Alphamin
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Tin Industry
I’m sure I don’t have to tell you about this metal used for literally thousands of years, found in is various archeological artifacts such as tools, weapons and structures. The ancient metal is instrumental in modern uses such as manufacturing semiconductors, solar panels, 5G technologies and electric vehicles (EVs), helping drive a robust demand outlook. If you’re bullish tech for the future, tin must be a part of that equation.
Tin is also very important for armaments and munitions, if you so happen to be a very pro-war type person! Tin has an advantage however in that it is not necessarily a battery metal and often goes missed as a “critical metal” for any energy transition. Likewise, some predict that it’s CAGR underestimates it’s true demand profile because of this lost fact.
More traditionally, alloyed tin with copper to make bronze, tin is now mainly used as a coating for other metals to prevent corrosion. These include food and beverage cans – hence the term ‘tin cans’, although they are primarily made of steel noawadays. As a third item of demand, the metal is also used in the chemicals sector to develop polymer additives. Tin offers itself as 13Bn market cap as we speak but even more appealing is the level of underinvestment it has seen for decades.
In some sense, we can regard it as being the “forgotten metal”. As of now, more than 50% of tin consumed is used as solder for circuit boards semiconductors, data centres, mobile phones, electric vehicle and batteries, as well as in solar panels — it is the solder that binds the technology revolution, literally.
To the extent that anything needs to be saudered for electricity at all–Tin will continue to do well. Look at this fantastic chart from Alphamin’s latest presentation
Lithium had a craze in price, as did nickel, gold as done well–Tin is the elephant in the room!
Supply
It’s interesting to note the reliance on China (currently undergoing a complete utter economic collapse where Wall Street has yet to react) as well as the other countries that old geopolitical uncertainty as they are key pieces for the superpowers.
The International Tin Association estimates US$1.4 billion is needed to deliver 50,000 tons per year more tin by 2030, yet supply, instead of expanding, is tightening sharply with global refined tin production in 2023 declining 2.1% from 2022 to 370,100t.
While tin is easily recyclable and accounts for around 30% of tin in use, most of the supply comes from mining, with little increases in production every year (this will excite you as you read on).
Interestingly, it’s worth mentioning that Indonesia was once a leading tin exporter, but recently banned shipments to support its domestic smelting industry, effecting global supplies and prices.
We covered this with respect to coal in our article here–> Dear Santa, this is a first…
There are government and technical problems with Indonesia and Myanmar holding more than 25% of all tin supplies–Myanmar just had a military coup remember. It points to the common problem that I often write about–> where the heck is the supply going to come from? The dynamics of tin supply are creating a bottleneck [for the stock I’m about to mention].
Notes
- Unlike battery metals such as cobalt, lithium and nickel (facing a supply glut) the tin market and price volatility entrench the lag in new tin addition to the supply curve
- Significant lead times between resource, feasibility, funding, development, production of around 5yrs
Ready to rise again?
Now the best part for you…the stock mention
I bless the gains down in Africa
Alphamin ($AFM.v on TSXV) is a Mauritius-based Tin mining company with property ownership in the Congo. —and Alphamin has lots of it.
Operations
Mpama North: Mpama North mine is the world’s highest grade tin mine, currently producing mined material (run of mine) at an average grade of around 4.5% tin (four times as pure as their closest competitor). If you were to compare this to other commodities that you love, you would end up with approximately 12% copper and 14.6 g/t gold resources with constant recovery.
The company has enormous potential, consisting of five exploration licenses and one current mining license covering 1,270km2 in the North Kivu province of the Democratic Republic of Congo.
Mpama South: Fast-tracked implementation with approximately 2 years from maiden resource to project completion (update as per their latest presentation):
February 2022: Preliminary Economic Assessment completed and announced
March 2022: Updated Mpama South resource increasing contained tin in the inferred category by 75%
March 2022: Decision to develop Mpama South targeting a 60% expansion of tin production
April 2022: EPCM appointed. Processing plant and mining fleet procurement commences
June 2022: Earthworks and civils commences
Q4 2022: Underground development and new mine portal commences
February 2023: Updated Mpama South resource – 286% increase in Indicated Resources
March 2023: Process plant erection commences
29 April 2024: First ore processing and final stage commissioning underway
14 May 2024: First high-grade tin concentrate produced to sales specifications
27 May 2024: Processing facility operating at targeted recoveries
A study last year had increased Indicated Resources by 286% to 3.26Mt based on assays from 63 additional infill and extensional drill holes.
