Alphamin Resources — Underlying results exceed prior forecasts

Alphamin Resources (CN: AFM)

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Last close As at 25/01/2023

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Research: Metals & Mining

Alphamin Resources — Underlying results exceed prior forecasts

Alphamin’s Q321 financial results were very close to our prior expectations (see Exhibit 2), with the exception of a warrant charge of US$4.1m and a deferred tax charge of US$5.1m (both of which we habitually decline to forecast on a quarterly basis on account of their inherent unpredictability). Excluding these two factors, earnings attributable to shareholders would otherwise have been 5.3%, or US$1.5m better than our prior forecasts, at US$30.1m, or 2.53 US cents per share.

Lord Ashbourne

Written by

Lord Ashbourne

Director, Energy & Resources

Metals & Mining

Alphamin Resources

Underlying results exceed prior forecasts

Q321 results analysis & exploration update

Metals & mining

6 December 2021

Price

C$0.95

Market cap

C$1,134m

C$1.2750/US$

Net cash (US$m) at end-September 2021, including US$3.5m in lease liabilities and US$1.7m in unamortised fees.

1.0

Shares in issue

1,193.9m

Free float

42%

Code

AFM

Primary exchange

TSX-V

Secondary exchange

JSE AltX

Share price performance

%

1m

3m

12m

Abs

(1.1)

16.3

238.2

Rel (local)

2.0

17.3

185.2

52-week high/low

C$1.06

C$0.28

Business description

Alphamin owns (84.14%) and operates the Bisie tin mine at Mpama North in the North Kivu province of the Democratic Republic of the Congo with a grade of c 4.5% Sn (the world’s highest). Accounting for c 4% of mined supply, it is the second largest tin mine in the world outside China and Indonesia.

Next events

Mpama South resource

Year-end 2021

Q421/FY21 results

March 2022

Q121 results

May 2022

Analyst

Charles Gibson

+44 (0)20 3077 5724

Alphamin Resources is a research client of Edison Investment Research Limited

Alphamin’s Q321 financial results were very close to our prior expectations (see Exhibit 2), with the exception of a warrant charge of US$4.1m and a deferred tax charge of US$5.1m (both of which we habitually decline to forecast on a quarterly basis on account of their inherent unpredictability). Excluding these two factors, earnings attributable to shareholders would otherwise have been 5.3%, or US$1.5m better than our prior forecasts, at US$30.1m, or 2.53 US cents per share.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(US$)

DPS
(US$)

P/E
(x)

Yield
(%)

12/19

27

(3)

0.01

0.00

126.3

N/A

12/20

187

(1)

(0.01)

0.00

N/A

N/A

12/21e

341

135

0.06

0.00

12.4

N/A

12/22e

265

90

0.05

0.00

15.7

N/A

Note: *PBT and EPS are as reported.

Operations returning to normal

Alphamin’s operational performance was achieved by significantly improved underground mining practices since mid-July 2021, which resulted in plant throughput increasing by 3.4% q-o-q and the processed tin grade increasing by 9.4%, while at the same time the tin price achieved rose 19.6% q-o-q. Note: by the start of Q322, Alphamin forecasts that the tin grade processed will have recovered by a further 17.6%, from 3.4% to 4.0%.

Net debt extinguished, net cash achieved

As previously predicted, Alphamin’s net debt (including lease liabilities and unamortised fees) declined by 103.5% (or US$30.5m) during the quarter, from a net debt position of US$29.5m to a net cash position of US$1.0m. This performance followed declines of US$17.0m and US$11.0m in Q221 and Q121, respectively. In the light of this development, the company’s board is in the process of devising a strategy to balance capital allocations between ongoing exploration drilling, the potential fast-track development of the Mpama South deposit and shareholder distributions.

