Almonty Industries Inc - Adding Moly to the Mix

Business model

Almonty Industries is a mid-cap miner holding a portfolio of production and pre-production assets across Europe and South Korea. The company has an ambitious and transformational tungsten growth strategy set to impact from mid-2023. An early-stage molybdenum play at Sangdong can add tangible ‘growth on growth’ with a maiden JORC resource declared. The company continues to seek acquisition opportunities to which it can apply its mining expertise (a core competency of the company) and in that regard, the operating portfolio could look materially different over the forecast period...the growth options appear unlikely to end with Sangdong and Valtreixal.

Moly has legs

The company has completed its initial phase of drilling across the Sangdong Molybdenum Project and has declared a maiden JORC resource of 21.48Mt @ 0.26% MoS2. We note the previous resource estimate based on drilling conducted in the 1980s of ~16.30Mt, highlighting that the recent work has suggested the play is considered to be open-ended to the NE/NW with potentially higher grades. Further evaluation work is planned over the next six months to better define the resource and grade distribution. Management is confident the molybdenum opportunity can support a major project on a stand-alone basis. Given the potential for a project to integrate with and leverage the tungsten development, initial capital expenditure should be low with further benefits on operating costs. Importantly, molybdenum is traded on the LME, providing transparency on pricing and hedging potential.

We upgrade our valuation to A$2.27/share

We set our base asset value against risk-weighted development (NPV) scenarios underpinned by company guidance, applying where appropriate, discretionary probability weightings to pricing, volume and success factors. On adjustments to Sangdong Moly underpinned by the current Mo price and spot FX rates, we upgrade our risked valuation to A$2.27/share against a reference share price of A$0.952/share. We highlight the risk weightings applied to inferred resources or in construction, noting the significant value upside inherent in unwinding the risk delivery of evaluation and feasibility results. We await confirmation of potential project expansions and extensions, but feel comfortable assigning an ‘unrisked’ valuation upside to >A$3.00. Our assumptions are subject to potentially significant adjustment through the course of delivery of the company’s growth strategy and particularly given the global economic and operating risks inherent in the present COVID environment.