- Mpama South Mineral Resources now stand at:
- 3.26Mt @ 2.46% Sn for 80.2kt contained tin in the Indicated category; and
- 2.84Mt @ 2.42% Sn for 68.7kt contained tin in the Inferred category.
This rapid development has been enabled by the free cash flow from the Northern operations.
The third portion of their operation is purely exploration. They hold current deposits open at depth and are exploring their models to scale further. For those of you familiar with the Lasonde curve, you can see that they have a position on all segments a long it. Soil sampling and geophysics studies of the area have indicated locations with the same metrics in terms of tin in soil anomalies and geophysical signatures as those to Mpama North and South; this could be larger than the Mpama.
They have current export/import routes that are active
The stock has FALLEN since Mpama South has commenced! Opportunity
Exploration to initial production in less than 6 years since they first raised money in 2013 from investors. Approximately 2 years from discovering the second tin deposit to completing an expansion targeting a ~55% tin production increase (from now) which continues to grow.
Catchy Facts
Alphamin stands out as having high-grade tin finds with low all-in-sustaining costs. From 2020 to 2022, it’s grades were all above 3.5% purity and its recovery rates increased from 71% to 76% across the same time period. In addition, they do not just have a high grade Tin. Alphamin is responsible for approximately 4% of all of the tin produced globally. It has been anticipated that if the Mpama South development reaches full production this value with rise to 7%. Just ponder that for a moment.
Outside of Alphamin’s Mpama South expansion, large new projects globally are unlikely to get to production before 2030; ensuring that at least for the next 5-6 years Alphamin has a solid moat behind their tin production. For Alphamin, they have been pumping up prediction reliable quarter to quarter and year to year.
As one indicator for the company’s future, Tin has historically lagged Copper price. (The X-axis ranges from January 2nd, 2020 to today’s date; the left Y-axis ranges from 4,000 US$ per tonne copper to 11,000; right Y-axis ranges from 10,000 US$ per tonne of Tin to 45,000).
One of their management goals is to maintain at least a 10-year rolling life-of-mine; exploration will seek to continually extend the life-of-mine date to keep your dividends coming in as a long-term investor!
Stock Ratios:
P/E: 19.23
P/B: 3.25
P/S: 3.05
Price to Operating Cash Flow: 22.15
For a mining company it has a high Free Cash Flow already and pays an annual dividend yield of 5.86% (0.01 CAD per quarter). At the time of writing the stock trades for 1.08 CAD. It’s 52 week high/low is 1.46/0.57 CAD with a current (March 24th)
Altman Z Score: 5.42 (considered “safe”)
Market Cap of 993M CAD.
Performance/News
| Gross Margin % | 43.27 |
| Operating Margin % | 36.31 |
| Net Margin % | 16.37 |
| FCF Margin % | -21.21 |
| ROE % | 16.18 |
| ROA % | 10.21 |
| ROIC % | 15.36 |
Canadian tin producer Alphamin Resources produced a record 12,568 tonnes of the metal in 2023, up 1% from the prior year
As of Q1 for 2024: EBITDA= US$52m, up 156% from the prior quarter
- Tin sales of 4,126 tonnes, up 102% due to delayed sales the previous quarter
- Tin production of 3,142 tonnes
- Of course Mpama South is now on line as well, producing high-grade tin as of Q2.
Remember, this is the highest grade and longest duration tin asset–on the planet
FY2023
- tin production of 12,568 tonnes, up 1% from the prior year (Q4 tin production of 3,126 tonnes)
- Q4 tin sales of 2,046 tonnes impacted by poor road conditions, which have subsequently improved
- EBITDA guidance of US$136m at an average tin price of US$26,009/t
- US$50 million tin prepayment arrangement and lower marketing commission secured
Growth
- The new Mpama South processing facility has been producing tin concentrate to sales specification. The processing facility has produced 159 tonnes of contained tin from 17 May 2024; we’re only 2 months into it.
- They have consistently been able to recover at a rate of 75% since operations began a few years ago.
- …declared a Final FY2023 cash dividend of CAD$0.03 per share on the common shares (approximately US$27.9 million in the aggregate) (the “Dividend”). The Dividend will be payable on 24 May, 2024 to shareholders of record as of the close of business on 17 May, 2024 (one more expected to be in 2024).
- Interestingly, they’ve kept their dividend in place despite putting Mpama South on-air.
For updates: https://www.juniorminingnetwork.com/market-data/stock-quote/alphamin-resources.html
Ownership
Only 2.62% of shares are held by institutions, I suppose the mining aspect in Africa is too good for them. More Nvidia calls instead.