Valuation: Reflecting the tin price but not blue sky

Our valuation of Alphamin is under review pending a reconsideration of our long-term tin price. Assuming that the current three-month price of tin (US$39,020/t cf US$33,863/t in Q321) prevails for the remainder of Bisie’s life however (ie adopting the current tin price as our long-term price), we calculate a valuation for Alphamin (excluding any blue-sky exploration potential) of 86.1 US cents, or 109.7 Canadian cents, per share. However, this rises to potentially as high as US$1.92/share (C$2.41/share) in the event that management is successful in its exploration strategy to the extent that it replenishes reserves and resources and keeps its plant at full capacity beyond FY27. Note that, within this context, recent exploration activity has both narrowed the gap between Mpama North and Mpama South and substantially increased the zone of high-grade mineralisation at Mpama South leading to the possibility of an expedited development strategy (see page 7).

Q321 results analysis

Alphamin’s Q321 financial results were released in the context of known operating results, which were announced on 4 October and are summarised in the table below relative to prior quarters.

Exhibit 1: Alphamin operating results, Q419–Q221

Q120

Q220

Q320

Q420

Q121

Q221

Q321

Change*
(%)

Tons processed

85,060

91,928

96,086

93,560

93,997

105,294

108,901

+3.4

Tin grade (%)

3.5

4.3

3.8

4.2

3.8

3.2

3.5

+9.4

Contained tin (t)

2,977

3,953

3,651

3,930

3,572

3,369

3,812

+13.1

Overall plant recovery (%)

71

69

71

74

74

72

75.2

+4.2

Actual payable tin produced (t)

2,119

2,739

2,563

2,898

2,611

2,412

2,832

+17.4

Payable tin sold (t)

3,860

2,613

2,695

2,306

3,351

2,404

2,710

+12.7

Tin price achieved (US$/t)

15,553

15,359

17,436

18,497

23,083

28,308

33,704

+19.1

All-in sustaining cost (US$/t)

12,425

10,849

10,777

11,384

12,162

15,112

14,765

-2.3

Source: Alphamin Resources. Note: *Q321 cf Q221.

Alphamin’s underlying financial results are provided in the Exhibit 2. A number of features of both its operational and financial performance are noteworthy:

Plant throughput increased by 3.4% after an already impressive increase of 12.0% in Q221 (cf Q121). Moreover, despite this increase in throughput, costs were well controlled, with all-in sustaining costs (AISC) declining 2.3% quarter-on-quarter to US$14,765/t, driven by a 6.1% reduction in on-mine costs per tonne of tin sold.

Alphamin’s operational performance was achieved by significantly improved underground mining practices since mid-July 2021, relating to stope planning, delineation and blasting. This resulted in an average tin grade of 3.5% for the quarter, including 3.8% processed during both August and September. In addition to improved grade control, run-of-mine volumes and waste development were reported to have increased by 5% quarter-on-quarter and although this probably caused costs to increase by marginally more than we would otherwise have expected, EBITDA for the quarter of US$53.7m nevertheless fractionally exceeded prior guidance of US$53.0m, which itself represented a 55.5% increase relative to Q221.

Financial results were very close to our prior expectations, with the exception of a warrant charge of US$4.1m and deferred tax of US$5.1m (both of which we habitually decline to forecast on a quarterly basis). Excluding these two factors, earnings attributable to shareholders would otherwise have been 5.3%, or US$1.5m better than our prior forecasts, at US$30.1m, or 2.53 US cents per share.

During the quarter, Alphamin’s net debt (including lease liabilities) declined by 103.5% (or US$30.5m) from a net debt position of US$29.5m to a net cash position of US$1.0m. This performance followed a decline of US$17.0m in Q221 and one of US$11.0m in Q121.

