Singapore-listed miner Alliance Mineral Assets could be set to ride a boom in lithium concentrate, a key rechargable battery component.
Alliance, together with joint venture partner Tawana, has secured A$25 million (S$26 million) in advance payments from Hong Kong-listed Burwill in exchange for exclusive selling rights to the lithium concentrate from its mine in Western Australia.
"This is the biggest milestone the company has made, from a story to a real project," Alliance Mineral chief executive Tjandra Pramoko said of the signing of the deal.
If all goes according to plan, the company will see its first revenue from lithium production roll in before its first shipment leaves the port in February next year.
The Burwill deal is over lithium concentrate from Australia's Bald Hill mine, in which Alliance Mineral and Australian-listed Tawana each have a 50 per cent interest.
Lithium has become one of the hottest metals in recent years, owing to rising demand for rechargeable lithium-ion batteries in hybrid and electric cars. The scarcity of lithium resources has helped the firm negotiate very favourable terms with Burwill, Mr Pramoko told The Straits Times yesterday.
For two years from next February, Burwill has agreed to buy at least 200,000 dry metric tonnes of high- grade lithium concentrate from the Bald Hill mine at US$880 per tonne. The price is subject to an increase or decrease of US$15 per tonne depending on variations in quality.
Lithium concentrate pricing is an opaque market, so prices tend to be fixed on a willing buyer and willing seller basis as there is no proper benchmark to track.
The average cost of production in Australia is A$400 to A$450 a tonne, but in Bald Hill's case, the revenue from tantalum - another mineral it mines there - alone can cover for the lithium production, Mr Pramoko said.
Although Alliance Mineral has held the mining concession since 2014, it stopped production after selling its last tantalum shipment in February last year as the tantalum market then was bad.
But Mr Pramoko plans to start tantalum mining again in August to get the cashflow running, and expects to re-engage Mitsubishi as sole customer. He said: "They are going to sign a contract with me very soon."
Another condition of the Burwill deal is that Tawana must have earned its 50 per cent interest in Bald Hill. Mr Pramoko explained: "They have to fulfil a 50 per cent earn-in, in other words, they would have to spend at least A$15 million on the project. With the A$25 million we already have from Burwill, that's A$40 million in the kitty."
Tawana is now raising money through a share placement to fund the earn-in.
For now, Mr Pramoko cannot say how much lithium there is in Bald Hill, as Singapore rules require the numbers to be verified by an independent valuer. A report meeting a key official standard is expected to be completed by the end of July.