Afritin – could the lithium trump the tin ?

Whilst the company continue tin production and have funded the mine expansion, we are expecting news any day on the lithium potential that could trump the lot!

I first covered Afritin back in January (you can read my research note here). I was initially (and still am) attracted to the ‘pure-play’ tin exposure, given it’s the only of its kind trading on the junior UK market, at least in terms of scale of resource and production.

Uis Tin Mine

If you’ve been watching the tin price you’ll see that it is very much still on an upward trajectory with no signs yet of stopping.

This in part due to low inventories and of course big demand from various sectors such as electronics.

12 Month LME Tin Price

Since my first coverage the Afritin share price has enjoyed a nice run from 3p to just over 7p. A bagger! Since then though the share price has fallen away today at a shade under 5p. They raised £13m at 6p per share to progress the Uis Tin project. I had anticipated a raise and positioned accordingly but didn’t think I’d get a second bite of the cherry sub 5p!

If you read my last blog on Horizonte Minerals you’ll see what I mean about a ‘summer market’ Horizonte too has suffered a steep share price decline from highs. As I said in that blog I see this as opportunity and hence why I have been adding a sizeable amount of Afritin whilst there is little noise and volume! Could it get cheaper? Maybe, so a scaling approach could be sensible, especially in this market!

The subject of this blog is lithium but to close out on the tin side, the recent £13m raise is to fund the Uis Phase 1 Tin mine expansion which reached name-plate capacity end of last year. The expansion requires just $5.7m Capex with a whopping $63m NPV at $31k/t Tin Price < todays spot price. That’s a great Capex/NPV ratio and will generate plenty of FCF when the expansion is complete in under 8 months.

The oversubscribed raise puts the company in a very strong position having settled Long term debt liabilities as recently RNS’d. In fact a portion of that settlement was c.£750k equity at 4p which could explain the recent weakness. However I think that will have been flushed through now or close to.

Lithium in Focus and it could be the Icing on the cake!

We all know about lithium and its important role in lithium-ion batteries but I am seeing more and more commentary on the metal and getting twitchy myself about not having any decent exposure !

We know that the likes of graphite, nickel and cobalt are going to see huge demand from the EV sector but the ‘pinch point’ definitely seems to be on the lithium side and sourcing it. This is evident by the number of deals being done.

In terms of getting exposure there are a number of options but unsurprisingly many stocks especially juniors have made big moves. Those moves however could still be a drop in the ocean!

Only today as I write this blog have Iron Ridge Resources a company I have followed, announced a partnership with Piedmont to invest and fund Capex for their African mine in Ghana. Looking around you’ll see other lithium deals being struck as off-takers and motor manufacturers look to secure resource, will Afritin be the next?

If you have 5 minutes to spare, listen to CEO Anthony’s recent interview with Proactive. I’ve had the pleasure of chatting to Anthony in the past and you can sense the level of excitement around the lithium.

They’ve had some ‘incredible’ intersections at the project which is high grade and as Anthony mentions of global significance in terms of size. Lab test work is pending however the steer from the interview in April was 3-6 months which means we can expect results anytime from now.

Hedging your Bets

Clearly we are going to want to see results of testing on the lithium. The other by-product tantalum is also being tested and the company have secured an off-take agreement on that.

If the results deliver we have potentially got a large high grade lithium resource and a potential fast track to production given an operational plant where the ore is being mined anyway. Either way at a company EV of around £40m considering recent raise I can’t see anything priced in for the by-products so not withstanding the current tin production and increased production within 8 months, the upside from here could be considerable.

Fast forward a few years and the company implement their Phase 2 production plan they expect to achieve over $100m in annual revenues.

They haven’t put a wrong thus far!

Disclaimer

Research materials prepared based upon my own analysis and research. Accuracy cannot be guaranteed and research notes should not be taken as investment advice. Please always do your own research.

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