Alphamin’s effective tax rate varies materially from quarter to quarter – for example, between 97.9% in Q320 and -259.4% in Q419 – not least, on account of the warrant charge discussed above. In Q321, however, if both the warrant charge and deferred taxes are excluded, the effective tax rate was 22.0% (cf our prior expectation of 25.0%). Owing to the continued rise in the tin price, however, it is possible the company’s subsidiary in the Democratic Republic of the Congo (DRC) may be subject to a superprofit tax. Superprofit taxes are triggered when the average sales price for the year exceeds the tin price used in the DRC feasibility study by more than 25%. For these purposes, in instances in which Excédent Brut d’Exploitation (an Ohada or Francophone Africa accounting concept that is analogous to EBITDA) for the year is more than 25% higher than that stipulated in the feasibility study, then a superprofit tax of an additional 20% applies, taking the effective tax rate on that incremental portion of profit from 30% to 50%. During 2021, Alphamin submitted a revised DRC feasibility study, which may result in no superprofit tax being payable. In the case of a superprofit charge being applied in FY21, management expects it to result in a possible additional tax charge of approximately US$15m (or 1.26 cents per share). Owing to the tax deductibility of superprofit tax from corporate income tax, there is a corresponding reduction in 2022 provisional tax payments, meaning the company would be cashflow tax neutral in 2022 in either case, with the cashflow impact occurring in 2023. In the medium term, however, the company expects, subject to sufficient exploration success, to submit further DRC feasibility studies that should mitigate the impact of any superprofit taxes. In the meantime, the effective tax rate for 2021 is expected by the company to fall between 21% and 30% (including utilisation of losses brought forward), depending on whether a superprofit tax is payable.

The minority interest reflected in Alphamin’s income statement has also proved to be of a similarly variable nature on a quarterly basis – for example ranging from 1,286.0% of net profit in Q320 to -8.9% in Q420. Again, in large part, this apparent variability is a function of the warrant charge (see above) that occurs at top company level and in which minorities do not share. Excluding the warrant charge, in Q321, the minority amounted to 16.64% of net profit – ie close to the ambient 15.86% rate that might be expected as a result of Alphamin’s 84.14% interest in the Bisie mine.

Exhibit 2, below, provides an analysis of Alphamin’s underlying results for Q321 relative to both Q221 and our prior expectations:

Exhibit 2: Edison forecast of Alphamin income statement, Q121a–Q221a (US$ unless otherwise indicated)

Q121a

Q221a

Q321e

Q321a

Change
(%)

Variance
(%)

Variance
(units)

Revenue

76,032,045

68,053,576

91,768,730

91,350,482

34.2

-0.5

-418,248

Cost of goods sold

(37,256,106)

(29,780,333)

(34,039,234)

(32,384,856)

8.7

-4.9

1,654,378

Depreciation

6,380,606

6,423,261

6,511,323

6,790,732

5.7

4.3

279,409

Gross profit

32,395,333

31,849,982

51,218,173

52,174,894

63.8

1.9

956,721

General and administrative

(4,549,884)

(4,729,496)

(4,729,496)

(5,280,772)

11.7

11.7

-551,276

Operating profit/(loss)

27,845,449

27,120,486

46,488,677

46,894,122

72.9

0.9

405,445

Other

 

 

 

Warrants

Excl*

Excl*

Excl*

Excl*

N/A

N/A

0

Profit on foreign exchange

16,595

(45,653)

(123,440)

170.4

N/A

-123,440

Loss on write off of assets

0

0

0

N/A

N/A

0

Interest expense

(2,648,401)

(2,280,673)

(1,782,310)

-21.9

N/A

N/A

Interest income

11

298

422

41.6

N/A

N/A

Net interest

(2,648,390)

(2,280,375)

(1,235,712)

(1,781,888)

-21.9

44.2

-546,176

Profit before taxes

25,213,654

24,794,458

45,252,964

44,988,794

81.4

-0.6

-264,171

Current income tax expense

(11,113)

(11,499)

(11,313,241)

(9,907,336)

86,058.2

-12.4

1,405,905

Deferred tax movement

(8,713,199)

(9,588,773)

(5,051,594)

-47.3

N/A

-5,051,594

Total tax

(8,724,312)

(9,600,272)

(11,313,241)

(14,958,930)

55.8

32.2

-3,645,689

Effective tax rate (%)

34.6

38.7

25.0

33.3

-14.1

33.0

8.3

Net profit/(loss)

16,489,342

15,194,186

33,939,723

30,029,864

97.6

-11.5

-3,909,860

Profit/(loss) and total comprehensive profit/(loss) attributable to:

