AUZ Details
Commencement of demonstration-size processing plant:Australian Mines Limited (ASX: AUZ)announced the construction of a $2 million demonstration-size high-pressure acid leach and solvent extraction (cobalt-nickel-scandium processing) plant in Perth, Western Australia, which will produce commercial grade, saleable cobalt, nickel and scandium products from November 2017. The plant is capable of processing over 15 tonnes of ore per week and deliver 67 kilograms of cobalt sulphate, 500 kilograms of nickel sulphate and 8 kilograms of scandium oxide each week. Importantly, it will become one of the only emerging cobalt companies in Australia producing cobalt sulphate and nickel sulphate products for potential off-take with 54,500 tones of cobalt resource. Notably, it has the potential to produce those commodities that constitute 95% of the raw materials in a Tesla Model-S battery pack cathode (80% nickel, 15% cobalt) and 100% of the iPhone battery cathode made exclusively from cobalt.
 
Commencement of resource extension drilling program at the Flemington project:AUZ has commenced 185-hole drill program at the Flemington Cobalt-Scandium-Nickel Project in New South Wales. It has been considered as a world class asset capable of producing cobalt sulphate and high quality scandium oxide and is expected to generate after-tax cash flow of A$677 million over the first 18 years of the project’s life with operating life of 45 years. The current resource drilling program proffers another major opportunity for the company to become one of the world’s largest suppliers of scandium and a significant supplier of cobalt and nickel to the rapidly growing electric vehicle and technology metal sectors. Moreover, the discussions are going-on with several potential customers and partners across Europe, Asia and the Middle East. Current demand for Scandium extends across multiple civilian and military applications, including, automotive and aircraft manufacturing, solid oxide fuel cells and lightweight, high-strength sporting equipment. Importantly, annual demand for Scandium is anticipated to increase at least 800% over the next decade primarily driven by the automotive manufacturing sector. Recently, the group acquired 100% interest in Exploration Licenses 8477 and 8478 from Dashell Pty Ltd. for a total consideration of $78,000 by issuing 9,750,000 fully paid ordinary shares in Australian Mines at an issue price of $0.008. This acquisition has significantly increased its potential scandium and cobalt ground-holding in New South Wales as it is surrounding the group’s existing Flemington Scandium-Cobalt Project.
 

Project Tenement Map (Source: Company Reports)
 
During, H1FY17, AUZ reported other income of $5,723 against $230 in H1FY16, while posting a loss after tax of $737,808 compared to $717,509 in H1FY16. For Q3FY17, AUZ’s cash flows from operating activities entailed an outflow of $525,856, whereas it was $2,696,669 for 9MFY17. Further, it has raised $3,804,309 by issuing convertible notes, $2 million by entitlement offer and held a cash of $5,168,470 as on March 31, 2017.
 
Recommendation:The stock has moved up 27.55% over last six months, however it declined about 8% over the past one month (as at May 15, 2017) owing to commodity price movements, some concerns on project commencements and financial position with accumulated losses on balance sheet. Given the financial position of the company, funding requirements and potential yet to be proved,we give an “Expensive” recommendation on the stock at the current market price of $ 0.012
 
 
AUZ Daily Chart (Source: Thomson Reuters)

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