Alkemy Capital Investments plc (LON:ALK) has announced its unaudited financial statements for the 6 months ended 31 July 2023.
Chairman’s Statement
I have great pleasure in presenting our interim results for the period ended 31 July 2023.
KEY OPERATIONAL HIGHLIGHTS FOR THE PERIOD:
· Class 4 Feasibility Study completed by Wave International for Australia’s first stand-alone lithium sulphate processing facility at the Boodarie SIA, Port Hedland
· Tees Valley Lithium shortlisted by a major OEM as the preferred European lithium refinery for portion of its lithium supply chain
· Oversubscribed private placement and directors subscription
· Grant funding secured from Innovate UK
Class 4 Feasibility Study – Boodarie Lithium sulphate refinery
In August 2023, Alkemy’s wholly-owned subsidiary Port Hedland Lithium Pty Ltd (“PHL”) announced the completion of a Class 4 Feasibility Study for its lithium sulphate refinery at Boodarie, Port Hedland.
The Boodarie refinery has been designed to process spodumene concentrate from various potential Australian mines, producing a lithium sulphate monohydrate for Alkemy’s wholly-owned subsidiary Tees Valley Lithium’s (“TVL”) Wilton refinery in the UK.
PHL will develop a stand-alone merchant lithium sulphate refinery at the Boodarie SIA located just south of the proposed new Lumsden Point Critical Minerals Wharf in Port Hedland, the world’s largest export port by volume, with established road and rail infrastructure connections to Western Australia’s world-class hard-rock lithium resources.
Powered by local renewable energy, each of the four proposed lithium sulphate trains at Boodarie will refine approximately 180,000 tpa of locally mined spodumene concentrate to produce 40,000 tpa of lithium sulphate, with lithium content equivalent to 24,000 tpa lithium hydroxide. It is anticipated that lithium sulphate produced by PHL will be processed further by TVL before sale to end customers, although PHL will retain flexibility to provide lithium sulphate to third parties should demand arise.
This new Pilbara to Teesside supply chain epitomises the new critical minerals supply chains made possible under the recently signed free trade agreement between Australia and the UK and will leverage the competitive strengths of Australia in mining and minerals processing and the UK in chemical refining.
The feasibility study was prepared by Wave International, a leading engineering consultancy firm with significant experience in developing lithium hydroxide projects worldwide.
Study highlights and economics:
· Initial capital cost for Train 1 of US$322 million
· Gross revenues per annum for Train 1 of US$396 million
· Internal rate of return (IRR) of 18%
· Post-tax net present value (NPV) for Train 1 of $293 million
· NPV for 4 Trains of US$1.0 billion, which combined with Wilton’s NPV of US$2.7 billion gives a total NPV of US$3.7 billion across both projects when all 4 Trains are built
In addition, in May 2023 an ecological baseline survey for the Boodarie lithium sulphate refinery site was completed by AECOM Australia which included a detailed flora and fauna survey and the publication of a full report in accordance with the Environmental Protection Act 1986 and other applicable regulations and standards.
Feedstock and partnerships
During the period we continued to advance our discussions with counterparties for both feedstock and offtake.
Earlier this month we announced that following extensive technical and commercial due diligence, TVL has been shortlisted by a major automotive OEM as the preferred European lithium refiner for a portion of its lithium supply chain. TVL is in discussions with several OEMs, encompassing proposals ranging from sourcing of raw materials and refining of those materials to lithium hydroxide, to toll treatment of lithium raw materials acquired or to be acquired by the OEMs.
Being shortlisted by major industrial players validates Alkemy’s two-stage processing strategy, the engineering studies conducted to date, and our team’s execution capability. Alkemy is continuing to work with these OEMs to satisfy their requirements with a view to concluding legally binding agreements as soon as possible.
OEMs have also confirmed the ability to benefit from provisions of the US-Australia Climate, Critical Minerals, and Clean Energy Transformation Compact and the European Critical Minerals Act and Batteries Regulations.
Alkemy continues in advanced discussions with a number of potential key feedstock suppliers, including several industry-leading lithium miners, well known automakers, global commodity trading houses and battery recyclers.
Alkemy is also advancing discussions with several other potential customers for its lithium hydroxide, including major European gigafactories and chemicals companies and expects significant offtake and/or partnership deals to be entered into in due course.
These customers are increasingly focussed on price, transparency and low embedded carbon, when sourcing high grade lithium products and have indicated their desire to partner with Alkemy due to our market leading credentials in these areas.
Fundraising and grant funding
In May 2023 we completed a successful private placing and director subscription raising £1.35 million. The placing was oversubscribed and supported by existing and new investors as well as by the directors who contributed £430,000 in total.
In August 2023 Alkemy received a rebate of approximately £230,000 from HMRC under its Research and Development tax relief programme which permits companies to claim a rebate of certain qualifying R&D related expenses incurred during the previous financial year.
In September 2023 we announced that TVL together with Weardale Lithium had secured a joint funding package of approximately £613,000, including a grant of approximately £430,000 from Innovate UK. The funding provided under the Launchpad: Net Zero, CR&D Tees Valley, R2 competition supports outstanding innovation projects that grow activities in the Net Zero innovation cluster centred on Tees Valley and supports the Government’s goals in the Levelling Up White Paper.
We continue advancing discussions with financiers for the funding of our LSM and LHM processing facilities and have received significant inbound interest including from private equity, structured bond providers and institutions.
As we intend to primarily finance and operate the LSM and LHM facilities via our operating subsidiaries TVL and PHL, it is anticipated that there will be no significant dilution to Alkemy’s shareholders as part of the proposed financing process.
Market recognition and outlook
During the period we have continued to make significant progress in a challenging macro environment.
The pace to decarbonise however continues to accelerate and with a growing need for lithium hydroxide and now a growing preference from western OEM’s to source lithium hydroxide using more local supply chains, Alkemy is well positioned to benefit from these changes.
The support received from third parties including major OEMs provides further validation of our proposed lithium refining strategy. The rapid completion of due diligence to the satisfaction of certain OEMs is testament to the quality of the work undertaken by our commercial and technical teams and confirms our wider business case.
Our focus remains on supporting our potential partners’ lithium strategies and concluding commercial negotiations and will update the market in due course as these arrangements become binding.
We would like to take this opportunity to thank our shareholders for their continued support and look forward to reporting on our progress during 2023 as we deliver on our strategy.
Paul Atherley, Non-Executive Chairman, Alkemy Capital
27 October 2023
