AAM: WELL EQUIPPED FOR THE FUTURE - A SUMMARY 2020 AND OUTLOOK...

AAM: WELL EQUIPPED FOR THE FUTURE - A SUMMARY 2020 AND OUTLOOK 2021-Advertising- Highlights• Extension of the option contract for the acquisition of up to 49% in Altech Australia until July 1, 2021• AAM's 25.0% stake in Altech Industries Germany GmbH (“AIG”), Dresden, concluded and thus exclusive rights of use for the production of high-purity aluminum oxide (“HPA”) and theNew development of materials for the lithium ion battery anode secured.• Altech's aluminum oxide coating for graphite anodes does not only include a unique oneMaterial composition but also an outstanding coating technology• Development agreement (MoU) with the world's leading supplier of silicon powder for lithium-ionBatteries signed by Altech regarding aluminum oxide coating of silicon anode material• FMEA study (Failure Mode and Effects Analysis) started with the Fraunhofer Institute for material optimization and performance of lithium-ion batteries in the automotive sector through aluminum coating of separators. Possible positive effects of using high purity 4N HPA compared to othersAltech Advanced Materials AG ("AAM") (pta014 / 23.12.2020 / 11: 30; FRA: AMA1) is pleased to provide its shareholders and capital market participants with a summary of 2020 and an outlook for 2021.As a result of the corona pandemic that broke out in spring 2020, we too felt the uncertainty among investors. As a result, we were unable to implement our ambitious financing plans in 2020 as planned. We have intensively prepared the European market development by actively introducing "Altech 4N HPA" and, together with Altech, we have advanced the development of new products and adjusted our strategy, which is positive for 2021.On this basis, as of today we were able to conclude the option agreement concluded with Altech Chemicals Limited ("ATC") for the acquisition of up to 49% in Altech Australia Pty Ltd ("Altech") for up to US $ 100 million January 2021 would otherwise expire, extend by 6 months until July 1, 2021 with unchanged conditions These are essentially:1. AAM has the right to subscribe at least 10% (for a pro rata amount of US $ 20.4 million) up to a direct HPA project share of a maximum of 49% for US $ 100 million through the acquisition of shares in Altech Australia;2. AAM undertakes to sell the acquired shares back to ATC 6 years after the start of the project ("Project Financial Close") on the basis of a fixed return of 15% p.a .;3. ATC receives the right to demand the repurchase of the acquired shares in Altech Australia on the same basis within 6 years ahead of time from AAM,AAM can terminate its resale obligation at any time and thus retain its HPA project participation.Altech's ambitionsAltech aims to become one of the world's leading suppliers of 99.99% (4N) high purity aluminum oxide (Al2O3) ("HPA"). For this purpose, a state-of-the-art plant for the production of HPA according to the patented production process of Altech is to be built in Johor, Malaysia by the 100% subsidiary Altech Chemicals Sdn Bhd (the "project"). The raw material for the HPA plant is obtained from the Altech kaolin deposits in Meckering, Western Australia. The next plant for the production of HPA is to be built in Germany.HPA is a high-quality product that leads to a significant improvement in the capacity and service life of lithium-ion batteries ("LIB") and also increases the safety of the batteries. In addition to LIB, HPA is also used in many other growth markets, such as in the manufacture of LED lights, in semiconductor wafers in the electronics industry, in medical technology and in scratch-resistant sapphire glass for smartphone components and for heat dissipation in the semiconductor industry.According to calculations by Altech as part of a “Definitive Feasibility Study”, the project shows a net present value (“NPV”) before taxes of US $ 505.6 million at a discount rate of 7.5%. With full production, the project generates an annual average of net free cash of around US $ 76 million with an attractive margin of around 63% for HPA sales in the medium price segment.The remaining investment volume for the project in Malaysia is around US $ 390 million, of which, under certain conditions, US $ 190 million has been committed by KfW IPEX Bank and SMS group GmbH has entered into an equity commitment of 10 million USD. The remaining funding for the project will be US $ 90 million in debt and US $ 100 million in equity. We were unable to raise the remaining US $ 190 million for the financial close of the project in the course of 2020. One of the main reasons is the general uncertainty caused by the corona pandemic. The lack of transparency in the market for HPA and the large number of inferior product variants have an intensifying effect. Larger investors need the transparency of the market price development for HPA as a basis for the investment decision. The technological confirmation of the superiority of our product through its Pure quality and the innovative production process are already in place.This is exactly where we are starting for 2021. We currently have one of our very exciting new product developments in the pipeline - Altech Anode Grade HPA. We are convinced that with this, together with ATC, we can bring a successful product to the market with a much lower investment volume that brings significant improvements for LIB. In addition to the expected early positive cash flows, we want to provide the price transparency and a minimum