A Glimpse At Mining Player, Pure Alumina

Pure Alumina Limited (ASX:PUA), formerly known as Hill End Gold Limited, is a Sydney-based company engaged in the production of high purity alumina and gold in Australia. It wholly owns the high-grade kaolin deposit at Yendon near Ballarat, Victoria and has also developed a hydrochloric acid-based process to extract alumina, purify it, and convert it to high purity alumina.

As of date, Pure Alumina has a market capitalisation of AUD 6.33 million, with approximately 171.09 million outstanding shares. At the time of trading on Tuesday, March 12^th, 2019 (1:40 PM AEST), the PUA stock price was trending at AUD 0.035, down 5.405%, indicating an intra-day loss of AUD 0.002 and 65k volume of shares traded.Â

Recently on February 28^th, 2019, the company announced to have granted further time, to secure funding, to the several bidders, that have submitted offers to buy the Hill End gold assets in central New South Wales, which were put up for sale following the Company’s decision to solely focus on high purity alumina. Meanwhile, the currently trending strong gold price has lured more interest in these assets and thus, Pure Alumina has re-opened the data room.

Earlier in the same month, the company informed of the progress in its ongoing negotiations to acquire Toronto, Canada-based Polar Sapphire, a global high purity alumina producer with agreement reached on a majority of terms. Currently, due diligence is taking place along with the negotiations in an effort to expedite the transaction. The technical due diligence is being conducted by Primero Group Ltd. (ASX:PGX), a specialist in hydromet processes; the accounting and governance due diligence is being undertaken by the Pure Alumina CFO and company secretarial team; and lastly the legal due diligence is assigned to be carried out by Canadian legal firms specialising in corporate and IP law.

The non-binding term sheet which contemplates exclusive negotiation of terms for the acquisition of 100% of Polar Sapphire, was signed back in December 2018, where in both parties committed to work towards agreeing formal terms for a potential transaction. Polar’s production processes have low working capital requirements and the estimated cost of constructing a 1,000 tpa HPA plant is circa AUD 12 million.

For the half-year ended December 31^st, 2018, the company recorded loss after providing for income tax at $ 4.38 million, although this is a dip from $1.17 million recorded as on December 31^st, 2017. The loss is mainly attributable to an impairment loss of $ 3 million (December 31^st, 2017: $Nil) recognised in relation to the consolidated entity's gold assets being held for sale.

The net assets of the consolidated entity stood at $ 2.78 million, as at 31 December 2018. Besides, the working capital position of the consolidated entity, including the value of held for sale gold assets, resulted in an excess of current assets over current liabilities of $ 6.64 million.

During the half-year, Pure Alumina commenced the Definitive Feasibility Study (DFS) of the Yendon high purity alumina Project following the robust technical and financial outcomes of the pre-feasibility study in June 2018. As an R&D tax incentive, the company received approximately $ 488k in January 2019, to maintain an acceptable cash position.

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