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

Attractive ROI on Pilgangoora Lithium Project: Altura Mining Ltd (ASX: AJM) reported that as per the DFS (Definitive Feasibility Study) for their Pilgangoora Lithium Project, the project looks attractive which will have a mine life of 13 years while producing an average of 220ktpa of spodumene concentrate over the LOM at a low cash cost of A$316/t. The project is expected to have a pre-tax NPV (Net Present Value) of A$411 million even at a conservative spodumene concentrate price of US$539/t despite the recent sales price of US$600/t. IRR is expected to be 58% with project payback of 1.8 years.

 
DFS highlights (Source: Company reports)

Pilgangoora Lithium Project development progress on track: Pilgangoora Lithium Project site development is progressing well with 3 x D10 Dozers fully deployed. The four blasts have been conducted to date, while the project remains on track for Q1 2018 production timeline. The New Access Road into site has been opened, while the temporary construction offices have been setup with full communications across the site. Altura Mining’s in house Processing Plant management team, design consultants DRA have been making considerable progress with the final design of the Process Plant. The first plant construction works and SMP (Structural Mechanical and Pipework) construction are expected to start on the site in Q42017. Altura Mining team has visited key equipment suppliers in China in late March 2017 to conduct quality inspections during the manufacture process on critical pieces of equipment including crushers and the ball mill. Moreover, the Altura Contracts and Procurement team have continued to place contracts for the process plant equipment. Of the forty packages that comprise all the machinery and equipment necessary to build the process plant, the contracts have been signed on twenty-five of the packages, while the remaining fifteen are all in advanced stages of negotiation. Packages have been let in order of priority relating to the lead times of each piece of equipment so that the aggressive development schedule set by the company could be maintained.
 

Built strong partnerships to deliver the project as scheduled: Australian based Civmec Limited (Civmec) has been awarded the contract to provide all concrete and civil works related with the construction of the Pilgangoora process plant. The first Civmec crews mobilized to site in May 2017 and the construction is expected to be completed by October 2017. Under the contract Civmec, would install over 5,000m of concrete. Moreover, Qube Bulk Pty Ltd, a wholly owned subsidiary of Qube Holdings Limited, has been awarded the contract to provide transport logistics services for a five-year period to the Pilgangoora Project. Qube would start planning and construction of the storage shed in Port Hedland ready to receive product from the mine in early 2018. The Qube fleet of trucks would also start mobilization in early 2018 in preparation for transporting product from the mine to the storage shed on a 24 hour per day basis. Additionally, AJM has awarded the contract to provide an 11MW diesel fueled power station to Kalgoorlie Power Systems (KPS), which is a wholly owned subsidiary of Pacific Energy Limited. The power station would become operational in December 2017 and will be owned and operated by KPS for a five-year contract period.
 

Pilgangoora Lithium Project (Source: Company reports)

Signed first client from China: The group made a binding offtake agreement signed on 22 April 2016 with a Chinese based downstream lithium production and investment group, Lionergy Limited. The group would offer a minimum 100,000 tonnes of spodumene concentrate annually for the first five-year period. Lionergy has built a cutting edge in China’s Lithium industry, given their wide coverage and the integration of the lithium industry. Lionergy would assist a major proportion of project funding offering the group an opportunity to participate as equity partner in planned new Lithium Carbonate conversion plant which would be constructed in China. Lionergy management has a solid reputation in the Chinese Lithium industry and are well connected.
 

Positive March 2017 Quarter update: The Company completed a Definitive Feasibility Study in September 2016 and commenced bulk on 13 March, while production expected to commence in Q4 2017 to enable first sales of spodumene concentrate in Q1 2018. The group got the approval by the WA Department of Mines and Petroleum (DMP) of the Mining Proposal and the Project Management Plan is making the way for the construction of the mine to start. The mining contract was awarded to NRW Holdings Limited (NRW) while the construction of the mine infrastructure started on 13th March 2017. Moreover, AJM finished buying and recommissioning of former Rail Camp 2 from Roy Hill Infrastructure, and re-occupied since early February 2017.
 

Altura Pilgangoora Revised Ore Reserve Estimate: AJM has announced a revised Ore Reserve estimate of 30.1 Mt @1.04% Li2O and the latest estimate represents an increase of 9.8 million tonnes on the previous estimate. The increase is due to the additional deep drill hole data and improved confidence in the drilling and sampling data after the completion of a closely spaced infill drilling program from June until October 2016.

Altura Pilgangoora Ore Reserve Estimate (source: Company Reports)
               

Enhanced Indicated Mineral Resource Estimate: AJM’s upgraded indicated Mineral Resource is of 40.3 Mt @1.00% Li2O, which is an increase on the previous 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.

Altura Pilgangoora Mineral Resource Estimate (source: Company Reports)
 

Positive Industry drivers: The lithium demand is expected to rise by 16% a year from 175,000 tonnes in 2015 to 775,000 tonnes by 2025, which is the fastest rate as compared to any major commodity in the last century, as per analysts from Morningstar. Accordingly, they expect a supply shortfall of 100,000 tonnes of lithium by 2025. Rising applications emerging for Lithium Ion Battery technology coupled with improving importance of next generation electric vehicles (EVs) is driving the Lithium demand. In fact, the recent Saudi Arabia’s declaring has hurt the Oil prices sentiment while world is making efforts to become less dependent on Oil. Electric vehicles (EVs) and large EV power battery applications are witnessing rapid growth backed by major players like Tesla.

Lithium industry drivers (Source: Company reports)
 

Disinvestment of the coal assets: AJM intends to focus on their core lithium project and planning to divest its interests in both the Delta and Tabalong coal assets. Accordingly, the group is pursuing several options for sale of the coal assets and information has been provided to several parties under confidentiality deed arrangements.
 

Stock Performance: The shares of AJM stock has fallen 18.2% (as of June 7th, 2017) in the last three months. On the other hand, the group is on track to deliver the first shipments by the first quarter of 2018. With Pilgangoora being a low-cost lithium project, we believe the group is well positioned to leverage this project’s potential benefits. The Pilgangoora project location is also ideal, with over 120km to established port and gateway to north Asian markets. We believe the stock would recover in the coming months and accordingly, we give a “Buy” recommendation on the stock at the current price of $0.135
 

AJM Daily Chart; (Source: Thomson Reuters)

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