$Alliance Mineral(40F.SI)

The placement to strategic partners is GREAT news:

1. Placement amount of A$32.2m is substantial and allows Alliance to really increase its capacity to explore for reserves, mine more, process faster etc.

2. Ability to attract not 1, but 2 strategic investors to take big stakes is proof of the great potential of Alliance. Note that Alliance is producing 6.2%-6.5% Li2O, the HIGHEST quality of spodumene in the market now. If strategic investors who are in the sector see the potential, we investors ought to follow and ADD!

3. Galaxy. We note that Galaxy already quietly collected a 4.73% stake in Alliance before this placement. After the placement, Galaxy owns 11.8%. As we mentioned before, Galaxy and Alliance are synergistic with each other. Galaxy has the cash (A$400m) but the spodumene quality it produces is inferior at around 5.7% Li2O. I believe Galaxy wants to eventually buy out Alliance. Only then can it have full control of the assets and operations of Alliance. So, becoming the single largest shareholder is just the first step for Galaxy. Like Galaxy Chairman, Mr Martin Rowley, said:

"...... Galaxy recognises that the Bald Hill Mine produces high quality spodumene concentrates and believes that the tenements surrounding existing Bald Hill Mine operations hold SUBSTANTIAL VALUE potential, that may be unlocked through further targeted exploration ...... We look forward to cooperation between the two companies...."

4. Jiangte. An existing off-take partner and substantial shareholder who will increase its shareholdings to 9% after the placement. This further cements the partnership between Alliance and Jiangte. It opens doors to many opportunities in China, via Jiangte's contacts. The recent Hydroxide JV with Jiangte (which should be signed into agreement in coming weeks and operations start end of the year) is very good news which investors so far have not really understood. Such partnerships, moving slightly down the supply chain, are coveted by miners all over. Furthermore, it allows Alliance to participate in profit sharing without having to invest a single cent and the hydroxide processing plant has already been built by Jiangte!

With the entry of these strategic partners giving Alliance a huge endorsement, and with their cashflows secured, Alliance can concentrate on executing their exploration, mining and production in coming months..........

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17 likes
15 comments
jeromeesng

Awwww, why they never go 0.2 today

losemoneyinvestor

But timing isn't the best. When it's traded at higher valuation there's no fund raising to capitalise on less dilutive equity placement. However that's before the merger of Tawana.

EngKia

Very good news. Huat ah

shirleytoong

Reply to @EngKia : Indeed very hood news
Very strong on the 4th point with the Chinese side

wonderland

May cross 0.20 soon after all contra players sell out.

YNWA

Buy out Alliance? sweetest words of all.

GrowthMaster

Hope to break 20 cents in SGX today :)

Sweeswee

ASX side now trading at A$0.215 bid (+7.5%).
High for the day so far is A$0.23.
Last year in the run up above S$0.40, Singapore side was the leader while ASX side lagged.
Lately, ASX side has been the leader.
I think its about time Singapore side closes the "discount gap"!

shirleytoong

Reply to @Sweeswee : I agree with you should be in tandem with Aussie market,
A lot of buyers in the range of 198--- 20

EngKia

Great news Huat Ah.

EngKia

Reply to @lynlynnakamori : Retail investors counters with good business objectives, what counters are they?

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christophertan0

I only have 2 words - Huat ah!


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The result was disappointing but not all bad.
Don’t just look at 1 number.

Consider also that Alliance has just emerged from a merger, changed management, just started ramp up of operations and shipments in the last 2 quarters.
Operationally, they have been very fast to progress from zero to A$47m in revenue in 6 months!

I shall compare its Q3FY19 and Q2FY19 result.
In my opinion, there are some good and bad points.

GOOD:
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2. In Q3FY19, there was no more big expenses related to the merger. “Acquisition costs” and “Write-off expense” totalling -A$34m in Q2FY19 have proven to be just one-off.

3. Revenue jumped +240% from A$14m to A$47.8m on the back of record shipment. Q3FY19 was the “take-off” quarter, which will lay the groundwork for further growth in production and shipment in the coming quarters.

BAD:
1. Very high COGS. This was the spoiler to its result. A component of COGS, Operational Expenditure, was -A$47.7m, too high. Although production cash cost has reportedly come down by 33% to A$772 per wmt, it still needs to be lower. The company had earlier said production cash cost would continue to be lower in the current quarter.

Also, part of the Operational Expenditure was due to some purchase price accounting adjustments related to the merger. It seems that there are still some legacy issues that need to be expensed off. It would be good if the company can further break down the components of “Operational Expenditure” for us to determine which items are one-off and which are recurring.

2. The company shipped 25,230Lbs of Tantalum to gain credits worth +A$3.2m in Q3FY19. Some people had expected them to ship around 35,000Lbs of Tantalum. Since the company is producing about 35,000Lbs of Tantalum per quarter, it is hoped they will ship around this amount this quarter to get more credits.

As we know, result belongs to the past. Sometimes, from that, we can forecast the future. Stock price movements reflect the future.

THE FUTURE:
1. Currently, Alliance is relying only on 1 off-take agreement. With their production level, they ought to win another off-take agreement. Indeed, the company has shipped a trial parcel to a non-Chinese North Asian customer. It is likely to be one of the Korean giants (Samsung SDI, LG Chemical or POSCO). CEO Calderwood said in an interview report today that off-take negotiations for its unallocated production were “well advanced”. I believe such an agreement can come within the next few weeks. In fact, he mentioned “non-Chinese parties”, implying there were more than 1. This will be very positive immediately, when it comes.

2. The Lithium Hydroxide downstream JV with Jiangte announced recently was actually a very good move. A formal agreement will likely be signed in this quarter and that JV can contribute revenue from the beginning of next year. It could also create more demand for the spodumene it produces.

3. The latest exploration results of its big 60,000m drilling program look very good. Within the next 3 months, they will likely know if they have found more proven reserves. If they do, valuation is likely to shoot up.

The immediate reaction to the result will likely be a knee-jerk selling. But whether this will lead the price down the drain, or it attracts bargain hunters to buy on dips for the future, we have to see.

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1. It is great news that the recent exploration drilling has yielded a potential for 17-24mt of resources, to add to the existing 13.5mt. More than double, maybe almost triple its current!

2. Alliance only completed the merger exercise a few months ago. It has also changed its top management. CEO Mark Calderwood is an industry expert in exploration (I have verified that with channel checks). Operations Director Mark Turner is an expert in running mining operations and processing plants. So the combination of these 2 experts has greatly enhanced the execution capabilities of Alliance.

3. Alliance owns the entire Bald Hill project, which is about the size of Singapore!! So far, the company has only been mining a tiny area (maybe the size of Gardens By The Bay). The proven resources are about 13.5mt now. When it explores more areas and successfully discovered new resources, the value of the company shoots up and it becomes an even more attractive takeover target from bigger miners and downstream players.

4. Many other junior miners spend a long time exploring and mining big areas, building the processing plant, before they can sell and ship out products. But Alliance has achieved that in very quick time! It mines a small area first, quickly refurbish an existing plant and make it operational, then start selling immediately. That's why it is able to achieve a strong Q1 2019 operational performance and cashflows. This is thanks to the expertise of Mark Turner.

We are in good management hands. They have only been really on the job for a few months and the results are showing already!

That's why I always say: THIS IS ONLY THE BEGINNING !!

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