Overview of Risks
There are numerous market risks to Astra. Potential investors in the Company should carefully read and consider the risk factors described below before they make a decision about acquiring shares in Astra. The realization of one or more of these risks could individually or together with other circumstances adversely affect the business activities and have material adverse effects on the financial condition and results of operations as well as on the prospects of the Group.
The selected order of the risk factors mentioned below represents neither a statement about the probability of the risks’ realization nor an assessment of the importance of these risk factors. The risk factors are based on assumptions that may in hindsight turn out to have been incorrect.
Additional risks which are presently not known to the Company or which are currently considered immaterial could also adversely affect the Group’s business operations and have material adverse effects on its financial condition and results of operations. The price of shares may fall if any of these risks materialize and investors could lose some or all of the funds they have invested.
Director and management experience
The Company’s Directors, the management team and team of consulting geologists assembled, have experience specific to the region being explored by the Company. The independent and consultative geologists have experience. The Board has conducted due diligence to this effect. However, mineral exploration and mining is a highly specialised business and the Board of Directors and management require the appropriate scientific and technical qualifications.
Key personnel risk
Astra Resources' operations are dependent upon the continued performance, efforts, abilities and expertise of its key Board and management personnel. The inability of Astra to attract and retain such people may adversely impact their ability to adequately meet project demands and fill roles in existing operations. Skills shortages in mining, engineering, technical service, construction and maintenance may also impact Astra’s activities. The loss of services of such personnel could have a materially adverse operational and financial impact on Astra.
Astra seeks to provide competitive compensation arrangements to retain and attract highly skilled personnel that are important to its business, including salaries, bonus arrangements and share incentive arrangements. The Directors believe that Astra Resources compensation arrangements are competitive and adequate to allow Astra to retain and attract the necessary calibre of employees.
Failure of Astra to attain goals
There can be no assurance that all of these initiatives will be completed as anticipated or that Astra Resources will be able to successfully realize these goals at the targeted levels or by the projected dates.
Partnerships and alliances may not be successful
Astra Resources is participating in a number of arrangements across its projects and may enter into other similar arrangements in the future. Although Astra Resources has sought to protect its interests, joint ventures and strategic alliances necessarily involve special risks including financial, operational or business issues.
Astra has full operational control of the T-Steel Intellectual Property (IP). Although Astra believes that the track record and testing of T-Steel to date has been proven to work, there can be no assurance that such technology will be commercially feasible. Also with other technologies – Clean Coal, Green Diesel, Corex Steel, Water to Hydrogen and any future technologies.
Changes in business of financial risk of customers
A significant downturn or further deterioration in the business or financial condition of a key customer or customers supplied by Astra Resources could affect Astra Resources results. Astra’s customers may experience delays in the launch of new products, labour strikes, diminished liquidity or credit unavailability, weak demand for their products, or other difficulties in their businesses. If Astra is not successful in replacing business lost from such customers, profitability may be adversely affected.
Unforeseen expenditure risk
Astra’s forecasts are based on certain assumptions in relation to the level of capital expenditure required. If the level of capital expenditure required is higher or is needed sooner than anticipated, the financial performance of Astra may be adversely affected.
The Company has invested in fieldwork and extensive research and will continue to do so. The Company has assembled an experienced team of geologists and other professionals in order to mitigate the risk of investment. However, resource estimates are based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter significantly when new information or techniques become available. By their nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate.
Actual reserves or resources may not conform to geological, metallurgical or other expectations, and the volume and grade of ore or product recovered may be below the estimated levels. Lower market prices, increased production costs, reduced recovery rates and other factors may render Astra’s reserves or resources potential uneconomic to exploit and may result in revision of its reserve estimates from time to time. Reserve data are not indicative of future results of operations. Reserve data is based on information collected by Astra.
Liquidity and financing risk
A lack of liquidity may mean that Astra Resources will not have funds available to grow its business as planned or take advantage of other opportunities that may arise. Astra’s projects and commercial activities are capital intensive and the continued funding of such activities is critical to maintain its ownership interests in its projects and to increase production levels in the future in accordance with its business plan or grow through the acquisition of new assets.
An inability to raise money or have access to debt to finance its activities could impair its operational capability. There can be no guarantee that financial institutions will support Astra Resources in the future. Future debt financing may result in increased borrowing costs, increased financial leverage and decreased income available to fund further acquisitions.
Risk of delays and execution of planned projects
Astra has a number of significant expansions planned for its projects, which the Company estimates will require significant substantial capital expenditure. The timing, implementation and cost of Astra’s expansion and development projects are subject to a number of risks, including:
- the Company's willingness to fund these projects if their free cash flow generation or prospects are not deemed sufficient;
- the failure to obtain, or termination of, necessary leases, licences, permits, consents and approvals;
- the effects of changes in laws and regulations affecting the countries and industries in which the relevant companies operate;
- work stoppages, weather interferences, unforeseen engineering, design, environmental or geological problems, or unanticipated cost increases;
- instability of production following commissioning;
- underestimation or mismanagement of project risks;
- the adverse exercise of regulatory discretion by relevant governments in countries or regions in which the companies engaged in the expansion operate;
- the effects of international and domestic political events; and
- the effects of future litigation, if any.
