January 10, 2021 - 11:55am EST by
2021 2022
Price: 0.35 EPS 0.073 0.098
Shares Out. (in M): 1,180 P/E 4.76 3.55
Market Cap (in $M): 410 P/FCF 3.52 2.81
Net Debt (in $M): 60 EBIT 90 119
TEV ($): 470 TEV/EBIT 5.24 3.96

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Alphamin owns 84.14% of the Mpama Tin mine and concessions in the north-east of the DRC. The Mpama mine is the highest grade tin mine in the world and is producing ~3% of the world’s tin. The shares are trading at a 48% discount to our estimated Post-tax NPV8, with massive potential for resource growth and a quantum leap in metallurgical efficiencies. 

The tin market is currently very strong and the mine’s production is rising. We therefore expect Q4’s EBITDA to increase by more than 40% vs Q3, with strong cash generation. There are 89.9m strike C$0.40 warrants that are expected to be exercised prior to their expiry on January 22nd. This inflow plus strong operational cash flows will see the company debt-free by the end of Q2. 

Our model shows a forward dividend yield of more than 20% at current tin prices. 

With lots of news flow expected and strong dividends, the only negatives will be the DRC factor and modest tradability of the stock. 


Why the opportunity exists

The Mpama North Mine is situated in a remote part of the north-eastern DRC. This explains why the resource was overlooked by Belgian explorers and only discovered by artisanal miners in 2002. The mine therefore had to construct roads, repair colonial-era bridges and create supply lines over vast distances. 

The lack of infrastructure and poor management caused a long list of costly mistakes that drained the company’s finances and required an endless series of capital raisings. These mistakes were fundamental, starting with the exploration program that failed in a number of key aspects, such as underestimating the depth of the artisanal workings by 25m (a void equal to an 8 storey building). This was followed by the mistake to build an underground mine using the wrong mining method, instead of producing early cash flow from an open pit, followed by a correctly designed underground mine. And lastly, the poorly designed metallurgical plant is sending 1.2% Tin per ton to the tailings dam, worth at least $60m of lost revenue on an annual basis. 

To boot, the DRC tax authorities lagged the mine’s VAT refunds by $15m, while the company was desperately trying to raise fresh cash to pay its suppliers. The collapse of a bridge, arsenic penalties and the weakness in the Tin price added further pressure. It’s therefore understandable that investors grew tired of management’s upbeat forecasts.

So what’s changed?


New management

Alphamin has a new CEO and the mine appointed new management. The new team is providing regular forecasts and delivering to plan.


Metallurgy : New Fin Tin Recovery Plant

Management acknowledged that they were experiencing poor metallurgical recoveries and are building a Fine Tin Recovery Plant (FTRP) at a cost of $4.6m. The plant is expected to commence operation in Q2 and management forecast an additional 400 – 800 tons of Tin contained in a low grade concentrate from this plant. We view this as a conservative estimate and would be surprised to see anything less than 800 tons. The plant should therefore pay for itself in 3 months.  


However, even at a recovery of 800 tons, that still won’t address the remaining 3,000 tons of recoverable tin that will be going to the tailings dam, worth a whopping $60m. 


We are confident that management will realize that the metallurgical challenge can be addressed by installing a Tomra pre-concentration plant and through a much coarser milling of the ore (700 – 900 microns, compared to 425 microns). The rich ore of the Mpama mine has a high nugget factor. This was seen in the drill cores, where quarterized cores from the same initial drill length would show a material variation in grade. 


The art in Tin metallurgy is somewhat similar to diamond metallurgy, where you don’t want to smash a 100 carat stone into a thousand pieces. The following picture is of a thin section from a low-grade Australian Tin project. The Cassiterite (SnO2) bleb extends beyond 1900 micron on the left hand side of the picture. It is obvious that if this bleb went through a plant set to 425 micron, you would end up with 5 or more separate pieces, which explains the excessive grade reporting to Mpama’s fines.


Thin section showing a low-grade Cassiterite bleb from an Australian Tin project running at 1/10th the grade of Mpama North. As can be seen, the bleb is more than 1900 micron in extent.


In a Tomra plant, the brown Cassiterite (78.7% Tin by weight) can be easily discerned by its color. Given Mpama’s rich ore, the Tomra plant will be able to produce a very high grade pre-concentrate, with a salutary impact on overall recoveries. This will also discard 30% - 40% of the ore as gangue, thereby increasing the effective mill capacity, while reducing the milling and reagent costs. This will also relieve the pressure on the mine’s logistical supply lines.


We believe that Alphamin’s Mpama Mine shares similarities with Minsur’s famous San Rafael Tin Mine in Peru. The following table highlights the extent of Mpama’s metallurgical inefficiencies, when compared to San Rafael. We estimate Mpama’s metallurgical losses for 2020 at $64m, compared to EBITDA of $65m and PBT of just $14m. 


The table below uses a flat Tin price of $20,000 per ton to provide a consistent basis for comparison over several years. Hence, the discrepancy between the $64m at last year’s average price of $16,545/ton and $77m (at $20,000) in the table. (Current Spot price : $21,325/ton).








Minsur : San Rafael Mine






Tons Milled






Ore Grade (% Tin)






Metallurgical Recovery (%)






Tailings grade (% Tin)






Less : Realistic residual of 0.15% Tin






Excess Tailings grade (%Tin)






Value lost to tailings ($ per ton milled)






Value lost to tailings ($m)












Alphamin : Mpama North Mine





Tons Milled





Ore Grade (% Tin)





Metallurgical Recovery (%)





Tailings grade (% Tin)





Less : Realistic residual of 0.15% Tin





Excess Tailings grade (%Tin)





Value lost to tailings ($ per ton milled)





Value lost to tailings ($m)












Our Earnings model assumes that the Metallurgical Recovery Factor will rise to 72% in Q1 2021, before the installation of the FTRP, in line with Mpama’s original Business Plan. The additional 800 tons of metal will take recoveries to 77%. We expect the mine to install a Tomra plant by 2023, resulting in further gains in the MRF to at least 86%. 


