STTCOMP A40, FA LongAlliance Minerals (Lithium,...

STTCOMP A40, FA Long

Alliance Minerals (Lithium, Tantalum)

SP:19.5c

MC:$240M

Debt: $5M

 

About Alliance Minerals:

Alliance is a producer of lithium & tantalum with its 100% owned “Bald Hill” mine. Off-take agreements are signed for 5 years for lithium & 2 years for the tantalum. Further off-takes are expected shortly due to the increase in production.

 

Catalysts for share price increase:

1.Record production of $13,160T of lithium concentrate last month, after teething problems at the start of the new plant last year. This should attract interest from institutions, as production will quickly transform into positive cashflow. Low cash costs due to the credits obtained through the sale of tantalum. Debt level is low too, contrary to the majority of other WA lithium players.

2.The inferred lithium resource at “Bald Hill” of 18.9M tonnes is largely underestimated as extensive drilling of the tenement has not been done. The company’s strategy has always been to optimise expenditure on the plant rather than drilling. Extra drilling will commence shortly. The CEO Mark Calderwood has been quoted as saying that the size of the deposit is “significantly higher”.

3.“Bald Hill” is valued at around $240M, yet Galaxy Resources with its “Mt Cattlin” mine is valued at $1B. I believe that these mines will be comparable once the full extent of the “Bald Hill” resource is known & published, hence a re-rate is in order.

4.Bald Hill spodumene with lithium at 6% is of higher quality than most other deposits, making A40 a potential take-over target.

5. A40 is dual listed on the ASX & SGX (Singapore) bourses with higher volumes & equivalent prices in SGX (for the moment).

5.Chilean government has banned any new licences for mining and restricted copper & lithium mining activities due to a shortage of water. This will add constraints in supplying the market & also attract further interests in the safer jurisdiction of Western Australia.

6.Future of lithium & miners look bright as Chinese & European car manufacturers ramp up production of electric cars, buses & energy storage systems. Lithium prices are starting to increase due to the increase in demand and the non-delivery of fresh supplies as so widely quoted by Morgan Stan & Maqbank. All Chinese cars now have a plug (either fully electric or hybrid) which will increase global demand.