Joel’s Resource Report – AfriTin needs to do what it says on the tin
(Note from Graham – the Midcap Report is back on Tuesday! For now, here are Joel’s latest thoughts on resources.)
At the time of writing the author holds a long position in ATM.
I was pleasantly surprised to see that AfriTin, last week, finally put out an RNS which shareholders could get their teeth into.
AfriTin is AIM listed tin mining company whose primary asset is the UIS tin project in Namibia. I first covered it for Cube back in December.
Since I’ve bought in, the lack of news flow hasn’t exactly helped the ailing share price:
Last August, AfriTin start the ramp of its Phase 1 operations. Phase 1 production is a pilot plant designed to prove the concept and produce 65 tonnes per month of Tin concentrate and “de-risk” Phase 2.
When I bought into AfriTin the following slide caught my attention. I’ve highlighted the bit I was most interested in: “Scoping Study Imminent“.
I believe that the scoping study on Phase 2 could contain some very interesting numbers (NPV/IRR etc). But six months later, this study still hasn’t been delivered – not impressive.
Even so, last week’s monster RNS is worth dissecting:
Phase 1 pilot plant ramp up is behind schedule – mitigating measures in progress
“The abrasiveness of the ore material is causing high wear rates in processing and conveying circuits and negatively impacting on plant availability. Mitigating measures include the introduction of abrasion resistant materials, optimisation of flow lines and enhanced maintenance planning. Various initiatives are also in progress to improve the operability of the plant, including the installation of additional instrumentation, process controls, and buffer capacity in selected circuits.”
It’s not ideal to hear of issues but the company appears to have a plan to address them and recently raised £2m via an unsecured loan note to fund these activities.
Phase 1 Expansion programme
AfriTin may not have released the promised scoping study, but they have announced that they intend to enhance the profitability of the Phase 1 plant once steady state production is reached.
The stages are as follows:
Stage II – Increase production capacity and recovery
- Increasing the throughput capacity by 50% from 80 tph to 120 tph (tons per hour).
- Improving the overall recovery of tin from 60% to 70% by adding beneficiation capacity for tailings streams in the concentrator, which are currently discarded.
- Improving the overall recovery of tantalum from 15% to 30% by optimising liberation between the tin and tantalum-bearing minerals and improved magnetic separation efficiency.
Stage III – Introduce a second by-product
- Add a circuit to produce a petalite concentrate, to sell into the glass and ceramics market. Initial metallurgical test work has demonstrated the potential of producing a saleable concentrate.
Stage IV – Further expand tin and tantalum concentrate production
- Increase the average concentrator plant feed tin grade from 0.139% to 0.158% through the implementation of an automated ore sorting circuit after the first two crushing stages to reject barren pegmatite before the final stages of comminution and then concentration.
The company has released internal expectations. These have not been independently verified but give some idea of the expected profitability:
Sunk capital costs are not included, and total capex is expected to be $28.5 million.
The company anticipates that “the above stages will be financed by organic growth cash flows and long-term facilities where necessary.”
For what I view as conservative management to state this, I think they must be have reason to be optimistic. If they can expand the production without further dilution, shareholders will certainly have something to cheer about.
And if Phase 1 can produce an NPV of over $120 million, Phase 2 will be a material improvement.
One area of concern is the outstanding debt on the balance sheet. Given the company’s confidence of being able to invest $28.5 million, my guess (or hope) is that there are large companies or off-takers circling. AfriTin already has a number of institutions invested.
AfriTin has two things many junior minors don’t have – a globally significant resource and production. If it can execute successfully in terms of both mining & non-dilutive financing, I believe that the share price could be at multiples in the coming years.
Till next week!