Shareholders

13,639,017

15,194,186

28,556,883

25,031,864

64.7

-12.3

-3,525,020

Non-controlling interests

2,850,325

0

5,382,840

4,998,000

N/A

-7.1

-384,840

Minority (%)

17.29

0.00

15.86

16.64

N/A

4.9

1

Total

16,489,342

15,194,186

33,939,723

30,029,864

97.6

-11.5

-3,909,860

 

 

 

Weighted average number of shares in period

1,182,251,580

1,188,156,191

1,192,267,057

1,188,156,191

0.0

-0.3

-4,110,866

Derivatives

119,536,582

95,621,651

95,181,199

99,333,451

3.9

4.4

4,152,252

Fully diluted weighted average number of shares in issue

1,301,788,162

1,283,777,842

1,287,448,256

1,287,489,642

0.3

0.0

41,386

 

 

 

Headline earnings

8,002,190

4,900,644

28,556,883

20,911,936

326.7

-26.8

-7,644,947

Headline earnings (excl. warrant charge)

13,639,017

15,194,186

28,556,883

25,031,864

64.7

-12.3

-3,525,019

 

 

 

EPS (US$/share)

0.0115

0.0128

0.0240

0.0211

64.7

-12.0

-0.0029

Diluted EPS (US$/share)

0.0105

0.0118

0.0222

0.0194

64.3

-12.3

-0.0027

HEPS** (US$/share)

0.0115

0.0128

0.0240

0.0211

64.7

-12.0

-0.0029

Diluted HEPS** (US$/share)

0.0105

0.0118

0.0222

0.0194

64.3

-12.3

-0.0027

Source: Alphamin, Edison Investment Research. Note: Company presented basis. *Excluded see Exhibit 3; actual Q321 charge US$4,119,929; **Headline earnings per share.

Outlook

At the time of its Q221 results, Alphamin updated its guidance for the rest of FY21. In the light of the lower grades encountered in Q221, it then expected to mine lower tin grades averaging 3.2–3.5% in H221 and into Q122 which, at higher plant recoveries of 78% (including the fine tin recovery plant) and monthly throughput of 36,000t, suggested contained tin production of 900–1,000t per month. Production guidance for H221 was approximately 5,500t of contained tin (cf 6,500t previously) – albeit this now appears likely to be exceeded on the basis of Q321 results (see Exhibit 3, below). The grade of ore mined is then expected to increase to an average of 4.0% from Q222 onwards.

Quarterly estimates for Alphamin in the light of Q321 results are provided in the table below, with the caveat that the quarterly results of junior mining companies can be prone to material volatility relative to both historical results and analysts’ forecasts. At the time of writing, the current three-month price of tin is US$39,020/t. Note that, for the purposes of forecasting, we have assumed this price will prevail for the remainder of the year.

Exhibit 3: Edison forecast of Alphamin income statement, Q121a–Q421e (US$ unless otherwise indicated)

Q121a

Q221a

Q321a

Q421e

FY21e
(current)

FY21e
(prior)

Tons processed (t)

93,997

105,294

108,901

108,000

416,192

416,192

Tin grade (%)

3.8

3.2

3.5

3.4

3.46

3.46

Contained tin (t)

3,572

3,369

3,812

3,638

14,391

14,391

Overall plant recovery (%)

74

72

75

78

74.4

74.6

Actual payable tin produced (t)

2,611

2,412

2,832

2,850

10,705

10,739

Payable tin sold (t)

3,351

2,404

2,710

2,850

11,315

10,887

Tin price achieved (US$/t)

23,083

28,326

33,704

36,916

30,221

29,143

Revenue

76,032,045

68,053,576

91,350,482

105,209,384

340,645,487

310,676,123

Cost of goods sold

(37,256,106)

(29,780,333)

(32,384,856)

(33,651,013)

(133,072,308)

(125,792,804)

