The share price of Alliance Mineral Assets closed up 2.7 cents (+15.17%) today at 20.5 cents on the Singapore Exchange after the company reported its Jan 2019 production figures for spodumene concentrate, a source of high lithium content. Below is Canaccord analysts' take:
Excerpts from Canaccord Genuity's report
Bald Hill update - record monthly production
Event: Bald Hill delivers record monthly production; MarQ'19 sales to see substantial QoQ uplift
• A40 (Alliance Mineral Assets) has reported Jan'19 concentrate production of 13.2kt at 6.15% Li2O, a 28% improvement over Dec'18 production.
The result represents a monthly production record for Bald Hill, and represents ~60% of the output for the entire DecQ'18.
• Plant performance continues to show improvement with throughput and feed grades showing QoQ increases.
• 23kt of SC was shipped in early February, with reported revenue expectations (subject to final assay) implying an average price of US$805/t.
A further 30kt is expected to be shipped or ready for shipment during the MarQ. This implies a significant +120% QoQ increase in sales, which assuming a weighted-average price of US$760/t for MarQ, results in cash inflow from spodumene sales exceeding A$50m.
• Tantalum sales for the MarQ to date are expected to be ~40kt, which we estimate could deliver an additional ~A$3m in by product revenue.
• Production guidance for H1'19 has been reiterated at 65-80kt. Assuming Jan'19 production rates are maintained, A40 could achieve the top end of the guidance range(vs CGe CY19 183kt).
|Impact on our view - POSITIVE
• Recent production issues which impacted DecQ'18 output have been addressed, withlower cash costs (lower strip ratio) and increased product sales expected to deliver a much improved cashflow performance in the MarQ.
• This update confirms our view that A40's operating and financial outlook is much better than that interpreted by the market following the DecQ. Should A40 deliver into expectations for the MarQ, this should alleviate recent market concerns and lead to a potential re-rate.
SPECULATIVE BUY and A$0.45 target maintained.