal Rate of Return (IRR) of 40% Acquisition of an ~14Ha industrial site in Saxony, Germany that is an ideal location for the full-scale plant. The battery materials coating plant project awarded “Medium Green” rating from the independent Centre of International Climate and Environmental Research (CICERO), based on the project achieving an environmentally sustainable design as well as lower CO2 emissions of between ~19% and ~52% possible. Security feedstock supplies from world leading European suppliers of high-quality materials, being SGL Carbon for graphite and Ferroglobe for silicon. NDA executed with two German automakers and one European battery maker. Johor HPA Project Altech continues to mandate BlueMount Capital and Bedford Row Capital with the listed green bonds, targeting an offer of ~US$144m, with the green bond offering reach out phase completed. More than 80 groups registered interest to receive the offering documentation. The Company continues with detailed due diligence and data room reviews with potential investors. In addition, Altech continues to mandate DelMorgan & Co. with the US$100m of project level equity, with the project equity process running in parallel with the green bond offer. The site for the production facility in Johor is currently on care and maintenance. Capital Raised During the year, the Company raised $10.3 million from a share placement combined with a share purchase plan. This has allowed for the next stage of Altech’s battery materials development, including the funding of the pilot plant, land purchase in Germany for the full- scale plant, and finalisation of the Preliminary Feasibility Study for the Silumina AnodesTM full-scale plant. In addition to this, the Company received total combined funds of $2.1 million as a result of the Company’s largest shareholder, Deutsche Balaton Aktiengesellschaft converting 15,000,000 listed options with an expiry date of 31 May 2022 and conversion price of $0.08 each, as well as another significant shareholder, Delphi Unternehmensberatung Aktiengesellschaft, converting 11,519,296 listed options. Altech was delighted with the support shown by the Company’s significant shareholders. New Website Altech has delivered on a new website. Shareholders and interested parties are invited to access the website at www.altechchemicals.com 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. The Board has established an Audit Committee. EMPLOYEES The Company had 11 permanent employees as at 30 June 2022 (2021: 9 permanent employees and 1 casual employee). - 4 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS 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 On 14 September 2022, Altech announced that it had entered into a Joint Venture with Fraunhofer IKTS in relation to commercialisation of a 100 MWh Sodium Alumina Solid State Battery Plant for grid storage. Further, there has not arisen since the end of the financial year any other 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. OPTIONS OVER UNISSUED CAPITAL Since 30 June 2021 and up until the date of this report the Company had not issued any new options (2021: 181,667,319 options with an exercise price of $0.08 per option and an expiry date of 31 May 2022). As at 30 June 2022, 43,729,294 new ordinary shares have been issued through the exercise of options. There are no issues outstanding at the date of this report. Information in relation to this is available on both the ASX and Company website. 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 Employees Total 5,000,000 10,000,000 6,000,000 200,000 1,400,000 1,700,000 5,750,000 30,050,000 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 5,000,000 10,000,000 6,000,000 200,000 1,400,000 1,700,000 5,750,000 30,050,000 Expiry Date 11/6/25 29/11/26 26/11/25 1/2/23 4/8/23 27/9/25 31/1/29 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 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 Group has what it believes to be a significant opportunity for the Company, with continued development and commercialisation of the Silumina AnodesTM Battery Materials Project in Saxony, Germany. To this extent, Altech will continue with the construction of the pilot plant to produce 120kg per day of Silumina AnodesTM for distribution to potential customers, with the aim being to secure an offtake agreement. In conjunction with this, and with the results achieved from the outstanding Preliminary Feasibility Study for the full-scale plant to produce 10,000tpa of Silumina AnodesTM, Altech will progress with the commercialisation of the project. Altech intends to prepare a Definitive Feasibility Study that will provide additional assurance over the project. - 5 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 In addition, work continues at the dedicated research and development laboratory in Western Australia, with Phase 2 R&D work striving to attain Silumina AnodesTM battery capacity retention beyond the current 30%. The Company also remains focused on securing the debt and equity funding that will enable it to bring about project financial close and continue with the construction of its proposed high-purity alumina plant in Johor, Malaysia, 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. 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 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 2022 has not identified any material issues. The table below sets out the Mineral Resources and Ore Reserves comparatives as at 30 June 2022 and 30 June 2021. Meckering kaolin (aluminous clay) deposit Mineral Resource estimate (JORC 2012) as at 30 June 2022 Mineral Resource estimate (JORC 2012) as at 30 June 2021 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 * 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 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 Mineral Reserve estimate (JORC 2012) as at 30 June 2022 Mineral Reserve estimate (JORC 2012) as at 30 June 2021 Classification Proven Probable Tonnes 454,000 770,000 Total Proven & Probable* 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 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 - 6 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 * rounded to the nearest one thousand tonnes 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 2022 is extracted from the ASX announcement entitled “Altech updates kaolin resource for its Meckering Mining Lease” dated 8 July 2016 and 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 2022 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. 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 - - - - - - - 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 6 1 7 7 Meetings held whilst a director 7 7 7 7 7 7 7 - 7 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 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 established a Remuneration Committee. 