[IMG] This lithium bead stands before production intake and...

This lithium bead stands before production intake and multiplication

http://spekunauten.de/artikel/altur...ht-vor-produktionsaufnahme-und-vervielfachung

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20.06.2017 | Article about Altura Mining (AU000000AJM9) from Turtle
Summary

• Obvious underestimation compared to the competition
• The timetable is: Production in the first quarter of 2018
• Collecting at a favorable level before final capital action possible

assessment

Buy stock as a long-term idea

In specialist circles it is almost certain that the next lithium producer will come from Australia with Altura Mining. Nevertheless, the mining company, which was formerly specialized in coal, is still largely unknown in the lithium sector - although it is predestined for a massive revaluation.

Looking at the current stock market valuation of just over 200 million Australian dollars (AUD), the stock seems to be a bargain. The course is almost 50% below the high of last year. This is likely to change soon.

Altura becomes the cash cow

The start of production is targeted for the first quarter of 2018. So far, the construction of the production facility or mine started in March of this year is progressing according to the schedule.

Https://www.youtube.com/watch?v=SCAQjSfsrzA The construction progress is clear - the concrete bases for the production plant have now been poured

For the duration of the mine life, Altura expects an average EBITDA of 92 million AUD . This estimate is based on a lithium spodumene price of US $ 539 per tonne. From a current point of view, this calculation is unrealistically low, as producing competitors such as Galaxy Resources are collecting USD 830 (USD 1088) for a lower quality product, such as Altura, for 2017. A more appropriate point of reference is the acquisition contract of the upcoming producer Tawana Resources, which is secured by China partners for an equivalent product for 2018 USD 880 per tonne (1160 AUD).

Realistically, Alturas' free cash flow is likely to move at current prices as well as the net profit in the three-digit million range (AUD). For instance, the first-year analysts at Beer & Co. in the Australian mining sector expect full-scale production with a free cash flow of 121 million AUD at a price tag of 725 USD per tonne (950 AUD). Even this calculation corresponds to a 20-percent discount on the current market price.

The following calculation shows the extreme profitability: the cost of delivery including shipping but excluding royalties, interest, depreciation and taxes is 316 AUD per tonne. If these costs are converted to the production of a ton, a production price of approximately 590 AUD (450 USD) is ultimately achieved. With a Spodumene price of 600 USD, this results in a net profit of approximately 45 million AUD. The current market price of $ 900 per tonne would give Altura a profit after taxes, interest and depreciation of more than 130 million AUD.

Top analyst with hammer price target

The fair value of alturas at production intake is seen by Beer & Co. at 0.335 AUD. Compared to the current price (0.135), this corresponds to an upside potential of almost 150 percent. Although the price target is based on the accumulated cash flow over ten years, the lithium prices underlying the calculation are very conservative. The fact is:

The lithium price, measured in the final products lithium carbonate and hydroxide, picked up slightly again in the current year after the rapid price rise in 2015, after stabilizing at a high level in 2016. The scarcity of the producers and the difficulties of their start-up (see Orocobre), coupled with high demand dynamics on the Chinese side due to massive capacity expansion of the battery production there, makes a larger price correction unlikely.

At the same time, Altura is also likely to have exceptionally profitable margins at Spodumen prices, which are significantly below present market prices, as shown above.

Management itself massively invested

The Altura management has approximately 18 per cent of the shares in the company, the top 20 shareholders around 65 per cent. This shows the solid shareholder structure. In addition, the major shareholders invested in coal mining times have enjoyed a reputation as loyal and loyal, not even dividing their shares as the company fell below 1 Australian dollar cents in the reorientation phase 2015. This is hardly surprising, the Altura management belongs to the variety 'under-promise and over-deliver'. The company's chronic reluctance to the capital market is also one of the reasons why the popularity of Alturas is mainly limited to expert circles.

Many good reasons for an investment

Institutional investors paid a public offering 0.20 cents per share in June last year. The placement was often overstated. Among other things, Altura used the money to secure long-lead items of the production plant, which took several months to manufacture. Altura is also a significant step further than the famous 'big brother' and Pilgangoora neighbor Pilbara Minerals, because of the proactive approach. Despite the time lag (construction of the production plant has not yet begun) and just one-third more of the planned production volume for the first three years (with comparable margins), almost three market capitalization (570 million AUD) after the recent capital increase.

Attractive valuation compared to the peer group

Compared to those well known in the lithium sector Pilbara Minerals, Nemaska Lithium, Galaxy Resources and Orocobre, Altura has a far better chance-risk profile. On the one hand, this is illustrated by Alturas' temporal advantage, which is paradoxically reflected in an under-valuation of disallowed value.

With Galaxy Resources, another producer's counterpart, which allows direct comparability. Galaxy has a stock market value of AUD 650 million at an estimated EBITDA of AUD 39 million and a net profit of AUD 17 million for 2017, which is the result of the recent drop of the price from 2.47 to 1.64 AUD. The Brine producer Orocobre, which is also listed as a home exchange in the ASX but active in Argentina, is similarly ambitious. Although Orocobre and Galaxy have significant expansion potentials, the current market capitalization of well over 750 million AUD still seems to be quite good. Net income for the first six months of the current financial year was USD 7.4 million.

If Altura were to enter into these evaluation relations, this would probably be directly linked to a course fire. A sign of Altura's undervaluation is that it did not take part in the recent slump in the lithium sector (Orocobre lost around 10% from 13 to 15 June). The non-existent sales pressure is likely to indicate that the Altura market is currently rated at the minimum.

Clear timetable

For Altura it is now necessary to bring the announced debt financing of approximately 100 million AUD into dry cloths to complete the mine financing. In addition, it is planned to make the previously non-binding off-take agreement with Optimum Nano legally binding. The latter is, however, only a matter of time, since Shaanxi J & R Optimum Energy (USD 3.4 billion market capitalization), which took Optimum Nano a few months ago, rose to Altura's major shareholder at the turn of the year and 20% to Altura hold. Particularly exciting is the fact that Optimum Nano is a company with strong growth intentions.

Conclusion: Currently, the Altura market still seems to be an inexplicable discount. This is probably due to the fact that the scarcely 100 million AUD has to be transferred into dry cloths via debt funding. According to the management, this is to be done by June 30th. A dilution of existing shareholders should be - if at all - to a manageable scale (about 20 million AUD).

In the subsequent months, particularly in autumn, a gradual adjustment of the share price to the fair value is likely. The current course offers mMn an attractive entry level with the chance of a multiplier in a relatively short period of time. One thing is clear: If Altura complies with the timetable up to the time of production, the revaluation of the stock is inevitable in the underlying valuation ratios.