PDI launches its business strategy to create sustainable revenues from new business

PDI launches its business strategy to create sustainable revenues from new business • PDI will cease its conventional Zinc Business by the end of 2017 Mr. Francis Vanbellen, Managing Director of Padaeng Industry Public Company Limited or PDI, announced that PDI’s Management Team has carefully studied how to assure the continuation of zinc business after the depletion of its only Mae Sod Zinc mine in 2016, in a profitable way, with acceptable returns for all our stakeholders. PDI’s Mae Sod mine will be fully depleted by the end of 2016. All efforts to identify and obtain permits for additional mine deposits in Thailand and neighboring countries have failed. As a result the continuation of PDI’s Zinc business would solely depend on imported ores, mainly from South-America and Australia. These highly expensive imported ores would fully replace the Mae Sod low cost supply. This will result in a sharp increase of logistic and production costs in the Rayong roaster and the Tak smelter. Hence operational costs will largely exceed revenues from the zinc business and PDI might generate continuous losses. The extreme low global zinc prices and the shrinking Thai industrial demand will further reinforce this. None of our assessments show any significant improvement in either the global zinc prices or the Thai economic situation in the markets important to us, such as the automotive industry. Because of these considerations, on February 18th 2016, PDI’s Board of Directors adopted a resolution to cease PDI’s zinc business operations by the end of 2017. After the Mae Sod mine closure this year, also the Rayong plant will cease operations by the end of 2016. The zinc smelter in Tak will limit its operations by the end of 2016, to produce only zinc metal and alloys until the second half of 2017. All supporting and corporate functions at the Bangkok office will be gradually aligned with the remaining operational activities in Tak and Rayong and with the new investments. The PDI Board of Directors also decided to speed-up the investment program in the make-over of the company into sustainable businesses such as but not limited to renewable energy, recycling, waste management and value added products from metals. Several projects in these businesses are in a final feasibility phase and will be implemented to generate revenues and profit within the shortest delay. The supporting strategic business plans have been approved by the Board of Directors, and will be balanced between green-field start-ups and M&A; targets. Due to the economic slowdown PDI will focus on robust targets with strong growth potential, rather than quick fits. • PDI will continue to produce Zinc from conventional supply till 2017 The 2015 revenues from normal zinc operations remain satisfying positive, despite shrinking sales volumes from domestic economic slowdown and despite the extreme low global zinc prices, from continued imbalance between supply and demand. Positive factors contributing to PDI’s operational profitability are the weak Thai Baht exchange rate against the USD, as zinc prices are quoted at the London Metal Exchange in USD. The low energy prices and the continued efforts to keep costs under control also support the positive results. In 2016 and partly 2017, zinc production will continue from the remaining ore reserves from Mae Sod and some added imported concentrates at positive margins. PDI will assure the supply to its loyal customers and help and guide them in the transition to other suppliers. Depending on the global zinc prices, the local demand and the Thai Baht to USD exchange rate, results from Zinc Operations promise to be satisfying. Beyond 2017, Zinc activities will be completely based on recyclable domestic and possibly imported sources and will focus on added value products, by-passing the expensive conventional electro winning process in our Tak Smelter. • PDI Energy increases its quest for sustainable (renewable) energy projects PDI Energy’s strategy to target (renewable) energy projects will be reinforced. As acquiring ppa’s for Wind and Solar projects remains a major hurdle, Biomass projects are increasingly important, whilst Wind and Solar opportunities will remain in the scope. For take-overs PDI’s quick response team is tuned to boost operations by adequate innovation programs. Several biomass M&A; targets are in due diligence phase and if confirmed positive finalization and concrete realization to be expected soon, generating additional revenues within this year. Since concerns for local community issues are a priority to PDI, the biomass project in Surat is under review. We expect to conclude in the short future. PDI believes to be well prepared to launch its 50MW Solar Farm in Tak on waste land, as all technical issues are resolved and grid connection is available. The only missing link remains ppa approval. • PDI Eco joins forces with overseas leading waste management companies PDI Eco’s main focus is the deployment of a strong sustainable waste management business at its Tak location. Negotiations have been finalized with an overseas leading waste management company to co-invest in the treatment of (non-)hazardous industrial waste for the North of Thailand at its Tak location. The feasibility study shows promising potential for the ecological management of complex industrial waste. Technologies have been identified and the legal hurdles are under review. PDI Eco expects to sign the MOU and SHA in the near future. PDI Eco has been requested to participate in the bidding process for sustainable treatment of municipal household waste in Tak Province. The outstanding environmental past performance of the plant, as well as the, constructive dialogue based, local community relations make PDI a preferred partner. The pre-feasibility study was launched and will be presented to the authorities. Also for this project PDI is discussing with a specialized experienced partner to enhance success. The MSW facilities at Tak can go live by the end of 2017. • PDI Materials goes for break-through innovation PDI Materials has entered into a joint venture agreement with CRT, Carbon Reduction Technology AS, a leading Scandinavian recycling company. The joint venture PDI-CRT aims to create sustainable business from the recovery of zinc from industrial waste streams using innovative ultra-high-temperature (UHT) processes. PDI-CRT has gained exclusive rights in Thailand to employ such technology, provided by ScanArc Plasma Technologies AB of Sweden. This unique process is not yet available in Asia. The technology to be deployed has the highest performance commercially available and as such contributes to the most efficient, environmentally friendly and effective, hazardous waste recycling. If confirmed, commercial operations can start within 2018 at PDI’s Rayong plant. --------------------------------------------------------------- General Information Padaeng Industry Public Company Limited, or PDI, was founded April 10th, 1981 and introduced at the Stock Exchange of Thailand with a registered capital of Baht 2,260 million. The Company has produced high quality zinc for over 30 years. It has specialized in producing special high-grade zinc ingot and zinc alloys used in the galvanizing and die-casting industries. In 2014, PDI reassessed its business structure in anticipation of a shift towards Green Business, with the objective to increase eco-efficiency and to foster sustainable growth. The company is structured around three businesses: PDI Energy – providing energy from renewable resources; PDI Materials – providing added value materials from recycling; and PDI Eco – providing raw materials from waste and eco management of waste.