Depreciation

6,380,606

6,423,261

6,790,732

6,897,328

26,491,927

25,914,576

Gross profit

32,395,333

31,849,982

52,174,894

64,661,044

181,081,253

158,968,743

General and administrative

(4,549,884)

(4,729,496)

(5,280,772)

(5,280,772)

(19,840,924)

(18,738,372)

Operating profit/(loss)

27,845,449

27,120,486

46,894,122

59,380,272

161,240,329

140,230,371

Other

Warrants

(5,636,827)

(10,293,542)

(4,119,928)

(20,050,297)

(15,930,369)

Profit on foreign exchange

16,595

(45,653)

(123,440)

(152,498)

(29,058)

Loss on write off of assets

0

0

0

0

0

Interest expense

(2,648,401)

(2,280,673)

(1,782,310)

(6,711,384)

Interest income

11

298

422

731

Net interest

(2,648,390)

(2,280,375)

(1,781,888)

345,445

(6,365,208)

(6,461,446)

Profit before taxes

19,576,827

14,500,916

40,868,866

59,725,716

134,672,325

117,809,498

Current income tax expense

(11,113)

(11,499)

(9,907,336)

(14,931,429)

(24,861,377)

(20,955,551)

Deferred tax movement

(8,713,199)

(9,588,773)

(5,051,594)

(23,353,566)

(18,301,972)

Total tax

(8,724,312)

(9,600,272)

(14,958,930)

(14,931,429)

(48,214,943)

(39,257,523)

Effective tax rate (%)

(44.6)

(66.2)

(36.6)

(25.0)

(35.8)

(33.3)

Net profit/(loss)

10,852,515

4,900,644

25,909,936

44,794,287

86,457,382

78,551,975

Profit/(loss) and total comprehensive profit/(loss) attributable to:

Shareholders

8,002,190

4,900,644

20,911,936

37,689,913

71,504,683

65,741,758

Non-controlling interests

2,850,325

0

4,998,000

7,104,374

14,952,699

12,810,217

Minority (%)

26.3

0.00

19.3

15.86

17.3

16.3

Total

10,852,515

4,900,644

25,909,936

44,794,287

86,457,382

78,551,975

Weighted average number of shares in period

1,182,251,580

1,188,156,191

1,188,156,191

1,193,945,424

1,188,289,347

1,188,897,472

Derivatives

119,536,582

95,621,651

99,333,451

95,502,832

95,502,832

95,181,199

Fully diluted weighted average number of shares in issue

1,301,788,162

1,283,777,842

1,287,489,642

1,289,448,256

1,283,792,179

1,284,078,671

Headline earnings

8,002,190

4,900,644

20,911,936

37,689,913

71,504,683

65,741,758

Headline earnings (excl. warrant charge)

13,639,017

15,194,186

25,031,864

37,689,913

91,554,980

81,672,127

EPS (US$/share)

0.0068

0.0041

0.0176

0.0316

0.0602

0.0553

Diluted EPS (US$/share)

0.0061

0.0038

0.0162

0.0292

0.0557

0.0512

HEPS (US$/share)

0.0068

0.0041

0.0176

0.0316

0.0602

0.0553

Diluted HEPS (US$/share)

0.0061

0.0038

0.0162

0.0292

0.0557

0.0512

Headline EPS excl. warrant charge (US$/share)

0.0115

0.0128

0.0211

0.0316

0.0770

0.0687

Source: Alphamin, Edison Investment Research. Note: Company presented basis.

Valuation

Our valuation of Alphamin is under review pending a reconsideration of our long-term tin price. Assuming the current three-month price of tin (US$39,020/t) prevails for the remainder of Bisie’s life, however (ie adopting the current tin price as our long-term price), we calculate a valuation for Alphamin (excluding any blue-sky exploration potential) of 86.1 US cents, or 109.7 Canadian cents, per share.

Exhibit 4: Alphamin LOM forecast EPS, maximum potential DPS and NPV10 of DPS, FY18–32 ($/share)

Source: Edison Investment Research

Note this valuation assumes management executes the Bisie life of mine schedule according to plan and applies a 10% discount rate to forecast dividends.

