Company trying to build Kentucky aluminum mill in talks to sell key asset cheap
The company trying to raise money to build an aluminum mill touted as an economic lifeline for northeastern Kentucky is considering selling a key asset at a fraction of what it cost.
The move comes as Braidy Industries faces a year-end deadline to show significant progress on the effort to build the $1.7 billion mill near Ashland.
Braidy, which recently changed its name to Unity Aluminum, is in talks to sell Veloxint, a maker of metal alloys, according to information provided to investors.
Unity bought Veloxint in March 2018 for about $26 million in stock and has since spent $21 million to cover operating losses as Veloxint worked to get to a point where it could sell its products, according to a recent message to shareholders.
Now trying to conserve cash, Unity has an offer to sell Massachusetts-based Veloxint for $1 million to Clearbrook Global, a financial advisory firm in New York.
Unity said in an Oct. 14 message to shareholders that directors decided to sell Veloxint in order to refocus on getting the mill built and because of the “cash burn” of carrying the subsidiary while it continues research and development.
It will take another 18 months or more for Veloxint to commercialize its technology, and Unity doesn’t have the $46 million it could take to cover its operating losses, the company told shareholders.
Unity reduced costs at Veloxint, but “the cash drain on Braidy Industries isn’t sustainable,” the company said in the message dated the day before it announced its name change.
Unity had an investment firm contact dozens of potential buyers for Veloxint, but Clearbrook made the only viable offer, Unity told shareholders.
The sale is not yet final. Unity said it could close by Oct. 31 but also that the date could be pushed back.
A spokesman said this week that securities laws barred Unity from commenting on the status of the potential sale.
Veloxint’s technology allows production of metals that are stronger and lighter than traditional alloys, according to its website. That could be valuable in the aerospace, automotive and other industries.
The company announced earlier this year that the federal government would give it a $5 million grant for research that would involve several institutions, including the University of Kentucky.
Unity Aluminum had high hopes for Veloxint at one time, saying in a February 2018 report to potential investors that some existing Veloxint shareholders had suggested the company could be worth $300 million.
The ability to market Veloxint’s technology along with the aluminum mill had helped Unity (then Braidy) get orders covering the entire capacity of the mill even before the groundbreaking, the company said in that report.
The efforts to build the massive Unity aluminum-rolling mill, announced in the spring of 2017, was a jolt of welcome news following steep employment setbacks in northeastern Kentucky in steel, coal and other sectors.
The mill would create 550 good-paying jobs directly and, according to one study, several thousand more at other workplaces in the Ashland area. Then-Gov. Matt Bevin said in April 2017 that the deal to build the mill “has the potential to be as significant as any economic deal ever made in the history of Kentucky.”
The state approved potential tax incentives for the mill and an unusual direct investment of $15 million.
The original projection was for the mill to be done in 2020. Braidy founder Craig T. Bouchard said in 2017 that in three years, the mill would be producing 20 percent of the sheet aluminum for the automotive industry in the U.S.
There have since been many bumps, including the board’s move to fire Bouchard earlier this year.
Bouchard said in a lawsuit that the ouster jeopardized potential investments in the project, and told the Herald-Leader he questioned whether the mill would ever be built without him.
Unity faces a deadline to invest $1 billion in the project by the end of the year. If it doesn’t, the state could seek repayment of its $15 million plus interest.
Company officials told legislators in February that the company needed to raise another $500 million for the project.
This week, the spokesman said Unity couldn’t comment on how much money it has lined up to build and equip the mill because of securities rules.
Unity said in its annual report covering 2019, which was filed in June, that it expects to put the mill into service in 2023 if it can raise the money.
The company has done engineering and other work to get ready for construction, and Doug Collins, the deputy judge-executive in Greenup County, said workers have been doing drainage work at the site.
Unity Aluminum said in an Oct. 15 news release that the company’s leaders had “accelerated” plans to build the mill and were working to finalize raising money.
Don Foster, president of the company, said assessments have indicated a shortfall of 2.6 million metric tons of aluminum from domestic manufacturers, and that most U.S. plants are decades old.
With a new, efficient plant, Unity will be in a prime spot to fill that gap, the company said.
“Based on the market needs, the initial positive customer response, and the shovel-ready position we are in, I am extremely optimistic,” Foster said.
