Altura Mining Limited: AJM/AJMOA The underlying value of AJM has still not yet been recognized by the markets however with news due on several fronts that could be about to change. As mentioned in a previous weekly update, the company has a suite of impressive projects including 30% of the Mt Webber Iron Ore project which I have valued at $200m on a DCF basis. Altura's JV partner, Atlas Iron Limited, has been managing a drilling program since early March with the objective of upgrading the JORC category of the current DSO resources with a large proportion expected to be converted to indicated and measured status. Diamond drilling is also being undertaken for metallurgical studies, bulk density measurements and geotechnical data. Results are due early in the current quarter. I have calculated the value of the Mt Webber project at $0.44 per AJM share (fully diluted) based on DCF modeling at a discount rate of 10%.
The MD has again been up in Indonesia recently most likely trying to get final permitting approvals for the development of the company's Tabalong Coal Project in Indonesia (DCF valuation of $37m or $0.08 per share). It is also a known fact that AJM is keen to secure new coal projects in Indonesia which is another possible reason for his visit.
The company's drilling business continues to generates free cash at a rate of greater than US$2m per year. Cash reserves are likely to be in the vicinity of $12.8m at the end of March 2011 which excludes the exercise of AJMOA options that could bring in another $19.5m by September. These funds could be used to fund a portion of the company's share of development costs at Mt Webber assuming Atlas don't attempt to buy out the entire project by offering an up front payment to Altura. News Due: Receipt of final permits giving the company the go ahead to develop the Tabalong Coal Project in Indonesia. News on the acquisition of new coal projects in Indonesia and the Philippines. Drilling results from the Mt Webber DSO project. Further drilling results from the Pilgangoora Lithium Project where drilling is underway. Updated development schedule for the Mt Webber DSO project which currently has a start up target of 2012. Price Target: A break above 15.5 cents should lead to a move back to the 16.5-18.5 cent range where there is a fair amount of resistance on the chart. Once 18.5 cents is broken I expect a swift move back into the 20's. Disclosure: Holding AJM
AJM Price at posting:
15.0¢ Sentiment: Buy Disclosure: Held