Sensitivities

Exploration and mine life extensions

A key sensitivity for Alphamin is its exposure to exploration success. Alphamin’s processing schedule follows its mining schedule closely. As this drops away towards the end of the life of the mine, so too do production, earnings and cashflow. To the extent that Alphamin is successful in its exploration at Mpama North and Mpama South in keeping its plant in full production at FY27 levels into the future (see Alphamin’s latest announcement: Alphamin provides Mpama North and Mpama South drilling update, released on 8 November 2021, and below), our valuation of the company (calculated at the prevailing tin price) would increase as follows:

Exhibit 5: Alphamin valuation sensitivity to exploration success

Additional years at full capacity

To year

Valuation
(US$/share)

Valuation
(C$/share)

Incremental change (C$/share)

0.861

1.097

0

2027

0.849

1.082

-0.015

+1

2028

0.890

1.135

+0.053

+2

2029

0.940

1.198

+0.063

+3

2030

0.976

1.244

+0.046

+4

2031

1.010

1.288

+0.044

+5

2032

1.060

1.351

+0.063

Source: Edison Investment Research

For the purposes of this valuation, we have assumed an ongoing exploration commitment at Alphamin of US$2.7m per year to achieve the replenishment of reserves and resources required to keep the mine operating at full capacity. Readers should note this is the reason for the apparent decline in valuation for zero years of additional life in Exhibit 5, above; in this case, extra exploration expenditure has been incurred for no additional increase in mine life.

On average, therefore, each additional year by which the plant is maintained at full capacity (in the short term) adds an average of 5.4 Canadian cents per share to our valuation of Alphamin (at the prevailing tin price). In the limiting case, in which exploration success is sufficient to maintain production at FY27 levels indefinitely (which, for these purposes may be taken to mean c 62 years), our valuation of Alphamin rises to US$1.92/share, or C$2.408/share, and its valuation profile to that shown by the ‘Cash-flow and terminal multiple valuation’ line in Exhibit 6, below.

Exhibit 6: Alphamin EPS, DPS and valuation forecast, including exploration success, FY18–32 ($/share)

Source: Edison Investment Research

Tin price sensitivity

Our valuation of Alphamin changes by ±13.3% from its current level of 86.1 US cents for every ±10% that the tin price moves from its current level of US$39,020/t. Alternatively, we calculate that Alphamin’s share price of C$0.95 discounts a long-term real tin price of US$35,090/t, which is 10.1% below the current (three-month) price of tin.

Exhibit 7: Tin price (US$/tonne), Q420 to present

Source: Refinitiv (23 September 2021)

Within this context, readers should note that tin is the second best performing of 16 metals and minerals since 1 January 2020 (after prime Australian coking coal) and the best performing since 1 January 2002.

Exploration success

Drilling at Bisie to date has achieved two important goals:

To narrow the gap between Mpama South and the currently operating Mpama North mine and deposit; in this respect, Mpama South drilling intercepts are now within 200m of the Mpama North orebody (cf 750m previously) at a similar mining level and the indications are that Mpama South and Mpama North were once one single zone of high-grade tin mineralisation that was subsequently displaced by a late-stage fault.

To demonstrate high-grade assay results at Mpama South.

Alphamin’s success in achieving these two goals creates the potential for synergies between the two deposits and expedited underground access to Mpama South, thereby connecting it to the already existing underground development, infrastructure and services of the Mpama North mine.

Mpama North drilling

Alphamin commenced extensional drilling of the Mpama North orebody in July 2021. By the end of October, approximately 6,167m of drilling had been completed over 12 drillholes (average 514m per hole) and has revealed the existence of a cross-cutting fault causing a downward and westward offset of the deeper mineralisation. By refocusing drilling closer to the final drill line relative to previous exploration, holes drilled 75m further along strike succeeded in intersecting significant zones of cassiterite mineralisation. Based on the quantity of cassiterite visible over 20.6m, for example, drillhole MND011 appears to be one of the best holes drilled on the property to date. In addition, five new holes west of the identified fault have also intersected visual cassiterite providing strike extension potential on the western block. Drilling will continue to refine Alphamin’s understanding of these mineralised areas with the objective of adding significantly to life-of-mine reserves and resources.

