November 01, 2024
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Afritin plans to go bigger with lithium production

October 27, 2022
Afritin plans to go bigger with lithium production

Earlier this month, Afritin took another significant step towards upgrading the already impressive production at its Uis tin mine in Namibia.

The company is nearing the end of a drilling programme that's designed to upgrade the resource to support an expanded production scenario that will bring tantalum and, more significantly, lithium into the equation in a major way.

For many years in the latter part of the twentieth century Uis was one of the most significant mines in Namibia and one of the most significant tin mines regionally, if not globally.

Times change, though, and the tin price crash which put an end to tin mining operations in Cornwall at the end of the 1990s also put paid to Uis.

But then, a few years later, along came Afritin's chief executive Anthony Viljoen with a band of young, energetic entrepreneurs.

They planned to start the whole thing up again and were just young and fresh-faced enough to think it would work, much against the grain of prevailing wisdom in junior mining, which says that tin operations are best left to the big boys.

But Viljoen recognised 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 some mining major's spreadsheet.

Fast forward a few years and tin production is well established. That box can be ticked, cash is coming in and a track record of success is being built up.

But there is a new twist now, one that none of the old timers would ever have predicted. Back when Uis was first operated, no-one really had any use for lithium. But boy has that changed.

Lithium remains one of the few commodities still firmly in bull market territory after all the ups and downs of recent months on the markets.

Which is good news for Afritin. Because, besides the tin, and some tantalum, Uis also contains a very significant endowment of lithium.

'This resource is turning into something quite special,' says Viljoen. 'It's one of the top five tin, lithium and tantalum resources globally. Our target resource is 200million tonnes of ore.'

Usually, when lithium, tin and tantalum are found together in pegmatite mineralisation, the structures are narrow and fairly short.

But in Namibia, Afritin's orebody is hundreds of metres thick and goes on for hundreds of miles. That makes it both one of the largest standalone tin orebodies, and one of the largest standalone lithium orebodies anywhere in the world.

Quite simply, it means that in all likelihood the company will effectively be able to mine its lithium free of charge, with all costs borne by the sales of tin.

And, as if that wasn't enough, it's all happening very quickly.

With production of tin already in place, the company has already cleared many of the potential hurdles that other junior start-ups face.

It knows the government, it knows the logistics, it knows the geology and to a large extent it knows the processing that will be involved too.

Officially, the plan to bring the lithium into the equation is called Phase 2 of development at Uis, with Phase 1 largely completed.

And if anyone doubts the significance of the foundation that Afritin has laid at Uis by the completion of this first phase, consider that at one point in this past year the operation was running at around a 50 per cent EBITDA margin.

This is a company that's already up and running in a meaningful way, and with plans to go much, much bigger.

Well, first off there is the planned expansion of the resource from the existing 71.5million tonnes to that 200million figure.

Part of the money that was recently raised will go towards completing that work, which will itself underpin further detailed economic study.

But Aftritin already has some idea of the parameters it's likely to be dealing with once Phase 2 is up and running.

An earlier preliminary economic assessment put the net present value of the project at $2billion and an internal rate of return of 75 per cent.

Those figures are based around plans to process 10million tonnes of ore per year over 14 year mine life, to produce a total of just under 275,000 tonnes of tin, 17,300 tonnes of tantalum, and 1.1million tonnes of lithium dioxide.

Under this scenario, lithium would account for just over 60 per cent of revenues, with annual EBITDA expected to run at over $600million, and margins at upwards of 64 per cent.

These are big ticket numbers, so it's perhaps somewhat surprising that the capital expenditure required is set at a comparatively modest $440million.

Of course, in the world of junior mining, a number like that would in any event be unachievable for most companies.

But not so, Afritin. For one thing, this is a company that's being built piecemeal. The market capitalisation has already jumped to over £60million (at 4.1p) over the past few years and it was significantly higher than that for a good portion of the summer.

A certain amount of value is already being recognised and the gap between market capitalisation and project finance doesn't look as unbridgeable as it does for some.

But more to the point, as the latest round of financing indicates, the likely funding partners are already in place.

Big names like Standard Bank and Orion have come on board at what for an operation like that is a relatively early stage. Why? – because they want to be able to get position when the real action starts.

And that sits well enough with Viljoen's approach.

'We're not going to take small steps,' he says. 'We're going to be pretty bold in what we do.

*This article was published by thisismoney

 

 

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Last modified on Thursday, 27 October 2022 17:05
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