APG AGM, page-6

AGM 2016
I was in two minds whether I was worth the effort to attend the AGM but in the end I decided to go, if for no other reason to get an understanding of why the change of tack from finishing the NIRP to the extra cost of building the NZIRP.

Overall it was a very interesting AGM, and one in which I did not see any of the usual crowd.

I asked NG for the reason for the change of venue, and it was purely to save costs, and is in line with the fact that the board payments were down 100% this year, NG payments were down 66% and MT is only claimed 35K last year (all figures quoted from MT when questioned from the floor about the high salaries in the past). All these moves are the correct behaviour for a company that is trying to stay as a going concern.

MT stated that 2015 was an interesting year, and contained many challenges in keeping APG going.

The first slide of the presentation is pretty self-explanatory, and details the NIRP project objectives and the progress to date, and an outline of the expected costs to commission the plant from the current state of 85% complete.

The second slide details the various attempt to raise the necessary funds to complete the plant.
The internal funding would require a massive expansion of shares and was not possible at the current prices, as indicated by the take up of the current SPP. It appears in the case of the SPP it is mainly smaller shareholders who are taking up the shares.

Approaches to the banks were not unsuccessful due to the perceived high risk, and the fact that the banks required a major partner / strong corporate supporter like BHP or Kronos.

In respect to the US company that was mentioned in several of the ASX releases, it appears that the Australian subsidiary was very interested, the US company seem to take the view that unless the technology was created in the US it was no good. MT used the term; ‘…lead on for many months”, so it appears that APG was releasing the ASX notices in good faith.

I did not catch what was said about the European attempts, but the Chinese seem to have found the idea very interesting but regarded the project as too small to invest in, they are looking for $100 projects.

An interesting comment MT made was that the Chinese were amazed that APG could have survived for 30 years without any cash flow. (Oh that it was not so, and we were making a profit)

Approaches were also made in India and elsewhere in Asia without success; again I really did not catch the details.

It appears that JW was instrumental in recognising the synergies of linking the NIRP front end with the ABR process and the interest of IXIOM.
The Manager of IXIOM is also an industrial chemist.
In July this year MT, JW and the ABR meet in Melbourne to discuss the options to go forward.

JW explained to the AGM the existing NIRP process and where the using of the ABR technology would be an answer to all his prayers as it would enable the use of a proven technology to solve some of the issues that existed regarding zinc in the APG process. It appears that there were some technical issues with a build of Zinc Chloride that the ABR process eliminates. The APG front end handles the iron component effectively, while the ABR backend electrolysis process can handle high zinc contents.
It appears that the ABR process cannot be utilised for HCL that is produced by galvanisers and the APG process can.

Some of the advantages of utilising the ABR technology were listed as:

• The NZIRP would be able to utilise a wider range of feedstock such as electric arc furnaces
• The pig iron is a much more marketable product
• There would be no need for the second stage reduction
• The briquette machine would no longer be required, and could be potentially sold
• The process would be continuous and a lot of valves opening and closing could be replaced (wonder if that includes the famous Canadian valves J
• The plant would now produce three end products pig iron, 33% HCL and Zinc
• Pig iron is more saleable and the HCL is much better quality up from 25% to 33% concentration and cleaner that the product that would have been produced by the NIRP. The product could be sold for $350 as opposed to $250.
• The ABR process is very low risk and easily scalable.

The presentation gives an overview of the possible annual production and an estimate of the cost to get into production.

MT advised that there was a presentation to Ixom about two weeks ago. They are in the process of reviewing the information and process.
The advantage of Ixom is that they know the markets for HCL and pickle liquor

MT is confident that Ixom go ahead with the idea, as they find the numbers stack up and agree with where APG/ABR want to go. But he is realistic enough to realise that other sources of funding should be pursued as is outlined on slide 18 of the presentation.
He advised that the negotiations for $1.2 million in working capital is quite advanced and all going well may be finalised and released to the market next week

Mike Smith advised that APG has been invited to apply for a government grant of 50% funding that will cover both the pre cost, drilling and post costs of the Nhil prospect.

In answers to questions
MT is confident that the APG technologies will not be stolen, as confidentially agreements where signed with most parties and the Chinese where only shown the bare bones of APG technologies.
The extent of the iron ore price fall will not impact the feasibility of the process as Pig iron is not iron ore, the zinc price is steady as is the HCL price.
When asked what guarantee there is Ixom will not turn out to be another Kronos, MT said Ixom is looking for new opportunities, Blackstone unlike Kronos will interested in growing Ixom, and Kronos had a history of crushing the originator of technologies. I hope he is right
Asked how the funding from Ixom would get to APG, he said this was still open to discussion but definitely will not be via a share placement, as there are already too many on issue. It could be via a licence fee or possibly a JV.
Asked when funding could be received, he is hopeful that by the end of the year Ixom will make a decision.
Asked if the Bluescope trial is still possible, MT stated there is still a deal, and the initial tests were very successful. BSL have over 2 million tons of waste that is iron oxide, coke etc, that cannot be moved and needs to be cleaned up.
Asked what equipment would be redundant if the NIRP was replaced by a NZIRP, he listed the briquetter and some of the redundant values could be sold. The briquetter only cost APG $110,000 and could be worth upwards of $1m but it is a limited market. Some of the valves could be used by the oil industry but they are currently in a downturn.
In response to a question from the floor regarding what guarantee the funds would be used for finishing the plant, it was answered that it takes about $1m a year to run a public company, in APG case, the rent of the Sydney office the NIRP and maintenance etc and other than the funds required for this all money will be utilised for the build the upgraded plant. The current pay of MT, NG and the board was also outlined to show the company has dramatically curtail expenditure to the bare minimum.
When asked for a timeline when funds become available, MT stated that unlike before where construction started before planning had finished, this time they would do it right. There will be a engineering rework before starting construction, with construction taking between 12 – 18 months. Commissioning will take 3 months, not sure if this is addition to the construction.
When asked if APG is still looking at overseas use, MT answered that, as there are only three plants in Australia, it is a definite yes.
When asked if the business plan of APG was to be paid for the waste and to sell the three products, MT advised that initially there are not including payment to receive the waste as part of the feasibility study they have prepared.

Hopefully this gives some idea of the AGM. Sorry for any typos or spelling errors or if I misunderstood anything.