People

Having a blast of a time in mining business

Mr Pramoko says he loves what he is doing. Over the past two decades, the industry veteran has gone from quarrying to mining gemstones and, finally, tantalum and lithium.
Mr Pramoko says he loves what he is doing. Over the past two decades, the industry veteran has gone from quarrying to mining gemstones and, finally, tantalum and lithium. PHOTO: SINGAPORE EXCHANGE

CEO of Alliance Mineral Assets on his start and how an early blow turned into a blessing

Mr Tjandra Pramoko, the chief executive officer of Singapore Exchange-listed Alliance Mineral Assets, enjoys getting his hands dirty. Over the past two decades, the industry veteran has gone from quarrying - producing granite and marble for the building and construction industry - to mining gemstones and, finally, tantalum and lithium which are used in electronic components, cellphone batteries and electric vehicles.

"Mining is my passion - I've been dealing with stones most of my life, and I love what I do," said the business graduate from Edith Cowan University in Western Australia.

After university, he began helping out in the family business. "My father built one of the largest businesses in the stone industry during the early 90s by mining in Indonesia, and supplying the finished product in the form of marble and granite to the building and construction industry in Australia," he said.

In early 2000, just before Australia's mining boom started, prospects were bright and exploration grounds plentiful. "With my economics background and construction industry experience, I was confident of venturing into mining. Our first foray involved buying a few mining sites and selling them to a major iron ore producer."

Mr Pramoko kept acquiring mining assets and licences, and bought the Bald Hill site in Western Australia in 2009. With his wife, Simone Suen, he founded Alliance Mineral Assets in 2010 to explore and mine Bald Hill. 

Ms Suen was named Alliance executive director in 2010. In June 2014, Mr Pramoko, then a consultant of the company, was appointed its CEO. In July that year, Alliance was listed on SGX's Catalist board.

QUITE A FEAT

In a way, we can pat ourselves on the back, because we've built something of significant potential with very little money. In the mining game, being able to produce this grade of lithium with this size of investment is a feat in itself.

MR TJANDRA PRAMOKO, chief executive officer of Alliance Mineral Assets.

TESTED TO THE LIMIT

The Bald Hill project covers 59,000ha, an area slightly smaller than Singapore. Exploration began in the 1960s, and mining has been going on since the 1970s. The project, which includes four mining leases, eight prospecting licences and eight exploration licences, started off by mining tantalum.

Tantalum is a rare, corrosion-resistant metal used in automotive electronics, cellphones, computers and surgical instruments. Australia is the second-largest global resource for the hard, blue-grey metal, which is considered a conflict mineral.

More than a year after its listing, Alliance, which secured an offtake agreement with Mitsubishi Corporation RtM Japan, began producing tantalum. Shortly after, prices of the metal - hovering around US$85 (S$119) per pound - started falling.

"We delivered our first shipment of tantalum in December 2015, and by February 2016, prices were tanking. By April, they had collapsed to US$55 per pound, and went as low as US$50," Mr Pramoko recalled.

At those levels, the project could barely break even. "So, we made the difficult decision to stop our operations." It was a big blow that later turned out to be a blessing. 

"We were tested, very tested," he said. "But we continued to hope, because we knew our ore deposits were the best in the area."

The couple went back to the drawing board. They sifted through old exploration data, mostly hand- drawn geological reports, of the site to see if they could find higher-grade tantalum deposits to boost their economics of production. They carried out further metallurgical tests on by-products "to see if we had missed anything".

They hit the jackpot. Studies showed Bald Hill's most significant by-product was a 6.73 per cent lithium oxide spodumene concentrate.

Lithium belongs to the group of alkali metals - the lightest of all metals and the least dense solid element. Demand for the soft, silvery white metal is driven by lithium- ion batteries used in electronic vehicles, energy storage systems and cellphones.

Spodumene is a lithium-bearing, aluminium silicate mineral occurring mostly in lithium-rich pegmatites, or granite-like igneous rock. Spodumene concentrate is converted to lithium carbonate through thermal processing and leaching.  

"Initially, we couldn't believe the results - how much lithium there was, and how high its quality was. A grade of 5.5 per cent is commonly sold in the market, while 6 per cent is considered premium. But we can produce 6.7 per cent!" he said.