purchase price for Altech HPA, which is particularly required by potential lenders, in order to achieve the conclusion of the overall financing for the HPA production plant (s).What is anode grade?By anode grade we mean on the one hand our HPA product composition (protected formulation) and on the other hand Altech's unique technology for coating graphite or silicon particles, as used in the anode of lithium-ion batteries. with a nano-layer of high-purity aluminum oxide (HPA) and other additives. As announced in our corporate news of September 23, 2020, Altech has developed processes for the aluminum oxide coating of graphite particles, which are currently in an independent verification phase. Although the newly developed product composition is confidential in detail, it contains high-purity aluminum oxide, slightly modified by Altech, as well as additional supporting compounds. The new product lines are called "Anode Grade APC01" and "Anode Grade ALC01". This Altech product and Altech's coating technology is expected to increase Coulombic Efficiency (CE), especially the CE in the first charge cycle of lithium-ion batteries, as well as improve cycle stability and quick charge capability. The first attempts have been successful. The HPA-coated graphite particles have already been examined at the "University of Western Australia" under a transmission electron microscope (TEM). The next step is to push battery performance tests forward. These trials will aim to quantify the potential performance and life cycle improvements of lithium-ion batteries with Altech's HPA-coated graphite anodes.Shortly after our announcement that anode grade independent verification phase would begin, a leading silicon manufacturer contacted Altech. On the basis of the signed letter of intent, cooperation is to be taken on the development of a coating of silicon metal powders with high-purity aluminum oxide ("HPA") for the lithium-ion battery industry. During the joint development, Altech's application know-how in relation to fine aluminum oxide particles is used to coat various silicon metal powders in lithium-ion battery quality.Implementation of the strategy in GermanyAAM today also announced the acquisition of 25.0% of ATC's German subsidiary Altech Industries Germany GmbH (“AIG”), Dresden. AIG holds the exclusive rights for the European Union to use Altech's patents relating to the manufacture of HPA and Anode Grade.AIG is currently working together with the Fraunhofer Institute for Ceramic Technologies and Systems (Fraunhofer IKTS) in Dresden to conduct an FMEA (Failure Mode and Effects Analysis) study on the effects of sodium impurities in the aluminum coating of separators on the performance of lithium-ion batteries in the Automibil area through. For this purpose, AIG appointed a qualified and certified FMEA moderator with industry knowledge who develops the models, their parameters and the desired result on the basis of advice and the knowledge of experts, among others from Fraunhofer IKTS within the technology sector. As soon as the battery system model has been designed and calibrated, Fraunhofer IKTS will present leading industrial partners from the automotive sector for this FMEA. The final model will then be used together with partners and will enable predictions about the application of 4N HPA in the respective individual lithium-ion battery system from the automotive industry. Furthermore, Altech intends to build a second plant for the production of high-purity aluminum oxide (4N HPA) in Schwarze Pump, Saxony, with a sole focus on battery materials through its subsidiary AIG. A feasibility study is currently being carried out for this. AIG has already received funding commitments of over EUR 7 million for the construction of such an HPA plant. It is also planned that anode grade under development will be produced with purchased HPA before the start of construction of the HPA factory in Germany and sold to European customers in the lithium-ion battery industry.Outlook for 2021At the beginning of 2021 we expect initial discussions with manufacturers of graphite anodes about the use of the new "Anode Grade APC01" and "Anode Grade ALC01" product lines for use in the automotive industry. This not only gives Altech the opportunity to offer additional products before the production of its own 4N HPA, but also enables us to achieve the price transparency for 4N HPA required by the capital market for financing the HPA project.In addition, we expect the results of the FMEA study in the first quarter of 2021, which should confirm that the use of high-purity 4N HPA will have a significantly positive effect on the service life and performance of lithium-ion batteries compared to other inferior products currently on the market .In the first half of 2021, based on the interim targets we have achieved, we want to carry out capital measures that will allow us to bring anode grade to the market. The capital required for this will be significantly below that for setting up an Altech HPA production plant and thus represents a significantly improved risk / opportunity ratio for investors.After the successful introduction of anode grade on the market and thus created price transparency for investors regarding Altech’s HPA, the financing for the HPA production plant already under construction in Malaysia is to be concluded first and then the second HPA production plant in Germany is to be tackled.To an exciting 2021! The board of directors About Altech Advanced Materials AG