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Pure Alumina lines up acquisition to fast-track HPA producer status

Proactive Investors Thursday, 21 March 2019
Pure Alumina Ltd (ASX:PUA) has signed a binding agreement to acquire Toronto-based high purity alumina (HPA) producer Polar Sapphire Limited. Polar Sapphire has spent six years developing an innovative process to produce HPA in the form of low capital cost 1,000 tonnes per annum (tpa) modules. Pure Alumina intends to purchase Polar Sapphire, construct and commission a 1,000 tpa module and begin producing HPA. The cost of the purchase will be C$13.75 (A$14.5) million in Pure Alumina shares and C$12 (A$12.7) million in cash. The acquisition is subject to a number of conditions including due diligence, regulatory approvals, and a A$30 million debt and equity raising. It is expected that the transaction will be completed in the third quarter of the 2019 calendar year. Cash flows from the first 1,000tpa module will fund expansions Pure Alumina’s managing director Martin McFarlane said: “The Polar acquisition aligns the rapid growth of the HPA market with Polar’s proven HPA process to deliver HPA production, sales and cash flow years sooner for the benefit of Pure Alumina shareholders. “Exceptionally low estimated capital and operating costs means, once the initial 1,000tpa plant is established, strong forecast cash flows are expected to largely fund future expansions. “The low funding requirements of this acquisition and the initial HPA production facility is a significant advantage when compared to other HPA projects.” Plan is to expand to 5,000tpa Acquiring Polar is expected to fast track Pure Alumina’s plans to commence commercial production of premium 99.999% 5N HPA in 2019. Assuming completion of the acquisition, Pure Alumina aims to rapidly expand HPA production to 5,000tpa within three years to capture exceptional growth in HPA demand. This demand is expected to come from use in LED lighting and coatings on lithium battery separators for electric vehicles. Each 1,000tpa HPA module takes less than a year to construct meaning expansion can be rapid to respond to market growth. Polar’s technology solves problems Polar’s HPA processing technology successfully overcomes many of the issues that Pure Alumina was planning to investigate during its DFS process. Polar has successfully translated its research into a pilot plant to significantly reduce the scale-up risks of expansion to a commercial operation. In addition to the low capital cost of Polar’s HPA process, Pure Alumina considers it to be substantially de-risked, flexible, scalable and robust.

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