London, UK, 16 March 2021

Alphamin Resources (AFM): Initiation -⁠ Alpha tin actually

Alphamin Resources offers rare exposure to immediate positive cash flow from a metal both Rio Tinto and the Massachusetts Institute of Technology regard as being the most likely to benefit from the widespread electrification of transport networks and the world economy. Fortuitously, Alphamin's Bisie tin mine in the north-eastern Democratic Republic of the Congo (DRC) is hitting its stride at just the moment that the tin price is being forced upwards in the biggest squeeze in decades, providing it with a golden opportunity to repay debt and even to consider making distributions to shareholders as early as next year.

Bisie is now operating, to all intents and purposes, at full capacity. With the current tin price having risen by 30.2% since Q420, we estimate that there is scope for net debt to reduce to zero before end-FY21. Beyond that, at a long-term tin price of US$23,425/t, we estimate that Alphamin should be capable of generating revenues of c US$266m pa (average FY22-27), EBITDA of US$139m and EPS of 6.19 US cents per share. On this basis, we estimate a valuation for Alphamin of 39.1 US cents, or 49.6 Canadian cents per share. This valuation assumes that management executes the Bisie life of mine (LOM) schedule according to plan and applies a 10% discount rate to future forecast dividends. If, however, management proves itself adept at continually replenishing reserves and resources to the extent that it keeps its plant fully utilised beyond FY27 (NB see Exploration section on page 6), then our valuation of Alphamin's shares on average rises by 2.5 Canadian cents for every year at full capacity up to FY32 and, beyond that, potentially to as high as C$1.117/share (subject to capex etc). 
 

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