AMAL share price: 24.0 c
Year to date
The stock price of Alliance Mineral Assets Limited (AMAL) moved up 20% yesterday to 24 cents after it announced "excellent results" from a large-scale test for lithium in its ore in its mine in Western Australia (more on this later).
The share price has reached a two-year high, fuelled earlier by updates from the company on its discovery of lithium-rich ore in its mine and its moves toward commercial production.
AMAL is the only play on lithium on the Singapore Exchange. Its peers listed in Australia have turned in huge multi-bagger gains in the past 1-2 years as market prices of lithium made big moves.
Demand for lithium, which has been recently described as the "new gasoline" by Goldman Sachs, is surging. (Watch Goldman Sachs' video)
The newly-announced test results place AMAL in a favourable position as it negotiates with potential off-takers who operate converters (that process AMAL's product and sell it to lithium-ion battery manufacturers) as well as battery manufacturers.
AMAL's announcement referred briefly to off-takers but hinted at the strong interest they have in AMAL's potential supply: "A number of off-take partners have visited the Project in the past few weeks and the company is currently advancing negotiations for offtake."
Any agreement is expected to be premised on AMAL's long-stated target of commissioning its facilities in October this year, which implies that the first shipment of lithium will be around year-end.
|"We have received many offers. We want to choose the off-take party very carefully. Financing for facility construction and prepayment for supply are what we will require, so there's skin in the game, and both seller and buyer will work closely together."
-- AMAL's CEO, Tjandra Pramoko
(NextInsight file photo)
On that timeline, AMAL is the next producer of lithium in Australia.
"We aim to produce 129,000 coarse material in the first year, with additional 59,000 of fine material the following year. This is according to the spectacularly better-than-expected large-scale metallurgical test work," says Mr Pramoko.
AMAL's announcement of the test results was made jointly with its partner, Australia-listed Tawana Resources, which has committed to spend A$20 million on exploration and feasibility studies as well as certain capital expenditure for lithium production.
In return, Tawana will earn 50% of the rights of AMAL's Bald Hill Project.
|♦ Test results point to highly profitable mining operations|
|The highlights of a larger scale metallurgical test work are contained in the AMAL announcement in much technical detail.
In simpler language, the findings are:
• AMAL's mine can deliver ore containing well in excess of 6% lithium oxide (Li2O), which is exceptionally high compared to its peers.
• 60-70% of the ore can be rejected after a first pass of a process, Dense Media Separation (DMS), thus reducing further processing costs appreciably.
• After further processing, 78% of the remaining feed which contains 83% lithium is available for the next stage of DMS processing. This is far richer than its peers'.
• The outcome: immediately marketable concentrates.
• The benefits of the selected process route for the stage one DMS circuit are: Low capital cost, short time to commissioning, low risk, very low processing cost and production of a coarse high grade premium concentrate.
The upshot of the findings is that the business is set to roll.
Additionally, AMAL has an advantage not commonly available in lithium mines. Its ore also yields tantalum, another mineral with commercial value.
AMAL's existing tantalum infrastructure is being revived to produce tantalum, generating income which will cover a big portion of the cost of mining the ore.
Lithium from the same ore, thus, will fetch a very high profit margin.
Click for full announcement here.