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Research: Metals & Mining
Alphamin’s team developed the high-grade Mpama North tin project from resource to production in under five years. Now a mid-tier producer mining c 4% of the world’s tin in the lowest cost quartile of the global cost curve, Q3 results showed a 24% increase in EBITDA to US$16.1m cf Q220.
Alphamin Resources |
New tin producer generating cash flow
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Metals & mining |
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24 November 2020 |
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Alphamin’s team developed the high-grade Mpama North tin project from resource to production in under five years. Now a mid-tier producer mining c 4% of the world’s tin in the lowest cost quartile of the global cost curve, Q3 results showed a 24% increase in EBITDA to US$16.1m cf Q220.
High-grade, simple mining with simple processing
Alphamin mines the world’s highest-grade tin resource, in the form of cassiterite, one of the densest minerals on earth, making it amenable to (non-energy intensive) gravity separation to produce a 60% concentrate, which Alphamin then sells at the mine gate to a dedicated off-taker. The mine is underground, fully mechanised, trackless, simple, shallow and ostensibly self-reliant with a small mining fleet and its own power and road infrastructure. As such, it is firmly established in the lowest-cost quartile of the global cost curve and enjoys relatively wide margins (eg Mpama North’s AISC was US$10,777/t in Q320, cf a prevailing tin price of US$18,640/t). Currently on a growth drive, each incremental ton of tin may be produced at an even lower AISC, to which end Alphamin is de-bottlenecking its plant (which should increase throughput by c 10%) at the same time as it is installing a fine tin recovery plant (which should increase production by a further 10%) by mid-2021. Concurrently, the same Alphamin team is allocating capital to drill and extend the size of the current orebody as well as drilling the known Mpama South orebody just 800m away from the existing processing plant. It is also aiming to allocate capital in search of a third orebody on its highly prospective licence area.
North Kivu operating environment
Such security problems as attract the attention of western headline writers in North Kivu are typically isolated, targeted and tribal in nature and affect Alphamin to a relatively small degree. Moreover, Mpama North’s isolated location offers it additional protection away from flashpoints, while its primary product (tin) renders it of little interest to either local artisanal miners or conflict mineral smugglers.
The tin market
In the medium to long term, tin is one of the metals expected to benefit most from the electric vehicle revolution. In the short term, Alphamin is well placed to substitute declining concentrate supplies from Myanmar to China (which produces c 50% of the world’s tin), which is reported to have fallen by c 30% in recent months as immediately accessible ore from unregulated mines has been exhausted. In the meantime, AFM is trading at a price 7.4x Q3 pre-financing (annualised) cash flows (excluding net interest).
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Historical financials
Source: Company sources |
Alphamin Resources is a client of Edison Investment Research Limited
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Research: Consumer
Treatt has performed well during FY20 despite the pandemic. There was strong momentum across the tea, health & wellness, and fruit & vegetables categories, and citrus markets recovered as expected. The strong growth across the non-citrus segments is resulting in a slightly reduced dependence on citrus (now 50% of sales). The UK relocation was slowed down as a result of the first lockdown, but the building work is now complete and the move will begin in mid-2021. While management report a strong start to the new financial year, the outlook is understandably uncertain: demand is not expected to return to normal levels before the end of FY21 or into FY22, though management is confident the business is in the best possible shape to face the uncertainty. The FY20 results demonstrate this, with a good cash performance and a 9% increase in dividends implying management’s confidence in the year ahead.
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