Company overview - Altura Mining Limited is an Australia-based company engaged in the supply of lithium raw materials. The Company is engaged in the exploration and development activities, including completion of a feasibility study at its Pilgangoora Lithium project in the Pilbara region of Western Australia. The Company's segments include coal mining, exploration services and mineral exploration. Its coal mining segment is engaged in the sale of coal. Its exploration services segment provides a range of drilling services to its customers, primarily mining and exploration companies. Its mineral exploration segment is engaged in exploration activities. The Company also has interests in producing Delta Coal project in Indonesia, which produces medium energy thermal coal, and the Tabalong Coal project, a thermal coal deposit located in South Kalimantan, Indonesia. The Tabalong Coal project consists of approximately five mining licenses.
 

AJM Details 
Boosting capital position via agreement with Shaanxi J&R Optimum Energy Co.: Altura Mining Ltd (ASX: AJM) has the subscription and cooperation agreement with Shaanxi J&R Optimum Energy Co. Ltd, which is one of the largest Chinese battery producers with 18 plants either in operation or under construction located in several Chinese provinces. With this move, the group is raising over $41.6 million (before costs) via the placement of 306 million fully paid ordinary shares at a price of A$0.136 per share to Shaanxi J&R Optimum Energy. After the placement of shares, J&R Optimum would have a 19.9% shareholding in AJM. This transaction would boost the Pilgangoora Lithium Project funds as AJM is working towards finalizing the complete financial package for the project. Construction of the mine would start once the last statutory approvals are obtained. The shares would be issued in two tranches in which the first tranche is the issue of 123 million shares and a second tranche is the issue of 183 million shares while the approval of shareholders in EGM is due. Moreover, J&R Optimum has acquired the Optimum Nano group with whom AJM has signed a non-binding Memorandum of Understanding (MOU) this year for a minimum of 100,000 tonnes per annum of Lithium Spodumene Concentrate. This partnership would offer a platform for the participation in not only raw material supply but in downstream processing and technology as well.
 
Developments in the September Quarter: AJM finished the Definitive Feasibility Study in the September quarter which came out with positive results. The study showed the annual production of 219,000 tonnes of spodumene concentrate, and an LOM net revenue of A$2,074 million, NPV of A$411 million and IRR of 58.1% (10% discount rate). 20.33 Mt of total ore feed would produce 2.89 Mt of spodumene concentrate production. The revised ore reserve estimates are 20.33 million tonnes @1.06% Li₂O while the upgraded Mineral Resource estimate is of 39.16 million tonnes @1.02% Li₂O. Moreover, AJM has signed the native tile agreement with the Njamal people, grant of the mining leases by the WA Department of Mines and Petroleum (DMP), lodgement of the Mining Proposal with the DMP, signed the non-binding agreement with Pilbara Minerals to jointly evaluate deposits on tenement boundaries and resource extension drilling program conducted on mining leases. Additionally, AJM in the September quarter has sold 27,795 tonnes of coal. Meanwhile, the group maintained their cash and cash equivalents of $13.4 million as of September quarter end.
 

Altura Pilgangoora Lithium Project DFS Key Results (Source: Company Reports)
 
Signed the Letter of Intent with Lionergy: The group has signed a Letter of Intent (LoI) with the Offtake Partner Lionergy, to get the funding requirements for the construction of the Pilgangoora Lithium Project through the mix of a debt and equity and the details would be finalized post the receipt of a detailed Terms Sheet. Moreover, after the completion of the funding, the LoI would enable AJM to progress with the discussions to invest in Lionergy’s planned lithium carbonate processing plant which would be constructed in China. Additionally, AJM has agreed with Lionergy to amend certain conditions precedent of its Binding Offtake Agreement with Lionergy by extending the time for completion of the financing of the lithium project to January 22, 2017.
 
Pilgangoora Lithium Project is on schedule: AJM’s 100% owned Pilgangoora Lithium Project is on track to produce its first Lithium (Spodumene) concentrate in fourth quarter of 2017 after the Definitive Feasibility Study (DFS). This would be enabled by their timely construction of the mine and associated infrastructure by providing the suitable accommodation available to its workforce for both the construction and subsequent operational aspects of the project. Therefore, AJM has entered into an agreement to purchase the former Rail Camp 2 from Roy Hill Infrastructure to accommodate its rail construction workforce. AJM sees a significant strategic advantage in having its accommodation village remote from the Mine site, on the western side of the Turner River and within easy reach of Port Hedland. Additionally, the Pilgangoora Accommodation Village consists of 324 rooms and has a cleared space for a further 176 rooms if future expansion is required. The room capacity is of 500 personnel. Moreover, AJM has bought High Pressure Grinding Rolls (HPGR) crusher and has placed orders for further eight suppliers of critical long lead equipment associated with construction of the Processing Plant. AJM’s procurement team is currently in negotiations with numerous other equipment suppliers and intends to place further orders for capital equipment over the coming months. Overall, we believe that the group is on track to deliver production from its world class lithium project in 2017 given their efforts in the submission of the mining proposal, the recent funding discussions with Lionergy, AJM’s Chinese offtake partnership and the positive results in the recent drilling program.
 

Pilgangoora Development (Source: Company Reports)
 
Fiscal year of 2016 Performance highlights:AJM reported an operating loss after tax and non?controlling interests of $31,498,799 for fiscal year of 2016 as compared to the loss in $29,847,345 in fiscal year of 2015. The loss in fiscal year of 2016, is on the back of the impairment of equity accounted asset, coupled with a reduced loss from its equity accounted asset and lower activity in the group’s exploration services sector. Additionally, there is a foreign exchange gain from the declining Australian dollar trend at year end. In addition, AJM would add shareholder value via the development of profitable mining operations, while other mining activities would deliver a strong cash flow for the group.
 

Fiscal year of 2016 Consolidated Financial Performance (Source: Company Reports)
 
Potential Market opportunity: Lithium potential market opportunity is growing rapidly given the use of rechargeable lithium-ion batteries in smartphones and tablets. Moreover, electric vehicles are also gaining momentum as major nations are making efforts to be emission-free on a long-term perspective. Recently, German government has voted for a non-binding ban on new combustion engine vehicles, starting from the year 2030. These measures could further drive the demand in Lithium market.
 

Lithium Market (Source: Company Reports)
 
Stock Performance:AJM stock was placed in the trading halt session state on November 04, 2016 on the request of the company ahead of their agreement with Shaanxi J&R Optimum Energy news release. The trading resumed from November 08, 2016 and delivered returns of over 16%. The group is making efforts to be a pure play lithium player and accordingly offloading their non-core coal assets. After making a long-term viability review of the group’s Indonesian coal assets which comprised the Delta Coal mine and Tabalong Coal Project, the group decided to divest these assets. Meanwhile, Altura Mining stock surged over 150.00% (as of November 08, 2016) during this year to date driven by the growing demand in Lithium market. On the other hand, AJM stock has fallen over 34.1% in the last six months (as of November 08, 2016) due to concerns of oversupply in the Lithium market. Nonetheless, given the rising demand, we believe that the stock has the ability to witness growth while AJM’s 100% owned Pilgangoora Lithium Project is on track to produce its first Lithium (Spodumene) concentrate in fourth quarter of 2017. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of – $ 0.14

 
AJM Daily Chart (Source: Thomson Reuters)

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