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..........