Company Overview -  Altura Mining Limited (Altura) is an Australia-based mining company with lithium and coal projects in Australia and Indonesia, and minerals exploration portfolio. The Company is engaged in the exploration activities at the Pilgangoora Lithium project; mining and production of coal; provision of mining services, including drilling and geological services, and other exploration activities within Australia, Indonesia and Philippines. It operates through four segments: iron ore mining, coal mining, exploration services and mineral exploration. Its coal mining segment includes investment and sale of coal. The iron ore mining segment includes the sale of iron to its customer. The exploration services include drilling services. Its mineral exploration is engaged in exploration activities. The Company's focus is the development of its Pilgangoora Lithium Project in Australia. Altura also has interests in the producing Delta Coal project in Indonesia, and the Tabalong Coal project.


AJM Details

Pilgangoora Lithium Project Highlights: Altura Mining Ltd.’s (ASX: AJM) 100% owned Pilgangoora FS Project has the top five global sized deposit of hard rock lithium with the mineral resource estimate of 35.7mt @ 1.05% Li₂O and Ore Reserve estimate of 18.47mt @ 1.07% Li₂O. Meanwhile, the group would deliver the Definitive Feasibility Study (DFS) by August 2016 while intends to get the Mining Lease (ML) by July/August 2016 and accordingly the company had lodged mining proposal for grant of ML.  Moreover, the mine life is over fifteen years and the production from the mine is expected to start from October 2017. After approval of mining proposal, the onsite construction is going to start by December 2016. Additionally, the capex for the project is A$129 million and the payback period is less than 2 years. On the other hand, AJM has completed the feasibility study and the FS input drilling. There is significant upside potential to increase resource inventory in tenement package. AJM has indicated over 70% of resource and there is comparatively straight forward ore body to mine with outcropping at the surface at a relatively low capital cost. Additionally, the net present value is A$382 million, internal rate of return is 59.5% and the forecasted EBITDA is A$73.9 million from annual production of 215,000tpa chemical grade lithium concentrate. Meanwhile, AJM has agreed to terms and executed the Native Title Agreement (NTA) with the Njamal people, the traditional owners of the land at Altura’s 100% owned Pilgangoora Lithium Project located in the Pilbara region of Western Australia. The signing of the NTA with the Njamal people is the final pre-requisite approval to allow the grant of the two mining leases covering AJM’s planned development of the Pilgangoora Lithium Project.
 

Pilgangoora FS Project Details (Source: Company Reports)
 
Building Binding offtake agreements for Pilgangoora Lithium Project: AJM has signed the binding offtake agreement with Chinese based downstream lithium production and investment group Lionergy Limited for the supply of a minimum 100,000 tonnes of spodumene concentrate annually. Lionergy would produce lithium iron phosphate (LiFePO₄) or LFP for the power battery production in China. The Binding offtake agreement is signed for up to 50% production of Pilgangoora Lithium Project. Accordingly, Lionergy would invest over A$3 million in the group through share placement. Moreover, the group made an Altura – Optimum Nano - Lionergy Tripartite non-binding Memorandum of understanding for offering spodumene concentrate to a major Chinese power battery application developer and producer Optimum Nano. Based on the MOU, for spodumene concentrate, the supply is in the range of 100,000 - 150,000 tonnes annually on “mine to market” concept. Lionergy is also a party to MOU and will focus on downstream spodumene processing for LFP applications. The offtake partners are leaders in battery production with over 85,000 EV battery systems already in China. The Memorandum of understanding (non-binding MOU) is signed for up to additional 50% of production of Pilgangoora Lithium Project.
 

Timeline of the Pilgangoora Lithium Project (Source: Company Reports)
 
Completion of Share Purchase Plan: Altura has raised the capital of total $A20 million through a direct placement of 100 million fully paid ordinary shares (New Shares) at an issue price of $A0.20 per New Share. Altura has received the funds from the SPP totaling $774,000 which was less than the maximum amount of $3 million offered. However, the outcome of the SPP will have no bearing on conducting of its current activities on the PIlgangoora Lithium project. Moreover, AJM’s Listed Options which expired on 30^th June, 2016 had a take-up rate of 99.9% and had provided the further proceeds for the company of just over $4 million.
 

Funds usage (Source: Company Reports)
 
Other Altura Mining Assets highlights: AJM has a one third interest in the operating Delta Coal mine in East Kalimantan, Indonesia with current annual production target of 1.4 million tonnes per annum (Mtpa) of mid ranking thermal coal. Moreover, AJM has a 70% interest in the Tabalong Coal Project in South Kalimantan which comprises five tenements (IUPs) that have attained operational status with in principle agreement for Forestry Land Use permit for first tenement being received. The project has low cost of production, low strip ratio, thick seam mining of high energy thermal coal +6,500kcal/kg. However, AJM has previously announced its intention to divest these assets as soon as practicable. On the other side, during February 2016, Lithium Corporation (LTUM) reported that it had received the analytical results from its 2015 trenching program at the Weather Station indicating the group’s BC Sugar Flake Graphite prospect in British Columbia. Earlier sampling in the area of the Weather Station had showed that coarse flake graphite mineralization was present in the considerable stratigraphic width, while the sporadic nature of outcrop made it difficult to get a handle on exactly how well mineralized the zone truly was. The 2015 trenching program indicated that the zone of graphite mineralization was steady, and protracted more than expected. During March 2016, LTUM reported that they signed a definitive agreement with 1032701 B.C. LTD., which is a private British Columbia company with respect to the Fish Lake Valley lithium brine property in Esmeralda County, Nevada. The terms of the agreement comprised an early payment to LTUM, issuance of shares in the publicly traded company, while work is estimated to be performed on the property in the next three years to earn a majority interest and possibly a 100% ownership in the property.
 
Booming Lithium Industry: AJM’s primary product is to supply chemical grade lithium feedstock for the rapidly expanding battery production sector as there is a significant opportunity to capitalize on the increasing CAGR in electric vehicles (EVs) and large EV power battery sector. The broadening set of applications is emerging for Lithium Ion Battery technology and there is a particular emphasis on next generation electric vehicles. Moreover, there is a significant upheaval in Chemical Grade concentrate markets and AJM has plans to enter the market with 215ktpa of 6% Li₂O spodumene concentrate. Additionally, there is an exciting growth in off peak energy storage for industrial and domestic use via products such as Tesla Powerwall. Recently, the demand of Lithium batteries has increased, given the rising demand from new car Tesla’s Model 3 whose analysts are predicting pre orders to be over 450,000 by the time production begins in 2017. In addition, there is an established consensus around the need to control urban carbon emissions particularly in Asia. The group’s Offtake partners are major players in battery production having around 85,000 EV battery systems in China.
 

Demand/Supply of Lithium (Source: Company Reports)
 
Stock Performance: The shares of Altura Mining stock rose over 185.7% in the last six months (as of July 26, 2016), driven by the recovering commodity prices coupled with rising demand for Lithium in the global markets. In fact, the company is one of the cheapest lithium producers with reserves in excess of 25 MT (yielding approximately 310,000 tonnes of lithium oxide) at its flagship mine in Western Australia. But the stock corrected over 30.43% in the last three months (as of July 26, 2016), which we believe is still an attractive entry opportunity for investors. We remain bullish on the stock as we expect there is more upside despite the gains this year. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of  $0.165
 

AJM Daily Chart (Source: Thomson Reuters)

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