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. Voting and comments made at the Company’s 2021 Annual General Meeting The Company received 2,406,857 proxy votes (6.2%) against its 2021 remuneration report (from the 169,415,172 proxy votes received and eligible to vote on the resolution) tabled at the 2021 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. 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) 2022 $95,000 $70,000 2021 $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. He has also been paid a short term incentive of $50,000 during the year. - 8 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 REMUNERATION REPORT (continued) 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. 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 of between 10% and 40% 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 year covered by this report short-term incentives were awarded by the board to executives for the attainment of pre-determined milestones. Mr Tan was awarded an amount of $95,700, plus superannuation of 10.0% (2021: Nil ), while Mr Volk was awarded $63,036 plus superannuation of 10.0% (2021: Nil) and Mr Stein was awarded $7,700 plus superannuation of 10.0% (2021: 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, 10,000,000 performance rights for Mr Iggy Tan were cancelled and 10,000,000 replacement performance rights were issued to him. The issue of these performance rights were approved by the Board of Directors by way of resolution on 29 November 2021. Further, 1,000,000 performance rights for Mr Shane Volk were cancelled and 1,000,000 replacement performance rights were awarded to him. In addition, 1,000,000 new performance rights were also issued to Mr Martin Stein. The issue of these performance rights were approved by the Board of Directors by way of resolution on 28 January 2022. 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. - 9 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 REMUNERATION REPORT (continued) No performance rights held by directors or key management personnel that were outstanding as at 30 June 2022 or awarded since that date, have vested. 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 $ 2021/22 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 Executives M Stein – CFO & Company secretary S Volk – Company secretary TOTAL 435,000 95,000 70,000 70,000 70,000 65,000 70,000 140,000 84,095 1,099,095 95,700 - - - - 50,000 - 7,700 63,036 216,436 53,070 9,500 7,000 - - - - 14,770 14,713 99,053 Total $ 947,410 116,985 89,485 82,485 82,485 127,485 82,485 363,640 12,485 12,485 12,485 12,485 12,485 12,485 25,231 25,231 489,012 187,701 187,075 1,903,596 (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. The base salary includes $5,000 which relates to services performed in prior year. 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 2022, 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. 2020/21 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) H Plaggemars – non-executive 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. 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 2022, 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. - 10 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 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 M Stein – CFO & company secretary S Volk – CFO & company secretary Fixed remuneration 2021 2022 At risk remuneration 2021 2022 52% 89% 86% 85% 85% 51% 85% 82% 53% 84% 83% 78% 77% 77% 74% 74% - 100% 48% 11% 14% 15% 15% 49% 15% 18% 47% 16% 17% 22% 23% 23% 26% 26% - - 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) $478,500 p.a. Martin Stein Chief Financial Officer & Joint Company Secretary Shane Volk Joint Company Secretary No fixed term 1 month notice No fixed term 1 month notice $231,000 p.a. $32,148 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 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, 10,000,000 performance rights for Mr Iggy Tan were cancelled and 10,000,000 replacement performance rights were issued to him. The issue of these performance rights were approved by the Board of Directors by way of resolution on 29 November 2021. Further, 1,000,000 performance rights for Mr Shane Volk were cancelled and 1,000,000 replacement performance rights were awarded to him. In addition, 1,000,000 new performance rights were also issued to Mr Martin Stein. The issue of these performance rights were approved by the Board of Directors by way of resolution on 28 January 2022 (2021: 6,000,000 performance rights were issued to non-executive directors). 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 2022, are set out below: - 11 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 REMUNERATION REPORT (continued) Name Directors Record Date No. of Performance Rights Issue price Fair Value at issue date $ Vested & Exercised at 30/06/22 Mr Iggy Tan Mr Iggy Tan Mr Luke Atkins Mr Dan Tenardi Mr Peter Bailey Tunku Yaacob Khyra Mr Uwe Ahrens Mr H Plaggemars 12/6/18 29/11/21 27/11/20 27/11/20 27/11/20 27/11/20 27/11/20 27/11/20 5,000,000 10,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Executives Mr Shane Volk Mr Martin Stein 31/1/22 31/1/22 1,000,000 1,000,000 nil nil nil nil nil nil nil nil nil nil 820,313 1,400,000 45,000 45,000 45,000 45,000 45,000 45,000 120,000 120,000 - - - - - - - - - - Un-vested at 30/06/22 Final date for vesting 5,000,000 10,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 11/6/25 29/11/26 26/11/25 26/11/25 26/11/25 26/11/25 26/11/25 26/11/25 1,000,000 1,000,000 31/1/29 31/1/29 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) (iii) rights over ordinary shares in the Company 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 2022 Directors I Tan L Atkins D Tenardi P Bailey Tunku Yaacob Khyra U Ahrens H Plaggemars Executives S Volk M Stein 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 Vested as Remuneration during year Acquired/(disposed) during year Other changes during year Balance at End of Year 7,817,000 10,857,438 5,594,915 3,774,710 135,034,675 1,000,000 - - - - - - - - - - - - - - - - - - - - - - 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 10,357,438 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 - 12 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 REMUNERATION REPORT (continued) KMP Holdings of Performance Rights 30 June 2022 Directors 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 I Tan L Atkins D Tenardi P Bailey Tunku Yaacob Khyra U Ahrens H Plaggemars 15,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,000,000 - - - - - - (10,000,000) - - - - - - 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 Executives S Volk M Stein 30 June 2021 Directors I Tan L Atkins D Tenardi P Bailey Tunku Yaacob Khyra U Ahrens