Earlier this month, afritin another important step towards upgrading the already impressive production at the Uis tin mine in Namibia.
The company is nearing the end of a drilling program designed to upgrade the resource to support an expanded production scenario that will bring tantalum and, most importantly, lithium into the equation in a major way.
For many years in the second half of the twentieth century, Uis was one of the most important mines in Namibia and one of the most important tin mines regionally, if not globally.
The tin price crash of the 1990s put an end to Afritin’s Uis mine, but it has now recovered and money is pouring in
Times are changing, however, and the tin price crash that put an end to tin mining in Cornwall in the late 1990s, so did Uis’ wages.
But then, a few years later, Afritin’s chief executive Anthony Viljoen came up with a group of young, energetic entrepreneurs.
They planned to reboot and were just young and fresh enough to think it would work, contradicting the prevailing wisdom in the fledgling mining industry which says that tin work is best left to the big boys. .
But Viljoen recognized what he saw at Uis as a “once-in-a-lifetime opportunity,” and he wasn’t about to let it end up as a footnote on a mining major’s spreadsheet.
Fast forward a few years and tin production is well established. That box can be checked, money is coming in and a track record of success is being built.
But now there’s a new twist, one that none of the oldies ever predicted. When Uis first had surgery, lithium was of no use to anyone. But boy has that changed.
Lithium remains one of the few commodities still firmly in bull market territory after all the ups and downs in the markets over the past few months.
That’s good news for Afritin. Because in addition to the tin and some tantalum, Uis also contains a very significant amount of lithium.
‘This source is going to be something very special,’ says Viljoen. “It is one of the top five sources of tin, lithium and tantalum worldwide. Our target resource is 200 million tons of ore.’
Usually, when lithium, tin and tantalum are found together in pegmatite mineralization, the structures are narrow and quite short.
But in Namibia, the ore from Afritin is hundreds of meters thick and goes hundreds of kilometers further. That makes it both one of the largest stand-alone tin ores and one of the largest stand-alone lithium ores anywhere in the world.
Quite simply, this means that the company will most likely be able to mine its lithium for free, with all costs borne by the sale of tin.
And if that wasn’t enough, it all happens very quickly.
With tin manufacturing already in place, the company has already overcome many of the potential hurdles other young start-ups face.
It knows the government, it knows the logistics, it knows the geology and to a large extent also knows the processing involved.
Officially, the plan to bring the lithium into the equation is called Phase 2 of development at Uis, with Phase 1 largely complete.
And if anyone questions the importance of the foundation Afritin laid at Uis with the completion of this first phase, consider that the operation had an EBITDA margin of about 50 percent at one point in the past year.
This is a business that is already running in a meaningful way and with plans to get much, much bigger.
Well, firstly, there is the planned expansion of the raw material from the existing 71.5 million tons to that 200 million tons.
Some of the money raised recently will go towards the completion of that work, which in itself will form the basis for further detailed economic research.
But Aftritin already has an idea of the parameters it will likely deal with once phase 2 is active.
An earlier preliminary economic assessment put the project’s net present value at $2 billion and an internal rate of return of 75 percent.
Those figures are based on plans to process 10 million tons of ore per year over a 14-year mining life, to produce a total of just under 275,000 tons of tin, 17,300 tons of tantalum and 1.1 million tons of lithium dioxide.
In this scenario, lithium would make up just over 60 percent of sales, with projected annual EBITDA of over $600 million and margins of over 64 percent.
These are big ticket numbers, so it’s perhaps somewhat surprising that the required capital expenditure is set at a relatively modest $440 million.
In the world of junior mining, such a number would of course be unattainable for most companies.
But not like that, Afritin. For starters, this is a business that is being built piecemeal. Market cap has already risen to over £60 million (at 4.1 pence) in recent years and was significantly higher than that for much of the summer.
Some value is already being recognized and the gap between market capitalization and project financing does not seem as unbridgeable as to some.
But more to the point, as the latest funding round points out, the likely funding partners are already in place.
Big names like Standard Bank and Orion have come on board in what is still relatively early for such an operation. Why? – because they want to get in position when the real action starts.
And that fits well with Viljoen’s approach.
“We’re not going to take small steps,” he says. “We’re going to be pretty daring in what we do.”
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