Any future upward revisions in estimated project costs, delays in completing planned expansions, cost overruns, suspension of current projects or other operational difficulties after commissioning, as a result of the above factors or otherwise, may have a material adverse effect on Astra’s business.
Accidents at Astra Resources commercial sites could result in injuries and fatalities
Any accidents or hazardous incidents causing personal injury or death or property or environmental damage at or to Astra mines, smelters, or related facilities (such as logistics and storage facilities) or surrounding areas may result in significant losses, interruptions in production, expensive litigation, imposition of penalties and sanctions or suspension or revocation of permits and licences. Injuries to and deaths of workers and contractors at mines have occurred in the past in the mining industry and may occur in the future.
Cyclical industry and changes in global economy
The resources industry generally remains highly cyclical and can be subject to fluctuations in commodities prices, economic conditions generally and resource end-use markets. The Company is unable to predict the future course of industry variables or the strength, pace or sustainability of the economic recovery and the effects of government intervention.
Declines in resource prices
A sustained weak resource pricing environment or a deterioration in resource prices could have a material, adverse effect on Astra Resources business, financial condition, results of operations or cash flow, and consequently on the value of Astra’s investment. Prices vary over time based on government policies and regulation, costs of production, global and regional economic conditions, demand in end markets for products in which the commodities are used, technological developments, including commodity substitutions, fluctuations in global production capacity, global and regional weather conditions and natural disasters, all of which impact global markets and demand for commodities.
Cost of raw materials
Astra Resources ' results of operations will be affected by increases in the cost of raw materials, including energy, carbon products and other key inputs, as well as freight costs associated with transportation of raw materials. Astra Resources may not be able to offset fully the effects of higher raw material costs or energy costs through price increases, productivity improvements or cost reduction programs.
The mining industry is subject to increasing environmental responsibility and liability. The proposed mining activities of the Company will be subject to applicable environmental laws, regulations and restrictions. The Company is aware of its legislative and regulatory obligations and as part of its exploration strategy and investigations, has taken steps to conduct its operations in an environmentally responsible manner. The Company is unable to predict the effect of future changes to legislation or policy and the cost of such changes on its operations and financial position.
Mining and native title
Astra Resources has commercial activities in certain countries where title to land and rights in respect of land and resources (including indigenous title) has not been and may not always be clear, creating the potential for disputes over resource development. While Astra Resources does not believe that any such disputes are imminent, such a dispute, if related to a material industrial asset, could disrupt or delay relevant mining, processing or other projects and/or impede Astra Resources’ ability to develop new production assets.
Exploration & mining risks
Exploration is a speculative activity and the success in ascertaining recoverable resources can never be guaranteed. Drilling operations can be affected by uncontrollable factors such as inclement weather, industrial action, environmental issues, unforeseen increases in costs, technical difficulties not anticipated in the Company’s business plan and ‘force majeure’. The development of a mine will require further approvals and involve additional expenditure.
At this stage the Company does not have any resources defined under the JORC code; no resources have been delineated or defined and no feasibility studies have been or carried out. Consequently, the Company is not in a position to give any assurance that it will achieve production from any of the projects. Before production can be achieved, resources will need to be defined within the meaning of the JORC code and feasibility studies commissioned.
Reduction in demand
The Chinese market is a significant source of global demand for commodities. A sustained slowdown in China’s economic and commodities demand growth that is not offset by increased commodities demand growth in other emerging economies can materially affect the Company's business, financial results, operations or cash flow, and consequently impact the value of Astra’s investment.
Resources is a highly competitive industry
The commodities industry is characterised by strong competition. Some competitors or existing producers may, in the future, use their resources to broaden into all of the markets in which Astra operates and therefore compete further against the Company. Increased competition may result in losses of market share for Astra Resources and could materially adversely affect Astra Resources' business, results of operations and financial condition.
Currency, exchange rates, inflation, risks in countries in which Astra Resources operates
The significant majority of transactions undertaken are denominated in U.S. dollars. Foreign exchange can fluctuate and therefore change the cost of operations and could adversely affect financial results. Broadly, economic factors, including inflation and fluctuations in foreign currency exchange rates and interest rates, competitive factors in the countries in which Astra Resources operates, and continued volatility or deterioration in the global economic and financial environment could affect Astra’s revenues, expenses and results of operations.
Astra is exposed to significant geopolitical risk. Astra is in partnership or has projects in place which are in a large number of geographic regions and countries and, as a result, is exposed to a wide range of political, regulatory and tax environments.
These environments are subject to change in a manner that may be materially adverse for Astra, including changes to government policies and regulations governing industrial production, foreign investors, price controls, export controls, tariffs, income and other forms of taxation (including policies relating to the granting of advance rulings on taxation matters), nationalisation or expropriation of property, repatriation of income, royalties, the environment and health and safety.