"If tantalum prices had not collapsed, we would not have found what we had. It was a learning curve we were meant to go through, and we're very blessed that we got the right address."

TURNAROUND STORY

The change in Alliance's fortunes has drawn significant investor attention. Last June, Lithco 2 - a unit of Australia's Tawana Resources - agreed to partner Alliance to explore and exploit minerals at Bald Hill, contributing A$20 million (S$21 million) to earn its 50 per cent share of the joint venture. 

This comprises a minimum A$7.5 million on exploration, evaluation and feasibility by end-2017, as well as A$12.5 million for upgrading and converting the plant to process ore from the project by end-2019. Tawana's partnership also provides expert knowledge through its managing director Mark Calderwood.

The firm also successfully placed out 83.5 million new shares at six Singapore cents each to institutional investors, raising S$5 million.

Alliance has a market capitalisation of more than S$130 million. Its shares have tripled so far this year, surging 197 per cent by March 22 to 27 Singapore cents, its highest in nearly 21/2 years. This level is still 26 per cent below the all-time high of 36.5 cents reached on its July 25, 2014 trading debut.

The company has yet to report revenue from production. Between the financial years ended June 30, 2014 and 2016, it averaged an annual net loss of A$7.1 million.

For the second quarter ended Dec 31, it reported an after-tax loss of A$989,360, compared with a net loss of A$678,245 a year earlier. Cash and cash equivalents stood at A$3.3 million as at Dec 31, from A$5.4 million as at June 30.

Meanwhile, drilling work to test for lithium at Bald Hill is nearly complete, with the resource estimate likely to be released by early next month. The feasibility study is due be completed in five weeks, and Alliance aims to award engineering, procurement and construction contracts for mine infrastructure in the same time frame. Production is set to commence before year-end.

It will also finalise offtake agreements with potential partners and review pre-payment and other financing opportunities.

"Comparatively, there are fewer big players in hard-rock lithium, so when we start production later this year, we will be Australia's fourth producer, and the only one on SGX," Mr Pramoko noted. "Once we become No. 4, we will be catapulted onto the world stage." 

Over 80 per cent of global lithium supply comes from four major producers - Australia's Talison Lithium, Chile's SQM Lithium, as well as Albemarle Corp and FMC Corp, both US chemical companies.

Last year's tight lithium market is expected to extend into this year, further boosting prices, Canaccord Genuity said in a recent report.

As a result, the research firm has raised its near-term projections - forecasting lithium carbonate prices of US$12,000 per tonne this year, up 60 per cent year-on-year, and US$9,243 a tonne next year, up 32 per cent year-over-year. For spodumene concentrate, it expects prices to rise 67 per cent year-on-year to US$904 per tonne, and 55 per cent to US$745 a tonne, for 2017 and 2018, respectively.

The next few years will be an opportune time for Alliance to ride the uptrend in lithium prices.

One way to weather price cycles in the mining industry is to establish strong customer relationships. "Once you have an established product, most Chinese and Japanese offtakers are focused on securing the supply," Mr Pramoko said.

Another avenue of diversification is finding new customers. "We will conduct a feasibility study to determine if our lithium is suitable for the ceramic and glass industry. Using lithium in cookware makes it more stable, so it doesn't crack or shatter under high temperatures."

The upside for Bald Hill is also substantial, due to the size of its tenement holdings, with Alliance mining only 500 ha.

Looking back over the past seven years, Mr Pramoko said: "In a way, we can pat ourselves on the back, because we've built something of significant potential with very little money. In the mining game, being able to produce this grade of lithium with this size of investment is a feat in itself."

Recognition of the project's value is growing. "In Australia, everyone is talking about Alliance. Other companies are saying, 'We're mining next to Bald Hill', and we're being quoted as the go-to address for lithium," he smiled.

There, however, remains a potential spanner in the works - government regulation and bureaucracy. "Getting all the relevant licences and approvals in Australia can be an unpredictable process, and timelines can easily blow out."

• This is an excerpt from the Singapore Exchange's "kopi-C: the Company brew" column that features C-level executives of firms listed on SGX. A longer version can be found on SGX's My Gateway website.

A version of this article appeared in the print edition of The Straits Times on March 27, 2017, with the headline 'Having a blast of a time in mining business'. Print Edition | Subscribe