H Plaggemars Executives S Volk 1,000,000 - 1,000,000 1,000,000 - (1,000,000) - 1,000,000 1,000,000 - - - 1,000,000 1,000,000 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 - - 1,000,000 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 2022 REMUNERATION REPORT (continued) KMP Holdings of Listed Options 30 June 2022 Directors I Tan L Atkins D Tenardi P Bailey Tunku Yaacob Khyra U Ahrens H Plaggemars Executives S Volk M Stein 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 - 250,000 - - 29,408,101 - - - - - - - - - - (250,000) - - (29,408,101) - - - - - - - - Exercised during year Balance at end of Year Vested and exercisable at year end Unvested and unexercisable at year end - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 - - - - - - - - - 250,000 - - 29,408,101 - - - - - - - - - - - - - - - - - - - - 250,000 - - 29,408,101 - - - 250,000 - - 29,408,101 - - - - - - - - - - - - _________________________________________________________________________________________________________ This concludes the remuneration report, which has been audited - 14 - ALTECH CHEMICALS LIMITED DIRECTORS’ REPORT For the year ended 30 June 2022 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 Australia Audit (WA), 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 on the following page. 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 21st day of September 2022 - 15 - ALTECH CHEMICALS LIMITED CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2022 Revenue from ordinary activities Interest Income R&D tax refunds 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) Research and development Interest expense Forex gain / (loss) Profit / (loss) before income tax expense Income tax benefit Net profit / (loss) from continuing operations Other comprehensive profit / (loss) Items that may be reclassified subsequently to profit and loss: Exchange differences on translating foreign controlled entities Total comprehensive profit / (loss), net of tax Profit / (loss) for the year attributable to: Owners of the parent entity Non-controlling interest Total profit / (loss) for the year, net of tax Total comprehensive profit / (loss) for the year attributable to: Owners of the parent entity Non-controlling interest Total comprehensive profit / (loss) loss for the year Earnings Per Share Basic profit / (loss) per share ($ per share) Diluted profit / (loss) loss per share ($ per share) Notes 3(a) 3(a) 3(a) 3(b) 16(e) 30-Jun-22 30-Jun-21 $ $ 227,104 241,555 - 468,659 117,619 - 7,941,804 8,059,423 (2,201,945) (1,345,086) (328,891) (230,623) (2,414,378) (3,094,837) (583,627) (328,979) (119,051) (546,262) (3,400) (9,919) (242,436) (200,006) (620,569) - - - (6,067,791) 2,325,866 265,362 - (5,802,429) 2,325,866 1,964,499 (3,837,930) - 2,325,866 (5,729,919) 2,325,866 (72,510) - (5,802,429) 2,325,866 (3,765,420) 2,325,866 (72,510) - (3,837,930) 2,325,866 5 5 (0.004) (0.004) 0.002 0.002 The above Consolidated statement of Profit and Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. - 17 - ALTECH CHEMICALS LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2022 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 Non-controlling interests TOTAL EQUITY Notes 6(a) 7 30-Jun-22 $ (Restated) 30-Jun-21 $ 10,912,939 6,728,978 502,908 246,918 11,415,847 6,975,896 8 9 10 11 12 13 14 15 15 16 17 19 31,999,798 29,931,589 5,950,181 782,659 6,195,810 604,821 37,679,490 36,463,669 3,351,214 7,208,984 2,085,439 7,509,881 86,972,327 82,791,209 98,388,174 89,767,105 55,394 412,222 219,814 687,430 34,532 128,569 163,102 850,531 30,878 427,089 228,461 686,428 53,352 100,703 154,055 840,483 97,537,643 88,926,622 124,487,779 107,509,911 3,726,868 8,889,821 (30,604,494) (27,473,110) (72,510) - 97,537,643 88,926,622 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 2022 Contributed Equity $ Accumulated losses $ Share- based payment reserves $ At 1 July 2021 – as previously reported 107,509,911 (25,930,066) 7,346,777 Prior period adjustment (refer Note 3) - (1,543,044) - At 1 July 2021 – restated 107,509,911 (27,473,110) 7,346,777 Profit / (Loss) after income tax for the year Other comprehensive profit / (loss) for the year (net of tax) Total comprehensive profit / (loss) for the year Transactions with owners in their capacity as owners: Issue of share capital (net of issue costs) Share based payments (issue of performance rights) Exercise of options Conversion of performance rights to share capital Expiration of performance rights - - - (5,729,919) - (5,729,919) 9,910,024 - 3,498,344 3,569,500 - - - - - - - - 583,627 - (3,569,500) 2,598,534 (2,598,534) Foreign currency translation reserves $ - 1,543,044 1,543,044 Other equity interests $ - - - Total $ 88,926,622 - 88,926,622 - (72,510) (5,802,429) 421,455 - 421,455 421,455 (72,510) (5,380,974) - - - - - - - - - - 9,910,024 583,627 3,498,344 - - At 30 June 2022 124,487,779 (30,604,494) 1,762,369 1,964,499 (72,510) 97,537,643 Contributed Equity $ Accumulated losses $ Reserves $ Foreign currency translation reserves $ Other equity interests $ At 1 July 2020 89,707,030 (28,255,932) 7,104,340 Profit / (Loss) after income tax for the year Total comprehensive profit (loss) for the year - - 2,325,866 2,325,866 - - Transactions with owners in their capacity as owners: Issue of share capital (net of issue costs) 17,802,881 Share based payments (net movement) - - - - 242,437 At 30 June 2021 107,509,911 (25,930,066) 7,346,777 - - - - - - - - - - - - Total $ 68,555,437 2,325,866 2,325,866 17,802,881 242,437 88,926,622 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 2022 Cash Flows from Operating Activities Payments to suppliers, contractors and employees R&D refund received Interest received Interest paid Deposits Paid 30-Jun-22 30-Jun-21 Notes $ $ (5,286,968) (3,801,433) 241,555 227,104 (3,400) - - 117,619 - (15,929) Net cash flows used in operating activities 6(b) (4,821,709) (3,699,743) Cash Flows from Investing Activities Acquisition of plant and equipment Payment for investment in Altech Advance Materials AG Payments for development expenditure Payments for exploration expenditure Proceeds from sale of 25% of Altech Industries Germany Gmbh Net cash flows used in investing activities Cash Flows from Financing Activities Payments for KfW IPEX-Bank loan facility Proceeds from issue of shares Share issue costs Proceeds from exercise of options Lease repayment (principal) Net cash flows from financing activities Net increase /(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Foreign exchange variance on cash Cash and cash equivalents at the end of the financial year 6(a) (2,443,218) (1,713,805) - (177,838) - (95,515) (1,981,363) (5,077,643) (38,129) 403,819 (4,334,862) (6,788,831) - 10,331,348 (421,324) 3,498,344 (56,998) (273,773) 16,658,272 - - - 13,351,370 16,384,499 4,194,799 6,728,978 (10,838) 5,895,925 833,053 - 10,912,939 6,728,978 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 2022 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 2022 (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 Consolidated Statement of Cash Flows, 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) and in Germany (Saxony) 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 1(q) 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 (expired 31 August 2022), and the Company has an option to renew the lease for an additional 1 year term. The Company’s 75%-owned subsidiary, Altech Industries Germany GmbH leases an office space in Dock 3, Saxony, Germany. This lease has a 5 year term (expiring 11 January 2026). 