38.8% are ‘other’ investors, small retail and business companies and the majority are insiders at ~60%. A master holdings company owns 57% of current shares.
Collectively, Top management team has over 100 years combined experience in African mining
They Contribute positively to communities with 4% of in-country expenses allocated to Community Development & have a good relationship with the government
It’s noteworthy that one insider upped his ownership by 6.7% more over the last year. No insiders had sold any stock.
Income/Balance Sheet
The company had no debt from a length of time–however they now hold a net debt of around 18,000,000 USD
Q1 2024
Total Current Assets: 136,440,749
Total Assets: 543,702,184
Plant & Equipment: 368,019,951
Current Liabilities of US$105.4m due within the next ~9-months, and Non-Current liabilities of US$47.8m falling due after that. Offsetting this, it had US$53.5m in cash and US$28.4m in receivables that were due within 12 months. This is totalling US$71.3m more than its cash and near-term receivables, combined. Although given the size of their market capitalization, its easy to see the debt being manageable.
In relative terms, EBIT is over 21X the size of their interest expense and about 9X that of net debt. If we look at the net income for FY2023–> 57,964,155 USD (a 53% fall), it still triples the current net debt.
Q1 2024
As part of “UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS” by Alphamin, you can see that they have brought up their operating income and net income since the last quarter with SG&A remaining stable.
Balance Sheet strength and cash flow generation enabled their growth. Pre-expansion, they currently hold discretionary semi-annual dividends (Current annual run-rate of C$6cps – around 5-7% yields)
Risks
Risks are tremendous to say the least, which is great for somebody who has time and patience for higher tin prices and a squeezing supply constraint. What risks you ask? Of course mining itself, plus workers revolts & macroeconomics but with Alphamin you also have to include AIDS, Ebola, & African warlords. In other words, the political risk is primary on the list. Northeast Congo is certainly in the running for one of the most dysfunctional places on the planet.
Once you have the material, of course you have to truck it to Rwanda and Uganda which are always unstable
They have shut down temporarily because the rebel group M23 took over Rubaya and several other small towns immediately after that. This comes after the presence continued non-state armed troops into the region.
M23 rebel group claims control of Rubaya, a key mining town; Many groups are accused of carrying out mass killings, rapes and other human rights violations. The violence has displaced about 7 million people, many beyond the reach of aid.
There’s been an upsurge in fighting in recent months between M23 rebels and Congo army forces, and it comes as the United Nations plans to withdraw peacekeepers from the region by the end of the year. The rebels seem to be advancing towards the town of Goma right now
It’s important to keep in mind you’re investing in a country whereby militias have been holding war lords hostage for over a decade.
Closing
Alphamin is a special mining company. It is trading at a fair value, that pays a steady dividend and operates in a commodity the world generally overlooks. Perhaps more interesting is their status of holding the highest grade deposit of tin in the world coupled with a low operating costs to ensure that a healthy margin is locked in for shareholders. If that sounds too boring for those who like jumping into speculation than you’d be pleased to hear that only fractions of their entire property have been explored and exploited for tin resources. We’re dealing with a company aiming to hold a 7% of the world’s total tin who continually extend their 10-year mine lifespan.
- Alphamin owns the Bisie tin mine, the highest-grade tin mine in operation globally with no close competitors
- Tin is an often overlooked critical metal that is used as solder. As economies are electrified, demand for tin is expected to soar as well as the price. Alphamin’s high grade gives them a leveraged exposure to the price.
- Alphamin is undervalued based on its current production profile and becomes grossly undervalued once its Mpama South expansion starts producing steadily; this doesn’t include any other expansion in the future.
Even if you’re like me who calls bullshit on the “green revolution” the facts still hold that data is the new currency, technology is becoming ever-critical and AI is more and more relevant into global economies. The exploding data traffic, computing and storage devices and digital infrastructure needs tin & there’s a perfect setup developing.
However, with speculation comes risk and being in the Democratic Republic of the Congo is about as peak risk as one could find themselves within. There are always civil troubles that can impact mining operations and there’s no clear guarantee about the long-term stability of operations. I suppose, you are dealing with actual bolsheviks in Ottawa, London and Washington with respect to mining; so I say pick your poison.
If one can overlook these inherent risks, you’re still finding a company that is setting records with production rates and expansion of mining operations faster than I can write about it. I think one has to really consider where in the world this company is operating, but its hard to ignore the huge advantage they have with their at their high-grade, low cost model running in parallel with favourable macro dynamics for the tin commodity.
If your heart is behind your investments, perhaps we should call you the Tinman & hopefully, I can be the Great Wizard who sees all to continue to find more stock picks for you!
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