Mpama South drilling

Exploration to date in 2021 at Mpama South has encompassed c 18,047m of drilling over 69 drillholes (average 262m per hole), of which assays have been received for 57 holes (83%) from ALS laboratories in South Africa. Selected significant intercepts from the most recent batch of assays include the following:

14.4m at a grade of 3.2% Sn from 115.4m down hole depth in hole BGH075.

18.4m at a grade of 2.2% Sn from 278.9m (including 5.0m at a grade of 2.9% Sn and 2.8m at a grade of 7.2% Sn) in hole BGH074.

2.6m at a grade of 8.5% Sn from 276.0m in hole BGH066.

4.7m at a grade of 3.2% Sn from 295.8m in hole BGH067.

5.4m at a grade of 3.0% Sn from 331.0m in hole BGH070.

5.1m at a grade of 2.7% Sn from 274.6m and 4.4m at a grade of 3.6% Sn from 290.4m in hole BGH072.

These grades may be directly compared with Alphamin’s current reserve grade of 4.01% Sn and its resource grade of 4.80% Sn (itself approximately the equivalent of a gold grade of 1oz/t in terms of the value of contained mineralisation at the currently prevailing prices of gold and tin).

The success of the Mpama South drilling is such that the zone of high-grade mineralisation has grown substantially since the recommencement of drilling in December 2020. The first three phases of drilling at Mpama South will form the basis of a mineral resource estimate in January 2022. An updated estimate will then be announced later in Q122, incorporating the results of the ongoing phase 4 drilling campaign.

Regional exploration

Assays have now been received from Alphamin’s detailed in-fill soil sampling campaign over the 13km long Bisie Ridge. The results are encouraging to the extent that new targets have been generated from them for follow up drilling. Drilling of the first major target, Marouge, commenced in late November.

Financials

Between Q419 and Q321, Alphamin paid down financial net debt (ie excluding leases and unamortised fees) by US$94.8m, from US$88.6m at end-December 2019 to a net cash position of US$6.2m at end-September 2021. As such, it is, at least theoretically, in a position to make dividend payments and the company’s board is devising a strategy to balance capital allocations between ongoing exploration drilling, the potential fast-track development of the Mpama South deposit and shareholder distributions.

Exhibit 8: Financial summary

Accounts: IFRS, year-end: December, US$000s

 

 

2018

2019

2020

2021e

2022e

INCOME STATEMENT

 

 

 

 

 

 

 

Total revenues

 

 

0

27,221

187,445

340,645

265,366

Cost of sales

 

 

0

(7,915)

(119,554)

(133,072)

(126,289)

Gross profit

 

 

0

19,306

67,892

207,573

139,078

SG&A (expenses)

 

 

(9,440)

(14,526)

(17,238)

(19,841)

(21,123)

Exceptionals and adjustments

 

0

(3,673)

(7,649)

0

0

Depreciation and amortisation

 

(20)

(7,927)

(25,471)

(26,492)

(28,023)

Reported EBIT

 

(9,460)

(3,147)

25,182

161,240

89,932

Finance income/(expense)

 

3

(6,330)

(15,614)

(6,365)

209

Other income/(expense)

 

7

(4)

(1,518)

(152)

0

Exceptionals and adjustments

 

6,272

6,850

(8,776)

(20,050)

0

Reported PBT

 

(3,178)

(2,632)

(725)

134,672

90,141

Income tax expense (includes exceptionals)

 

 

0

7,755

(7,141)

(48,215)

(22,535)

Reported net income

 

 

(3,178)

5,123

(7,866)

86,457

67,606

Basic average number of shares, m

 

 

733

845

1,066

1,188

1,194

Basic EPS (US$)

 

 

(0.00)

0.01

(0.01)

0.06

0.05

Adjusted EBITDA

 

 

(9,440)