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 9. - 22 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 (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 16(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 2022 (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. (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 inflows for the year ended 30 June 2022 of $4,194,799 (2021: $5,895,925). In addition, as at 30 June 2022, the Group had net current assets of $10,463,053 (30 June 2021: $6,289,468) 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 2022 (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. 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 2022 (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 16(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(h)), 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 or where exploration activities have not reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. 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 1(h). The carrying amounts of exploration and evaluation assets are set out in Note 1(h). Development expenditure and Malaysian HPA Plant (work 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 28. 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. - 26 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 (v) Financial Instruments 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 2022 (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 2022 (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 2022 (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 2022 (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 2022 2. Restatement of comparatives Errors were made in the 30 June 2021 financial statements in relation to treatment of leased assets. With effect from 1 July 2020, the consolidated entity has retrospectively applied AASB 16 – Leases. Under this policy, assets subject to lease are now treated as right-of-use assets and depreciated over their respective useful lives. The change in this policy has resulted in changes in the carrying value of property, plant and equipment and right- of-use assets. In addition, errors were made in relation to treatment of foreign currency translation reserves. With effect from 1 July 2020, foreign currency translation of functional currency to presentation currency are taken to reserves instead of accumulated losses. Adjustments made to the consolidated statement of financial position: Current Assets Cash and cash equivalents ade 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 Reported 30-Jun-21 $ 6,728,978 246,918 6,975,896 Adjustment $ - - - 36,039,267 (6,107,678) 88,132 6,107,678 604,821 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 88,926,622 107,509,911 - - - - - - - - - - - - - - - - 7,346,777 1,543,044 (Restated) 30-Jun-21 $ 6,728,978 246,918 6,975,896 29,931,589 6,195,810 604,821 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 88,926,622 107,509,911 8,889,821 (25,930,066) (1,543,044) (27,473,110) 88,926,622 - 88,926,622 - 32 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 3. Loss for the year includes the following specific income and expenses (a) Revenue Interest income Sale of 25% equity of Altech Industries Germany GmbH R&D tax refund 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 30-Jun-22 30-Jun-21 $ $ 227,104 117,619 - 7,941,108 241,555 - - 696 468,659 8,059,423 (55,180) (121,903) (836,490) (276,927) (166,277) (174,618) (477,796) (305,188) - (50,268) (74,759) (1,095,422) (255,015) (123,054) (127,256) (218,669) (258,943) (891,451) (2,414,378) (3,094,837) - 33 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 4. Income Tax Income tax expense Current income tax benefit / (expense) Deferred income tax expense Total income tax expense Tax reconciliation Accounting profit (loss) before tax from continuing operations At statutory tax rate of 25% Adjustment for: Non-assessable income R&D spend R&D tax offset Share based payments to employees Other non-deductible expenses Deferred tax assets not recognised Tax rate differential Recoupment of prior year tax losses not previously brought to account 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 Tax losses 30-Jun-22 30-Jun-21 $ 265,362 - 265,362 $ - - - (6,067,791) (1,516,948) 2,325,866 650,249 - 136,565 265,362 - 1,182,934 484,417 628 (287,597) 265,362 68,645 677,013 745,659 (2,064,688) 82,973 - 63,033 812,665 430,278 25,490 - - 241,168 560,318 801,486 (745,659) (801,486) - - (96,794) (648,865) (745,659) 745,659 - 2,017,465 2,017,465 (103,684) (697,802) (801,486) 801,486 - 1,594,407 1,594,407 - 34 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 5. Earnings per share Basic profit (loss) per share Diluted profit (loss) per share The weighted average number of ordinary shares used in the calculation of basic earnings per share was: 30-Jun-22 30-Jun-21 $ (0.004) (0.004) $ 0.002 0.002 Number Number 1,080,764,077 1,018,048,889 6. 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 Consolidated Statement of Financial Position as follows: Cash at bank and on hand 30-Jun-22 30-Jun-21 $ $ 10,912,939 6,728,978 (b) Reconciliation of the loss from ordinary activities after income tax to the net cash flows used in operating activities: Profit/(Loss) from ordinary activities after income tax Non-cash items: - Depreciation expense (Operations) - Foreign exchange gains / losses - Share based payments - Loss on disposal of assets - Impairment – investment in associate (AAM AG) - Share in profit/(loss) of associate (AAM AG) - Deferred Consideration Receivable - sale of 25% Altech Industries Germany GmbH - Minority equity interest 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 Net cash outflows from Operating Activities 7. Trade and other receivables CURRENT RECEIVABLES Research and development tax rebate Sundry debtors GST receivable Deposits paid Altech Advanced Materials AG Other receivable - 35 - 30-Jun-22 30-Jun-21 $ $ (5,802,429) 2,325,866 328,891 (200,699) 583,627 - 119,051 328,979 230,623 - 333,000 464 620,569 200,006 - (7,537,290) 72,510 - (14,867) (255,990) 19,218 (192,196) 228,709 90,506 (4,821,709) (3,699,743) 30-Jun-22 $ 30-Jun-21 $ 265,362 - 130,231 30,383 68,930 8,001 502,908 - 4,240 24,976 24,754 184,950 7,998 246,918 ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 8. Property, Plant and Equipment OFFICE EQUIPMENT At cost Less: accumulated depreciation Total office equipment LAND At cost Total land PLANT AND EQUIPMENT At cost Less: accumulated depreciation Total plant and equipment MALAYSIAN HPA PLANT (work in progress) At cost Total Malaysian HPA Plant GERMAN PILOT PLANT (work in progress) At cost Total German Pilot Plant 30-Jun-22 30-Jun-21 $ $ 281,816 260,646 (211,866) (158,924) 69,951 101,722 3,578,359 3,578,359 (Restated) 1,575,497 1,575,497 205,774 (36,896) 168,879 37,384 (11,527) 25,857 27,367,758 28,228,513 27,367,758 28,228,513 814,852 814,852 - - Total Property, Plant and Equipment 31,999,798 29,931,589 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 Depreciation expense (profit & loss account) Carrying amount at the end of the year LAND Carrying amount at the beginning of the year Additions Less: amortisation Adjustment Carrying amount at the end of the year 30-Jun-22 30-Jun-21 $ 101,722 21,171 (52,942) 69,951 $ 66,499 54,534 (19,311) 101,722 1,575,497 2,002,862 (Restated) 7,850,066 7,520 - (174,411) (6,107,678) 3,578,359 1,575,497 - 36 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 8. Property, Plant and Equipment (continued) Reconciliation (continued) 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 (work in progress) Carrying amount at the beginning of the year Additions Foreign currency translation Carrying amount at the end of the year GERMAN PILOT PLANT (work in progress) Carrying amount at the beginning of the year Additions Less: depreciation Carrying amount at the end of the year 9. Right-of-use Assets At cost Adjustment for restatement (refer note 2) Accumulated depreciation Net carrying amount Reconciliation Reconciliation of the carrying amount of right-of-use assets at the beginning and end of year are set out below: Right-of-use assets At beginning of the year net of accumulated depreciation Adjustment for restatement (refer note 2) Application during the year Depreciation charge for the year Net carrying amount at the end of the year 30-Jun-22 $ 30-Jun-21 $ 25,857 168,390 - (25,368) 168,879 7,050 25,652 (116) (6,729) 25,857 28,228,513 28,202,820 - 25,693 (860,755) - 27,367,758 28,228,513 - 814,852 - 814,852 30-Jun-22 $ 6,854,271 - (904,090) 5,950,181 - - - - (Restated) 30-Jun-21 $ 142,933 6,107,678 (54,801) 6,195,810 6,195,810 - (15,345) (230,284) 5,950,181 - 6,107,678 142,933 (54,801) 6,195,810 Lease liabilities are significantly lower in comparison to the carrying amount of the right-of-use assets as the lease of the land in Malaysia (Johor HPA plant site) has been paid upfront in full. 10. Exploration and Evaluation expenditure Carrying amount at the beginning of year Exploration and evaluation expenditure incurred during the year (at cost) Carrying amount at the end of the year 30-Jun-22 30-Jun-21 $ 604,821 177,838 782,659 $ 566,692 38,129 604,821 - 37 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 11. Development expenditure Carrying amount at the beginning of the year Development expenditure incurred during the year (at cost) including foreign exchange movements Carrying amount at the end of the year 30-Jun-22 $ 30-Jun-21 $ 36,463,669 36,628,368 1,215,821 (164,699) 37,679,490 36,463,669 The Malaysian HPA plant is part way constructed, and is currently on care and maintenance. The Company requires further capital in order to complete the plant. Should the Company not be successful in raising sufficient additional capital, the plant will not be constructed in full. Should this occur, the carrying value shown will not be realised. 12. Investment in Associate (Altech Advanced Materials AG) 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 Altech’s ownership in the associate increased from 17.7% as at 30 June 2021 to 27.1% as at 30 June 2022. 13. Other non-current receivables Deferred consideration sale of 25% AIG to AAM AG 30-Jun-22 30-Jun-21 $ $ 2,085,439 1,713,806 (328,979) (119,052) 2,891,365 14,650 (200,006) (620,570) 3,351,214 2,085,439 30-Jun-22 30-Jun-21 $ $ 7,208,984 7,509,881 AAM AG has recently received shareholder approval to undertake a capital raising. Altech anticipates that the deferred consideration will be received subject to a successful capital raising. Should AAM AG not be successful in raising capital and subsequently paying the deferred consideration to Altech, the amount receivable may not be realised in full. In the event that this occurs, Altech has the contractual right to receive back the 25% equity held by AAM AG in Altech Industries Germany GmbH. 14. Trade and other payables CURRENT PAYABLES (Unsecured) Trade creditors Accrued expenses Payroll Tax payable Other creditors and accruals Total trade and other payables 15. Provisions CURRENT Provision for annual leave NON-CURRENT Provision for long service leave Total provisions 30-Jun-22 30-Jun-21 $ $ 289,623 48,102 6,255 68,242 412,222 209,008 51,991 5,982 160,108 427,089 30-Jun-22 30-Jun-21 $ $ 219,814 228,461 128,569 348,343 100,703 329,164 - 38 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 16. Contributed Equity (a) Ordinary shares Contributed equity at the beginning of the period Shares issued during the period Options conversion Transfer of historical share-based payment reserve to share capital 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: 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) 12-Aug-21 at $0.08 (Exercise of options) 13-Oct-21 at $0.08 (Exercise of options) 20-Oct-21 at $0.08 (Exercise of options) 27-Oct-21 at $0.08 (Exercise of options) 4-Nov-21 at $0.08 (Exercise of options) 10-Nov-21 at $0.08 (Exercise of options) 16-Nov-21 at $0.08 (Exercise of options) 23-Nov-21 at $0.08 (Exercise of options) 30-Nov-21 at $0.08 (Exercise of options) 8-Dec-21 at $0.08 (Exercise of options) 9-Dec-21 at $0.107 (Placement) 15-Dec-21 at $0.08 (Exercise of options) 22-Dec-21 at $0.08 (Exercise of options) 23-Dec-21 at $0.107 (Share Purchase Plan) 4-Jan-22 at $0.08 (Exercise of options) 17-Jan-22 at $0.08 (Exercise of options) 24-Jan-22 at $0.08 (Exercise of options) 31-Jan-22 at $0.08 (Exercise of options) 14-Feb-22 at $0.08 (Exercise of options) 28-Feb-22 at $0.08 (Exercise of options) 14-Mar-22 at $0.08 (Exercise of options) 24-Mar-22 at $0.08 (Exercise of options) 31-Mar-22 at $0.08 (Exercise of options) 7-Apr-22 at $0.08 (Exercise of options) 21-Apr-22 at $0.08 (Exercise of options) 27-Apr-22 at $0.08 (Exercise of options) 3-May-22 at $0.08 (Exercise of options) 10-May-22 at $0.08 (Exercise of options) 17-May-22 at $0.08 (Exercise of options) 27-May-22 at $0.08 (Exercise of options) 2-Jun-22 at $0.08 (Exercise of options) Ordinary shares on issue at the end of the reporting period - 39 - 30-Jun-22 30-Jun-21 $ $ 107,509,911 89,707,030 10,331,350 18,770,923 3,498,343 3,569,500 - - (421,326) (968,042) 124,487,779 107,509,911 30-Jun-22 30-Jun-21 1,286,482,133 870,451,255 - - - - - - - 2,600 466,722 145,729 52,231 137,500 463,419 966,819 153,844 346,862 59,440 75,964,556 14,540 120,445 20,589,886 104,500 93,612 587,217 3,789,506 491,370 240,529 224,782 202,800 695,971 671,926 91,942 625,530 27,349,788 2,698,777 900,531 667,420 1,362,942 1,426,765,869 4,285,714 8,571,429 8,571,429 16,457,143 315,721,720 14,810,375 47,613,068 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,286,482,133 ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 16. Contributed Equity (continued) (b) Performance Rights During the year, a total of 3,400,000 employees’ performance rights expired and were cancelled. The Company issued 5,750,000 performance rights to certain employees pursuant to the Altech Chemicals Limited Performance Rights Plan ("the Plan"), part of which was replacement for those that had expired. In addition, the Company issued 10,000,000 performance rights to the Managing Director to replace the same amount that expired during the year. No performance rights vested during the year. At 30 June 2022, the Company had the following unlisted performance rights on issue: Performance rights - managing director (exercise price: nil) Performance rights - employees & consultants (exercise price: nil) Performance rights - non-executive directors (exercise price: nil) Total performance rights on issue at 30 June 2022 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 15,000,000 9,050,000 6,000,000 30,050,000 15,000,000 6,700,000 6,000,000 27,700,000 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. (c) Listed Options The Company did not issue any listed options during the reporting period (2021: 181,667,319 listed options issued as part of an entitlement offer). At 30 June 2022, the Company did not have any listed options on issue (2021: 181,667,319). (d) Unlisted Options The Company did not issue any unlisted options during the reporting period (2021: nil). At 30 June 2022, the Company did not have any unlisted options on issue (2021: nil). (e) Share Based Payments Performance Rights During the year, the Company issued 10,000,000 performance rights to the Managing Director to replace the same amount that expired during the year. The Company recorded a total share based payment expense of $363,640 in relation to these. The share based payments expense relating to Non-Executive Directors totalled $74,908 (2021: $36,360). In addition, a total of 3,400,000 employees’ performance rights expired and were cancelled during the year. The Company issued 5,750,000 performance rights to certain employees pursuant to the Altech Chemicals Limited performance rights plan, part of which was replacement for those that had expired. A share-based payments expense associated with these, for $145,079 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 $0.12 - $0.14 80.0% 0% 1.35% 5.00 15,750,000 - 40 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 16. Contributed Equity (continued) 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. Performance Rights Plan The establishment of the Altech Chemicals Limited employee Performance Rights Plan (“Plan”) was approved by ordinary resolution at a General Meeting of shareholders on 5 November 2014 and re-approved by shareholders in General Meetings on 12 June 2018 and 29 November 2021. 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 year, the Company issued 10,000,000 performance rights to the Managing Director to replace the same amount that expired during the year. In addition, a total of 3,400,000 employees’ performance rights expired and were cancelled during the year. The Company issued 5,750,000 performance rights to certain employees (2021: 6,000,000 to non-executive directors) pursuant to the Plan, part of which was replacement for those that had expired. 17. Reserves Share based payments reserve Foreign currency translation 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 Transferred to contributed equity – conversion of performance rights to share capital Expiration of performance rights Balance at end of year Foreign currency translation reserve Balance at the beginning of the period Foreign exchange movements on translation of subsidiary financial statements Balance at end of year - 41 - 30-Jun-22 $ 1,762,369 1,964,499 3,726,868 30-Jun-22 $ 7,346,777 583,626 (3,569,500) (2,598,534) 1,762,369 1,543,044 421,455 1,964,499 (Restated) 30-Jun-21 $ 7,346,777 - 7,346,777 (Restated) 30-Jun-21 $ 7,104,340 242,437 - - 7,346,777 - 1,543,044 1,543,044 ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 18. Financial Instruments 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 % Notes Funds Available at a Floating Interest Rate $ Fixed Interest Rate $ Assets/ (Liabilities) Non Interest Bearing $ Total $ 2022 Financial Assets 0.50% 10,912,939 Cash and cash equivalents Trade and other receivables Other non-current receivables 6(a) 7 13 Total Financial Assets Financial Liabilities Trade and other payables 14 0.00% Lease liabilities Total Financial Liabilities Cash and cash equivalents Trade and other receivables Other non-current receivables 6(a) 7 13 Total Financial Assets Financial Liabilities Trade and other payables 14 0.00% Lease liabilities Total Financial Liabilities - - 10,912,939 - - - - 6,728,978 - - - - - - - - - - - 502,908 7,208,984 7,711,892 412,222 89,926 502,148 10,912,939 502,908 7,208,984 18,624,831 412,222 89,926 502,148 6,944,380 17,857,319 - - - - - - - - - 246,918 7,509,881 7,756,799 427,089 84,230 511,319 6,728,978 246,918 7,509,881 14,485,777 427,089 84,230 511,319 7,245,480 7,245,480 Net Financial Assets/(Liabilities) 10,912,939 Weighted Average Effective Interest % Notes Funds Available at a Floating Interest Rate $ Fixed Interest Rate $ Assets/ (Liabilities) Non Interest Bearing $ Total $ 2021 Financial Assets 0.50% 6,728,978 Net Financial Assets/(Liabilities) 6,728,978 (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. - 42 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 18. Financial Instruments (continued) (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. 