Alliance Mineral CEO: Better terms in latest agreement with Burwill

Catalist-lilsted Alliance Mineral Assets Ltd got much better terms in its recently concluded renegotiations with Burwill Commodity which is also funding and taking an equity stake in the lithium mining company in Western Australian, said its CEO.

The company got more "lenient" terms from Burwill in the commercial re-negotiation, said Tjandra Pramoko, Alliance Mineral chief executive who flew to Singapore to speak to The Business Times on Monday.

Last week, Alliance Mineral said that it was placing A$19.575 million (S$20.8 million) of shares to Burwill Commodity as its auditor flagged uncertainty about its ability to operate as a going concern if it were unable to raise more funds.

The auditor, Ernst & Young, noted that the firm incurred a loss after tax of US$4.8 million for the past financial year, and experienced net cash outflows from operating activities of US$1.91 million. It had cash and restricted cash of US$9.08 million as at Sept 28.

The company's cashflow forecast reflects that it will need to raise additional funds for the quarter ending on Dec 31 to meet its committed and planned capital spending for the Bald Hill project as well as for ongoing working capital needs, said EY.

"In Australia, when you do mining, going concern is very common, because mining is based on time and funding," he said.

"You always have to raise money, it is the management that doesn't want to dilute shareholders, so you only raise what you need to use in the mining project."

Burwill will hold about 13.4 per cent in Alliance Mineral following the share placement.

With the injection from Burwill, the company will be "fully funded," he said.

In fact, since Alliance Mineral's IPO in 2014, it has had three going concern notices - the first was at its listing, he said.

On last week's re-negotiations, he said some observers did not seem to understand the outcome. "We got less stringent delivery terms . . . of an additional one month grace," he said.

The original agreement with Hong Kong-listed Burwill stipulated a A$3 million penalty if Alliance Mineral did not deliver the lithium within two months starting March 2018 under an offtake agreement.

Mr Tjandra said this means that in the new deal, it can deliver as late as May and not worry about the penalty.

In addition, Burwill agreed to take lower grade 4.5 per cent lithium concentrate from the previous minimum 5.5 per cent concentrate.

"The new offtake agreement is much more lenient, much more favourable to AMA," he said. "And in addition, AMA has secured the strategic investor (Burwill) to fully fund production," he said.

Just as important, Burwill also agreed to increase the amount it will buy to between 70,000 and 75,000 tonnes in 2018, and 80,000 and 85,000 tonnes in 2019, at the same price of US$880 per tonne. In the previous agreement, it was 40,000 tonnes in 2018 and and 60,000 tonnes in 2019.

The current price of lithium of about US$880 per tonne is the highest ever - it was around US$400 per tonne last year, he said.

The increase in offtake means Alliance Mineral will be getting US$132 million to US$140 million, up from US$88 million previously, said Mr Pramoko.

The re-negotiations took place following a roadshow that Mr Pramoko held in China where he met downstream companies, car and battery manufacturers, a Japanese counterparty and a private equity fund, he said.

"Bankers told me it will take three months to raise money; but the negotiations only took about one week." he said.

Alliance Mineral share price next year should should rise to S$1 per share, he said, as its nearest competitor Australian-listed Galaxy Resources is a A$1.2 billion company.

On Monday, Alliance Mineral closed at S$0.325, up four cents, giving it a market capitalisation of S$156.2 million.

Siow Li Sen

10 October 2017