For context, Mintek’s original metallurgical test work showed that recoveries of “at least 80%” could be expected from Mpama, without any mention of a Tomra plant. (43-101 2019, p.113)


The crux is that one isn’t paying for this metallurgical upside. The rich tailings are thankfully also not being used for cemented backfill, as the mine opted to use rock fill for the mined-out underground stopes. So the tailings can be reprocessed at any time and already represents more than $100m of embedded value, waiting to be unlocked.  

Milling Capacity

Management indicated that throughput will rise by 10% through de-bottlenecking the production plant. Our model therefore assumes 408ktpa (2020 +10%) for 2021 – 2024 (inclusive). After that we expect Mpama South (see below), to enable an increase in tonnage to 600ktpa, but at a lower combined ore grade of 3%. If the Tomra plant does what it says on the tin, the 600kt of ore will translate to roughly 400kt of post-Tomra mill feed. This would mean that the existing plant will be able to accommodate the increased ore production without requiring major capex.  


Mpama South

The 43-101 Statement of 2019, p.132, contains a bold timeline which postulates drilling the 6000m during 2020, the establishment of a small box cut and developing a 50m mine portal. This shallow drilling phase would then be followed by trial mining by March 2021. While these timelines were preliminary in nature, the drilling has already started and we feel very confident that steady state production of 16kt per month from Mpama South is entirely achievable by 2025. 


We also believe that the Tomra plant would be a great help in ensuring that the metallurgical streams from North and South mines are treated optimally. It could also be tweaked to separate ore with excessive arsenic or lead content, to avoid smelter penalties. With Mpama South starting off as an opencast operation from the box cut, the On-Mine unit costs will be much lower than at Mpama North, off-setting the lower ore grades. 


At the same time the increased overall tonnage will help to absorb overheads and thus lower Mpama North’s pay limit. This will have a meaningful impact in increasing the economically mineable tonnages per vertical level beyond the current Resource halo. It will also increase mining flexibility at North Mine to mine the boudin-shaped ore bodies to a more rigid plan, to improve the rock mechanics as the workings extend to deeper levels. Again, the Tomra plant will allow this planned increase in waste mining to be easily sorted, without causing grade dilution.


We expect several Mpama South look-alike pits to be established along the highly prospective regional North/South mineralized arc. Mpama will therefore become a much larger hub and spoke operation with several satellite pits. The current valuation doesn’t reflect this scenario in any way.



The mineral endowment at Mpama is truly exceptional, with more than 2% of all drill intersections carrying more than 30% Tin and one intersection grading 60% Tin. This is supreme “elephant country”, with several historic and current artisanal Tin mines stretching over tens of kilometers.



With Mpama North in production, Alphamin’s geologists now have a high quality base camp from which to conduct their activities and avoid the rookie errors of the past. Their systematic plan includes;

  1. A 6000 meter drilling program commenced in Q3 2020 on Mpama South. This will test the lateral continuity of the previously intersected ore body, where very high Zinc and Lead values were encountered. The hope is that this drilling could also bridge the 650m gap between Mpama North and Mpama South, at depth. A value of 3.57% Tin was intersected in the gap between North Mine and Mpama South at a depth of 75m.

  2. A drill cubby is being prepared on a footwall drive in North Mine, from which extensive underground drilling will be performed. This will test the lateral and depth extent of the ore body, which remains open at depth and to the north. Shallower holes will support production planning.  

  3. The Oso prospect lies 700m north of Mpama North. This will be drilled during this year. 

  4. The Wedge Area is an area immediately south of Mpama North’s declared Resource (see map below). This area was previously drilled, but excluded from the formal Ore Resource calculations due to various geological shortcomings.

  5. Alphamin has constituted an exploration committee under Prof Laurence Robb, a world-renowned specialist on the tin fields of Myanmar. The program has commenced with a close spaced soil geochem survey over the entire license area. This is being correlated with previously gathered geophysical data and interpreted using the known signatures of Mpama North Mine and Mpama South. Initial results point to 3 Mpama North-type prospects.


We expect this process to add at least 50kt of contained Tin in the Indicated Resource category to the current Measured & Indicated Resources by June next year. The reason for our optimism is not only the exceptional tenor of the regional mineralization, but the fact that the ore is so shallow and can therefore be drilled to high precision in a short space of time. This compares to the M&I Resource of 199kt, basis June 2019. We expect this pace of Net Resource Growth to be maintained, with new resources handsomely outpacing depletion through mining for at least the next decade.


We expect exploration news flow to have a material bearing on the stock price, with >5% Tin discoveries likely on a regular basis.  

Map showing the Wedge Area (hatched) that was excluded from the formal Ore Resources. 

The Tin Market

We are skeptical of many of the figures proffered by various authorities on the Tin market. 

Movements in the price of Tin are often poorly correlated to the level of published exchange stocks, supposed supply deficits and “shock announcements” of abrupt curtailments of production or sales by the Chinese or Indonesian smelters. Anybody embarking on an excursion into the world of Tin should find it instructive to study the era of the International Tin Council Buffer Stock Manager and the factors surrounding the Buffer Stock’s bankruptcy in October 1985. 



Our optimism for the medium-term outlook for Tin is based on a fundamental assessment of the growth in demand from the metal’s application in tin-based solders for circuit boards and potential application in future battery technologies. In a 2018 study by MIT commissioned by Rio Tinto, Tin was highlighted as the metal that stood to benefit the most from new technologies.