𝛼SKAlmonty Industries Inc - Financing Pieces Now in Place
Almonty Industries Inc.
Financing pieces now in place
Almonty Industries Inc (ASX:All) is a global mining company specialising in the mining, processing and sale of tungsten concentrate. The company’s primary operations are in Spain, Portugal and South Korea. The company’s flagship asset, the Sangdong Tungsten-Molybdenum Project, should underpin a transformational growth opportunity which aims to increase tungsten concentrate production seven-fold out to 2028. The final piece of the Sangdong financing is done with all conditions met for the drawdown of the US$75.1mn facility. The company has made significant progress on the construction schedule and is now in the position to accelerate towards commissioning, expected in Q4 FY22. The Sangdong Project is becoming very tangible, importantly as the world transitions towards a new energy paradigm requiring new sources of supply and tungsten is finding new markets as a technology metal. The company is looking at downstream value-add opportunities...it doesn’t stop at mining AII is well positioned to drive value accretion from its pre-development portfolio, particularly over the next 12 months with a number of significant re-rating events in the offing.
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 late 2022. An early-stage molybdenum play at Sangdong could add ‘growth on growth’. 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.
All conditions met and the debt facility is finalised
After an extensive application process, the company has now met all the conditions precedent and the US$75.1mn is now in place representing the last financing requirement for the Sangdong Project. Construction has progressed with some 15% of the total works completed including 27% of the underground development, some six months ahead of schedule. Completion and the start of commissioning remains on track for Q4 FY22. We highlight that project construction costs are set against a fixed-price contract with POSCO E&G, which provides a buffer against current global inflation pressures.
Our valuation is A$2.03/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. We set our risked valuation at A$2.03/share against a reference share price of A$1.00/share. We highlight the risk weightings applied to inferred resources and projects not yet defined (Sangdong-Moly) 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.
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