|Alliance Mineral Assets started life as a listed company on the Singapore Exchange in 2014, counting the well-regarded Alan Wang as one of its investors.
In its IPO, it held out the prospects of doing well in mining in Western Australia. The mineral: tantalum, a rare metal that most Singaporeans, being city-slickers, have never heard of.
Tantalum is widely used as tantalum capacitors in automotive electronics, and PCs, etc. It has other applications but consumer electronics is where it is most in demand.
Since Alliance's IPO, when it raised net proceeds of S$7.7 million, the company has refurbished infrastructure at the Bald Hill project (which it had bought over the rights to mine for tantalum and other minerals).
The Bald Hill project spans 70,000 hectares, or about the size of Singapore (71,910 hectares).
Two surprising turn of events have since materialised:
♦ Tantalum prices slid (though, of late, it is making a partial comeback). As a result, Alliance decided to defer commercial mining.
“We are very pleased with the encouraging results of the initial drilling program for lithium as it provides a good indication that the Bald Hill Project contains a significant lithium resource potential in addition to tantalum. With the majority of the infrastructure already in place, we believe that we are better placed than other tantalum and lithium explorers to progress the project quickly to production once both the tantalum and lithium resource potential are confirmed.”
♦ Preliminary results of deeper drilling indicate that the Alliance mine has high-quality reserves of lithium. This is the cause of the current buzz around Alliance, whose stock is up 31% year-to-date.
"We were surprised at how high the content of lithium is in our ore. We can produce 6.7% concentrate without a proper lithium circuit," says Tjandra Pramoko, CEO of Alliance, in a telephone interview from Perth with NextInsight.
The price of spodumene concentrate, which contains lithium, has surged 3X to over US$900 a tonne since 4Q2015, says Mr Pramoko.
The driver: growing demand from producers of lithium-ion batteries for electric vehicles as well as consumer electronics. "China is super hungry for lithium," says Mr Pramoko.
Recently, a lithium plant engineering company, Primero Group, was engaged to conduct a feasibility study which is expected to be completed by end-March 2017.
Early results pointing to bright prospects enabled Alliance to attract institutional investor support: In June 2016, Alliance placed out 83.5 million new shares at 6 cents apiece to raise A$5 million.
|Stock price||11.9 cents|
|52-week range||4.5 – 13.9 c|
|Market cap||S$57 million|
|Shares outstanding||480.8 million|
Alliance has also won over Lithco No 2 (which subsequently was acquired by Tawana Resources, a listed company in Australia), as a 50-50 JV partner for the exploration and exploitation of minerals.
Lithco has committed to contribute A$20 million, as announced in June 2016.
In addition, Alliance, with only A$4.3 million on its balance sheet as of end-Sept 2016, has attracted potential off-takers.
Alliance is negotiating with them on matters including prepayment and other financing options to support mining and production.
All in, as Alliance already has most of the production infrastructure in place, the capex required until production begins is "not high", says Mr Pramoko.
"We are working fast, and expect to start building the rest of the necessary infrastructure by April and be ready for commissioning in October," he says.
"To sum up, our strengths are our speed to production and low capex."
Notably, from the ore that contains lithium, Alliance seeks to derive tantalum as well, says Mr Pramoko.
The sale of tantalum will help cover a substantial part of the working capital of the entire operation, he adds. (See also press release dated 26 Jan 2017).
At the current high selling price of spodumene concentrate, it can be inferred that the entire operation will enjoy solid operating margins.
The risk is if lithium prices soften on oversupply in the year ahead before Alliance can monetise its resource. "If everything goes well, our first shipment will be in December," says Mr Pramoko.
Alliance is targeting to produce 150,000-170,000 tonnes of spodumene concentrate a year. That figure, if achieved, is close to that of Galaxy Resources, the second largest producer in Australia.
Will Alliance then join a small host of Aussie lithium miners on the road to riches? Only time will tell.
|The dynamics of the demand-supply for lithium are complex, and their possible impact on future prices of lithium are beyond the scope of this article. You may read views that range from bullish to conservative, as follows:
Many more details about Alliance Mineral Assets' business development have been put up by the company in a presentation uploaded to the SGX website. Click here.