19. Accumulated losses Carrying amount at the beginning of the period Profit (loss) for the period Foreign exchange movements on translation of subsidiary financial statements Expiration of performance rights Carrying amount at the end of the year 20. Auditors' remuneration Audit - Moore Australia Audit (WA) Audit and review of the financial reports 21. Related Parties Key management personnel compensation Short-term employee benefits Post-employment benefits Share-based payments 30-Jun-22 $ (27,473,110) (5,729,919) (Restated) 30-Jun-21 $ (28,255,932) 2,325,866 - (1,543,044) 2,598,535 - (30,604,494) (27,473,110) 30-Jun-22 30-Jun-21 $ $ 50,619 46,011 30-Jun-22 30-Jun-21 $ 1,317,967 99,297 489,012 1,906,276 $ 1,120,755 81,685 217,265 1,419,705 During the financial year there were no loans made or outstanding at year end (2021: 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 (2021:$100,000) rent and outgoings on normal commercial terms and conditions. Other related party transactions MIE Tech Sdn Bhd, a company controlled by Non-Executive Director, Tunku Yaacob Khyra, recharges RM75,000 monthly for secondment of Mr Uwe Ahrens to the Group. The Company recharges €10,000 per month to its associate company, Altech Advanced Materials AG as reimbursement of Mr Uwe Ahrens’ secondment cost to Germany. The Compay charges its associate company, Altech Advanced Materials AG, 3% p.a interest on a quarterly basis, on balance of consideration (€4,750,000) for sale of 25% of Altech Industries Germany AG. 22. 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 2022, 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 $228,000 (2021: $152,000). 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. - 43 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 22. Expenditure commitments (continued) (b) Intercompany Loan Commitments 0n 1 May 2015, the Company entered into an Intercompany Loan Agreement (Agreement) with its 100% owned subsidiary Altech Chemicals Sdn Bhd (ATCSB). Under the terms of the Agreement: • The Company extends a loan facility up to the amount of $100,000,000 to provide funding to enable ATCSB to advance the development of a high purity alumina manufacturing facility in Malaysia. Interest payable is nil for the period up to and preceding the date at which ATCSB commences commercial production from its proposed high purity alumina manufacturing facility. From the date at which ATCSB commences commercial production from its proposed high purity alumina manufacturing facility, interest shall be charged on the loan at an arms-length commercial rate of interest. • • 0n 1 April 2020, the Company entered into a Shareholder Loan Agreement with its 75% owned subsidiary Altech Industries Germany GmbH (AIG). On 29 December 2020, the Shareholder Loan Agreement was amended to include the party Altech Advanced Materials AG (AAM), the holder of the remaining 25% in AIG. Under the terms of the Shareholder Loan Agreement and as amended on 29 December 2020: • The Company extends a loan facility up to the amount of EUR50,000,000 to provide funding to enable AIG to advance the development of its operations in Germany. • AIG simultaneously and proportionally (75% to 25%) utilises the facility made available under the AAM Shareholder Loan Agreement. That is, funding • • to be provided to AIG is allocated in the proportions of 75% by the Company and 25% by AAM. Interest payable is nil for the period up to and preceding the date at which AIG commences commercial production from its proposed battery materials manufacturing facility. From the date at which AIG commences commercial production from its proposed high purity alumina manufacturing facility, interest shall be charged on the loan at an arms-length commercial rate of interest. (c) 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 2022, the Company had no capital commitments in relation either contract (2021: Nil). All works completed as stage 1 or stage 2 early works construction under the US$280 million SMS group GmbH contract had been billed to the Company and paid as at 30 June 2022. As at 30 June 2022, no early works had been completed under the Simulus Engineering Pty Ltd contract. On 9 August 2022, the Company’s 75%-owned subsidiary, Altech Indistries Germany GmbH entered into a Contract for Supplies and Services with Kuttner GmbH & Co for the development of a battery materials pilot plant in Saxony Germany, for the price of €2,981,146. As at 30 June 2022, the Group had capital commitments of $2,334,922. It is currently anticipated that all of the commitment amounts will become payable during the subsequent financial year (2022/23). 23. 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 2 segments, which are the development of a battery materials pilot plant in Germany and development of a high purity alumina (HPA) plant in Malaysia, as well as mineral exploration. Although the Group has established a 75%-owned company in Germany and a wholly owned subsidiary in Malaysia, the operations of the Group for the year ended 30 June 2022 were largely centred in one geographic segment, being Australia. The board of directors anticipate including a second geographic segment when the proposed construction of the battery materials pilot plant in Germany and HPA plant in Malaysia are at a more advanced stage. 24. Employee entitlements and superannuation commitments Employee Entitlements These are the following employee entitlements at 30 June 2022: Annual Leave Provision $219,814 (2021: $228,461) and Long Service Leave Provision $128,569 (2021: $100,703). Directors, officers, employees and other permitted persons’ Performance Rights Plan Details of the Company's Performance Rights Plan are disclosed in the Remuneration Report. - 44 - ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 24. Employee entitlements and superannuation commitments (continued) 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 $156,933 (2021: $173,715). 25. Contingent liabilities There were no material contingent liabilities not provided for in the financial statements of the Group as at 30 June 2022 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. 26. Events subsequent to balance date On 14 September 2022, Altech announced that it had entered into a Joint Venture with Fraunhofer IKTS in relation to commercialisation of a 100 MWh Sodium Alumina Solid State Battery Plant for grid storage. Further, there has not arisen since the end of the financial year any other 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. 27. 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 - 45 - 30-Jun-22 30-Jun-21 $ $ 11,055,759 6,654,844 92,252,694 87,026,385 103,308,454 93,681,229 560,654 158,930 719,583 535,855 154,055 689,910 102,588,871 92,991,319 124,487,777 107,509,911 (23,661,275) (21,865,368) 1,762,369 7,346,777 102,588,871 92,991,319 (4,394,441) (4,394,441) 4,688,626 4,688,626 ALTECH CHEMICALS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022 28. 