8,453

58,302

187,732

117,955

Adjusted EBIT

 

 

(9,460)

526

32,831

161,240

89,932

Adjusted PBT

 

 

(9,450)

(5,809)

15,699

154,723

90,141

Adjusted EPS (C$)

 

 

(0.00)

0.01

(0.01)

0.08

0.06

Adjusted diluted EPS (US$)

 

 

(0.00)

0.00

(0.01)

0.06

0.04

BALANCE SHEET

 

 

 

 

 

 

 

Property, plant and equipment

 

 

230,626

255,125

239,103

223,271

199,586

Other non-current assets

 

 

2,467

10,632

15,882

23,871

26,581

Total non-current assets

 

 

233,093

265,757

254,985

247,142

226,167

Cash and equivalents

 

 

17,105

5,941

6,559

41,894

141,198

Inventories

 

 

3,235

27,755

21,866

18,666

14,541

Trade and other receivables

 

 

0

1,486

7,601

34,065

26,537

Other current assets

 

 

3,738

17,633

6,710

6,710

6,710

Total current assets

 

 

24,078

52,815

42,736

101,334

188,986

Non-current loans and borrowings

 

 

80,896

78,229

34,821

0

0

Other non-current liabilities

 

 

6,699

9,641

8,872

8,872

8,872

Total non-current liabilities

 

 

87,595

87,870

43,693

8,872

8,872

Trade and other payables

 

 

7,030

23,487

17,037

18,278

17,349

Current loans and borrowings

 

 

0

16,339

25,810

0

0

Other current liabilities

 

 

5,711

16,290

13,250

33,301

33,301

Total current liabilities

 

 

12,742

56,116

56,098

51,579

50,649

Equity attributable to company

 

 

131,914

145,215

171,735

246,877

303,760

Non-controlling interest

 

 

24,921

29,371

26,196

41,148

51,871

CASH FLOW STATEMENT

 

 

 

 

 

 

 

Profit before tax

 

 

(3,178)

(2,632)

(725)

134,672

90,141

Net finance expenses

 

 

0

5,456

15,616

0

0

Depreciation and amortisation

 

 

20

7,927

26,504

26,492

28,023

Share based payments

 

 

300

403

471

0

0

Other adjustments

 

 

(6,272)

(6,851)

8,842

20,050

0

Movements in working capital

 

 

3,942

(6,710)

(20,281)

(22,022)

10,724

Interest paid / received

 

 

0

(3,092)

(11,378)

0

0

Income taxes paid

 

 

0

0

(843)

(48,215)

(22,535)

Cash from operations (CFO)

 

 

(5,188)

(5,498)

18,205

110,978

106,352

Capex

 

 

(116,094)

(22,720)

(7,448)

(18,649)

(7,048)

Acquisitions & disposals net

 

 

0

0

0

0

0

Other investing activities

 

 

151

(46)

(96)

0

0

Cash used in investing activities (CFIA)

 

 

(115,943)

(22,766)

(7,544)

(18,649)

(7,048)

Net proceeds from issue of shares

 

 

55,235

11,936

10,010

3,638

0

Movements in debt

 

 

69,448

0

(18,735)

(60,631)

0

Dividends paid

 

 

0

0

0

0

0

Other financing activities

 

 

6,317

5,165

(1,319)

0

0

Cash from financing activities (CFF)

 

 

131,000

17,100

(10,044)

(56,994)

0

Increase/(decrease) in cash and equivalents

 

 

9,869

(11,164)

617

35,335

99,304

Cash and equivalents at end of period

 

 

17,105

5,941

6,559

41,894

141,198

Net (debt)/cash

 

 

(63,791)

(88,627)

(54,073)

41,894

141,198

Movement in net (debt)/cash over period

 

 

N/A

(24,836)

34,554

95,967

99,304

Source: Company sources, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Alphamin Resources and prepared and issued by Edison, in consideration of a fee payable by Alphamin Resources. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Alphamin Resources and prepared and issued by Edison, in consideration of a fee payable by Alphamin Resources. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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