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
Update on Pilgangoora Project: Altura Mining Ltd (ASX: AJM) had reported good results from their Definitive Feasibility Study (DFS) at their Pilgangoora project located in Western Australia, in September 2016. As per the DFS, the project has a long mine life of 13 years, producing an average of 220ktpa of spodumene concentrate over the Life of Mine (LOM) at a low cash cost of A$316/t. Accordingly, the project has a net present value of A$411 million (assuming a spodumene concentrate price of US$539/t even though the recent sales price was US$600/t). The study had indicated a lucrative Internal Rate of Return (IRR) of 58% with project payback period of 1.8 years. Meanwhile, the group signed the contract with Roy Hill Infrastructure to purchase the former Rail Camp 2, located 20km from the Pilgangoora mine site. The order is placed for fifteen long lead mechanical equipment items for the process plant. AJM has signed native title agreement with the Kariyarra People, the traditional owners of the land on which Rail Camp 2 is situated. However, there is ongoing liaison with the WA Department of Mines and Petroleum (DMP) regarding statutory and environmental approvals, which has led to the resubmission of an amended Mining Proposal in December 2016. AJM expects that the revised Mining Proposal would be approved in early February 2017, making the way for the mine construction to start thereafter. Moreover, AJM has finished all resource extension drilling on existing Mining Leases. 

Geological and Drill Hole Plan (Source: Company Reports)
 
Setting up of Pilgangoora Village Facility: AJM has signed an agreement with Roy Hill Infrastructure Pty Ltd for the purchase of an existing 324 room camp, which is former Rail Camp 2 and is located just 20 km from the Pilgangoora mine site. In January 2017, the group also finished all of the necessary approvals for the final transfer of ownership of the camp from Roy Hill. Moreover, AJM is currently finishing the recommissioning activities to enable occupation by its initial mining and construction workforce in early February 2017. The facility has been renamed “Pilgangoora Village”, which would offer quality accommodation during both the construction and operational phases of the project. Additionally, the village is strategically located on the Western side of the Turner River and therefore would not be cut off from a supply or evacuation point of view during the cyclone season.
 
Subscription and Cooperation Agreement with Shaanxi J&R Optimum Energy Co.: AJM has signed a Subscription and Cooperation Agreement with Shaanxi J&R Optimum Energy Co., Ltd (J&R Optimum) for raising over $41.6 million before costs through a Share Placement. J&R Optimum are currently the leading lithium battery producers in China focused on lithium iron phosphate (LiFePO₄) power battery systems for commercial and domestic applications. After finishing the Share Placement, J&R Optimum would have a 19.9% shareholding in AJM along with a right to participate in any new issues of shares. However, these anti-dilution rights are subject to the maintenance of an interest of not less than 15% of AJM, and would be granted after fulfilling all the required regulatory and other approvals. On the other side, the group also signed the strategic agreement with Kairos Minerals which would offer the group with rights to explore for lithium on Kairos’ Wodgina East tenements comprising E45/4780 and E45/4715. The group paid $100,000 to Kairos for right to explore these tenements for a five (5) year period. Moreover, the group has the option to acquire a 75% interest in the Wodgina East tenements by spending a total of $1.25 million over 5 years, or pay $1.25 million less the cost of any exploration or mining expenditure undertaken at any time in 5-year period.
 
Altura Pilgangoora Revised Ore Reserve Estimate: AJM reported an Ore Reserve estimate of 30.1 Mt @1.04% Li₂O as of December 2016 quarter and this latest estimate represents an increase of 9.8 million tonnes as compared to their earlier estimate of September 2016. The increase is on the back of further deep drill hole data and better drilling and sampling data after finishing a closely spaced infill drilling program from June until October 2016. AJM’s upgraded indicated Mineral Resource is of 40.3 Mt @1.00% Li₂O as of December 2016 quarter, which is better than their earlier indicated Mineral Resource of 30.6 Mt @1.04% Li₂O. Moreover, the revised Inferred Mineral Resource estimate of 2.3 million tonnes at 0.90% Li₂O is lower than the previously reported 8.6 million tonnes at 0.95% Li₂O due to the improved confidence in the data after the recent infill drilling program. The group has reported for a 75% conversion of the Mineral Resource estimate to Ore Reserves. 

Altura Pilgangoora Ore Reserve Estimate (Source: Company Reports)
 
Update on the Drilling Program: AJM in the December quarter has reported further positive results from the resource and reserve extension drilling program. The program had comprised a total of 246 Reverse Circulation (RC) holes, drilled between July and October 2016 in which, 139 were within the main deposit with a particular focus on the eastern and southern mineralization zones. The remaining 107 sterilization holes have covered all the areas of key infrastructure within the granted Mining Leases, including over waste dumps, Tailings Storage Facility (TSF), process plant and other non-process infrastructure.On the other side, the groupis progressing well on the project and procurement teams are taking many proactive measures to advance a number of key tenders that would enable starting on site early in 2017. In the December quarter, fifteen of the major long lead mechanical plant packages were ordered. 

Drilling Program Highlights (Source: Company Reports)
 
Divestment of non-core assets: AJM has planned to divest its interests in both the Delta and Tabalong coal assets and is pursuing a number of options for sale of the coal assets and information has been provided to a number of parties under confidentiality deed arrangements. Moreover, the group offloaded their remaining interest in the Mt Webber production which is a joint venture with Atlas Iron. Accordingly, the group retained residual royalty rights to iron ore sold from the Mt Webber mine every quarter, in any month where the average CFR 62% Fe index is greater than A$95 equivalent. Payment of the royalty would stop when the amount of iron ore sold from the mine has reached a total of 29.8 million dry metric tonnes (being the JORC ore reserve for M45/1209 at the starting of mining). As of December 2016 quarter, the average CFR 62% Fe index was above A$95 during the months of November and December, and accordingly the group would get a royalty of A$192,000 plus GST from Atlas.
 
Stock Performance: Altura Mining is continuing to negotiate with potential clients for their Pilgangoora project. The group made an Agreement for a minimum of 100ktpa of 6% Li₂O concentrate to Lionergy, China and entered into a Memorandum of Understanding with OptimumNano for further minimum 100ktpa of 6% Li₂O concentrate. The group reported a cash position of $11.518 million as of December quarter while net cash used in operating activities decreased to $3.523 million for December quarter. After an 11-month construction period, the commissioning of Pilgangoora Lithium Project is expected from the fourth quarter of 2017. AJM stock rose over 29.6% in the last four weeks (as of January 31, 2017) and we believe this bullish momentum in the stock would continue in the coming months. Given the growing demand for Lithium and the performance prospects for the group, we give a “Buy” recommendation on the stock at the current price of – $ 0.18

 
AJM Daily Chart (Source: Thomson Reuters)

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