Many of the commodities that Astra plans to produce can be considered strategic resources and governments may decide not to recognise previous arrangements if they regard them as no longer being in the national interest. Governments may also implement export controls on commodities regarded by them as strategic or place restrictions on foreign ownership of assets.
Astra will continue to do business in emerging markets where greater risk instability is present such as terrorism, civil war, guerrilla activities, military repression, civil disorder, crime, workforce instability, change in government policy or the ruling party, economic or other sanctions imposed by other countries, extreme fluctuations in currency exchange rates or high inflation.
Reduction or elimination of investment incentives
Astra may claim significant tax incentives, which may not be available in the future that may have a material adverse effect on the Company’s results of operations. The Company currently enjoys, in the form of tax holidays, exemptions and subsidies, the benefit of various tax incentives provided by the Indian federal and state governments designed to encourage investment in the resources sectors. These incentives have a material impact on the Company’s investment returns. The Company’s results of operations and financial condition could be materially adversely affected if these benefits were amended or withdrawn or were to become unavailable.
Astra Resources may fail to make successful acquisitions or fail to integrate acquisitions effectively
The Astra business model utilises partnership and acquisition to facilitate the growth in the Company. Business combinations entail a number of risks, including the ability of Astra Resources to integrate effectively the businesses acquired with their existing operations (including the realisation of synergies, significant one-time write-offs or restructuring charges, difficulties in achieving optimal tax structures and unanticipated costs). All of these may be exacerbated by the diversion of the Directors’ attention away from other ongoing business concerns.
Patent and intellectual property risk
Some patent applications are still pending. The applications have not yet been examined and hence it is not known whether there will be barriers to registration of the patent applications raised by government authorities. There may be third parties holding rights that prevent registration of the Company’s patent applications in Australia and in other jurisdictions. There could be a scenario where holders of stronger rights to the subject matter of the applications may be able to prevent the Company marketing its products in Australia, which would be catastrophic for the Company.
Development phase technology
The Company is a technology development company and its Products are at various stages of development and testing. There may be technical, legal or regulatory issues limiting the commercial viability of the Products and full commercialisation may not be achieved.
Technological change and competition
Astra could face increased competition via both new and existing entrants into the market which could adversely affect its ability to attract customers to its Products. There can be no assurance that competitors of the Company will not succeed in developing technologies that would render the Technology and Products of the Company obsolete or non-competitive. The future success of the Company may depend on its ability to adapt to rapidly changing technologies. The failure of the Company to adapt to such changes and evolution could have a material adverse effect on the business, results of operations and financial condition of the Company.
Risks relating to the Company / Group’s structure
The holding company structure means that the Company’s ability to pay dividends will be dependent on distributions received from its subsidiaries
Since the Company is a holding company, its operating results and financial results will be dependent on the performance of members of the Group. The Company’s ability to pay dividends will depend on the level of distributions, if any, received from the Company’s subsidiaries.
Tax charges may affect the level of distributions made to the Company by the Group companies and accordingly by it to Shareholders
Tax charges may affect the level of distributions made to the Company by the Group companies and accordingly by it to Shareholders. The Group will, in structuring its investments, seek to maximise after tax distributable cash in a manner consistent with its business operations. However, any change in the Company’s tax status, domicile, taxation rates or in taxation legislation could affect the profits of the Group and, in turn, the return to Shareholders.
The price of the Ordinary Shares may fluctuate significantly
The market price of the Ordinary Shares could be subject to changes unrelated to the operating performance of the Group. The market price may change due to a number of factors including but not limited to: variations in operating results in the Group’s reporting periods, changes in financial estimates by securities analysts, fluctuations in commodity prices, changes in market valuation of similar companies, loss of a major customer, additions or departures of key personnel, any shortfall in revenue or net income or any increase in losses from levels expected by securities analysts, future issues or sales of Ordinary Shares, and stock market price and volume fluctuations.
Risks relating to the Shares
Risk related to dilution
Future capitalization measures could lead to substantial dilution of existing shareholders’ interests in the Company. The future value of carbon credits are unknown.
Major shareholders may exercise significant influence over the Group after Admission
Following Admission, Astra Industries Pty Ltd will continue to own approximately 33% of the Company’s issued Ordinary Shares. Major shareholders, including Astra Industries Pty Ltd, may exercise significant influence over the Group after Admission. Astra Industries also has an interest in the subsidiaries.
An active market for the Shares may not develop, which may affect the shareholders ability to dispose of shares
Prior to the Admission, there had been no public market for the Shares. The Offer Price at listing may not be indicative of the market price for the Shares following Admission. Although the Company has applied for the Shares to be admitted to trading and it is expected that this application will be approved, there can be no assurance that an active trading market for the Shares will develop or, if developed, that it will be maintained. If an active trading market is not developed or maintained, the liquidity and market price of the Shares could be adversely affected.
To read Astra’s Risk Management Framework Policy in full, please click here.