Excerpts from Canaccord Genuity's report
Analysts: Reg Spencer & Larry Hill
MarQ production update - strong performance at Bald Hill
Event: MarQ'19 production update
• A40 reported MarQ spodumene concentrate production of 38kt, slightly ahead of CGe of 35kt. No detailed production statistics were reported, but we note management commentary that grades, throughput and recoveries were up QOQ.
Importantly, concentrate specifications continue to impress with grades of 6.1% Li20 and continued low impurities.
“Upcoming potential catalysts are expected to include finalisation of remaining offtake, potential reserve upgrades from resource drilling programs, and completion of the plant optimisation at Bald Hill in DecQ'19”
• Sales for the MarQ came in at 44kt, ahead of CGe of 42.5kt. Volumes reflected an expected reduction in concentrate inventory levels from the DecQ (18.8kt).
Tantalum by-product sales were also slightly above expectations at 39,000 lbs.
• Shipments were delivered to the company's offtake partner, Jiangxi Bao Jiang Lithium Industrial, with a trial parcel delivered to a new customer.
A40 has noted that it expected to select its preferred customers for the remaining uncommitted offtake in the coming months.
• H1CY19 guidance was reiterated at 65-80kt concentrate (vs prior CGe 79kt).
|Impact on our view:
• No detailed production data was reported but we are encouraged by management commentary around continued improvement in plant performance. Operating margins should remain impacted to a degree by strip ratios.
However, looking ahead, we expect the strip to fall over the course of 2019, with cash flow further boosted by improved concentrate volumes.
We further note that residual material under 2018 pricing was delivered in the MarQ, resulting in an estimated average price received of US$765/t.
• Upcoming potential catalysts are expected to include finalisation of remaining offtake, potential reserve upgrades from resource drilling programs, and completion of the plant optimisation at Bald Hill in DecQ'19 (which we estimate will lift annual production from 155ktpa to +220ktpa). Maintain SPEC BUY.
Alliance Mineral Assets Ltd (ASX:A40) MD Mark Calderwood: