The revival of the Sangdong tungsten project
We are initiating research coverage of Almonty Industries with a Buy rating and a CAD 1.67 price target, which is derived using a blended NAV- and two-stage DCF-based approach. Considering the expansion of its own value creation by building a vertically integrated nano-tungsten oxide processing plant to supply the South Korean battery anode and cathode manufacturing industry would unlock additional value creation potential for Almonty, allowing the company to generate significant earnings growth, which is not yet reflected in the current share price, in our view. Almonty’s shares are currently trading at 1.82x and 5.5x 2024e revenues and EBIT, respectively, and we believe the stock needs to re-rate to reflect the company’s value creation prospects.
Almonty Industries is a Canadian-based mining, exploration, and development company that controls a portfolio of four high-grade tungsten projects in stable Tier 1 jurisdictions in South Korea and the Iberian Peninsula. The Group's flagship tungsten deposit is Almonty Korea Tungsten ("AKT"), which was one of the world's leading tungsten producers for more than 40 years, under the former name Sangdong Mine. After a planned restart in 2023e, AKT is expected to be the largest tungsten mine outside China.
Almonty Industries was able to conclude an off-take agreement for the South Korean production facility with The Plansee Group—one of the world's leading tungsten suppliers with 11,000 employees in 35 production facilities in 50 countries—at what we consider attractive conditions: With a minimum term of 15 years and a floor price of USD 235 per MTU, Almonty Industries expects a minimum estimated operating cash flow of USD 580mn over the term of the agreement. Since the agreement covers only ~50% of the production, this is for only half of the potential cash flows from the Sangdong Mine. Given South Korea being the largest per capita tungsten consumer globally, Almonty could hold the balance back for sale, f. ex. to the South Korean battery markets, in our view.
By commissioning its own vertically integrated nano-tungsten oxide processing plant ("Sangdong Downstream Extension Project") to supply the South Korean battery anode and cathode manufacturing industry, Almonty Industries would substantially enhance its value creation and profitability, according to our view. Annual production capacity is reported between 3,000 and 4,000 tonnes. Completion and commissioning are expected in the second half of 2023e. Once the downstream plant reaches full capacity from 2026e, it will provide up to 30% of non-Chinese and up to 10% of global tungsten supply, according to the company estimates
Almonty Industries is engaged in mining, processing and shipping of tungsten concentrate from its tungsten mine at the Los Santos Project.
Founded in 2010, Sphene Capital is a German based pure-play research house offering state-of-the-art research and evaluation services to European small- and mid-caps by avoiding typical conflict of interests of traditional investment banks.
As a general rule, analysts of Sphene Capital strive to understand companies better than any other analyst or investor before publishing their initiation reports. Therefore, the comprehensive initiation research reports comprise of 50-80 pages, including an extensive analysis of the value chain of the IPO candidate, its unique selling proposition, an elaborate analysis of suppliers and clients, a thorough SWOT analysis, a commercial due diligence (i. e. market and competitive analysis), an integrated financial forecast model and a profound company valuation (both DCF methodology and peer group multiples). Before publication, each of Sphene Capital’s research report will be double-checked by a fellow research colleague (“Four-eyes-principle”), ensuring highest quality and avoiding careless mistakes.
After initiation of research coverage, Sphene Capital publishes regular updates of 12-30 pages following relevant news flow from the issuer or major peers, f. ex. after acquisitions or after publication of quarterly results.
Due to Sphene Capital’s extensive experience in equity and bond research, the team has established longstanding contacts to all relevant market players, i. e. institutional investors, family offices and high net-worth individuals as well as journalists. To each of these groups, Sphene Capital’s research analysts have regular contacts during analyst and management roadshows or via daily phone calls. Finally, analysts publish articles in selected stock markets magazines and websites in which the analysts help issuers to improve their popularity on the German capital markets.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.