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 Beneficial percentage held by economic entity 2022 % 2021 % 100 75 100 100 100 100 75 100 100 100 Principal activities Parent entity HPA Plant Battery Materials Plant Kaolin Mine Intellectual Property/Patent Holder Mineral exploration Altech Chemicals Sdn Bhd is incorporated in Malaysia, and Altech Industries Germany 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. - 46 - ALTECH CHEMICALS LIMITED DIRECTORS’ DECLARATION For the year ended 30 June 2022 The Directors of the Company declare that: 1. The financial statements and note, as set out on pages 1-46, are in accordance with the Corporations Act 2001: (a) (b) 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 give a true and fair view of the financial position as at 30 June 2022 and of the performance for the year ended on that date of the consolidated group. 2. 3. The Managing Director and Chief Financial Officer have given the declaration required by s295A of the Corporations Act 2001. 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 21st day of September 2022 - 47 - ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2022 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 Complies Complies Complies Complies 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. 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. (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) ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2022 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 Compliance Complies The board currently undertakes, on an annual basis, an internal formal evaluation of the performance of the board and individual directors. In addition to this, the Chairman provides informal feedback to individual board members on their performance and contribution to board meetings, on an ongoing basis. 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. ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2022 Principles and Recommendations Disclosure Compliance 2.4 A majority of the board of a listed entity should be independent directors. Mr Peter Bailey 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-bribery and corruption policy is available on the Company web site. Complies ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2022 Principles and Recommendations Disclosure Compliance Principle 4 – Safeguard the integrity of corporate reports 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) The Board has approved the formation of an Audit and Risk Management Committee. The Audit and Risk Management Committee Charter is available on the Company’s website. Complies 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 website. 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 ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2022 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 The Board has approved the formation of an Audit and Risk Management Committee. The Audit and Risk Management Committee Charter is available on the Company’s website. Complies 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 The board reviews the management framework annually. Complies 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. The Company does not currently have an internal audit function. The board considers that the Company is not of a size that currently warrants an internal audit function. Does not comply. ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2022 Principles and Recommendations Disclosure Compliance 7.4 A listed entity should disclose whether it has The Company does make these disclosures Complies Partly Complies The Company has set up a Remuneration Committee which has four members comprising the Non-Executive Chairman, two Non-Executive Directors and the Managing Director. Only one director is considered independent and the Remuneration Committee is not chaired by an independent director. 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. ALTECH CHEMICALS LIMITED CORPORATE GOVERNANCE STATEMENT For the year ended 30 June 2022 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 7 5 7 7 6 4 1 4 4 3 1 4 2 ALTECH CHEMICALS LIMITED ASX ADDITIONAL INFORMATION For the year ended 30 June 2022 The shareholder information set out below was applicable as at 18 October 2022. Altech Chemicals Ltd has its registered office at Suite 8, 295 Rokeby Road, Subiaco, Western Australia, Australia, 6008. The telephone number is +61 8 6168 1555. Altech shares are listed on the Australian Securities Exchange as well the Frankfurt Stock Exchange. COMPANY SECRETARY The name of the Company Secretary is Mr Martin Stein. 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 CITICORP NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM BNP PARIBAS NOMS PTY LTD MR YUSUF KUCUKBAS MR KENNETH JOSEPH HALL LAKE MCLEOD GYPSUM PTY LTD BNP PARIBAS NOMINEES PTY LTD MR PETER JOSEPH BOURKE & MRS KERRIE LEEANNE JONES MR IAN EWART HALFORD MR JOHN SMITH & MS BARBARA SMITH NATIONAL NOMINEES LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR BASIL CATSIPORDAS MR LINDSAY GEORGE DUDFIELD & MRS YVONNE SHEILA DOLING DUDFIELD LJ & K THOMSON PTY LTD Total Top 20 Others Total Ordinary Shares on Issue No of Ordinary Shares Held 168,291,263 90,995,691 70,812,687 57,418,528 53,405,739 53,269,264 50,598,374 32,376,950 13,940,000 13,380,000 11,408,202 7,640,708 7,573,000 7,282,897 7,140,000 7,121,212 6,872,142 6,000,000 5,745,497 5,600,000 676,872,154 749,893,715 1,426,765,869 Percentage % of Issued Shares 11.80% 6.38% 4.96% 4.02% 3.74% 3.73% 3.55% 2.27% 0.98% 0.94% 0.80% 0.54% 0.53% 0.51% 0.50% 0.50% 0.48% 0.42% 0.40% 0.39% 47.44% 52.56% 100.00% DISTRIBUTION OF EQUITY SECURITIES Analysis of numbers of security holders by size of holding as at 18 October 2022: 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 194 370 1,103 3,395 1,374 6,436 15,184 1,563,465 9,268,841 145,280,684 1,270,637,695 1,426,765,869 % of Issued Shares 0.00% 0.11% 0.65% 10.18% 89.06% 100.00% ALTECH CHEMICALS LIMITED ASX ADDITIONAL INFORMATION For the year ended 30 June 2022 SUBSTANTIAL SHAREHOLDERS The names of the substantial shareholders listed in the holding Company's register as at 18 October 2022 are: Substantial Shareholder DEUTSCHE BALATON AKTIENGESELLSCHAFT/ DELPHI UNTERNEHMENSBERATUNG AKTIENGESELLSCHAFT Number of Shares 239,103,950 % of Issued Shares 16.76% MELEWAR EQUITIES (BVI) LIMITED & MAA GROUP BERHAD 135,034,675 9.46% UNMARKETABLE PARCELS The Company has 653 holders of unmarketable parcels, being a parcel of shares less than $500. UNQUOTED SECURITIES Altech has unquoted securities totalling 30,050,000 Performance Rights held by a total of 20 holders. The names of the holders holding more than 20% of each class of unlisted securities are listed below: Performance Rights Holder Managing Director Performance Rights Iggy Tan VOTING RIGHTS Number 15,000,000 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. EXPLORATION AND MINING INTERESTS As at 30 June 2022, 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

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