IDEAS FOR SMALL CAPITALIZATION: Afritin plans to increase lithium production

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

The company is nearing completion of a drilling program designed to upgrade the resource to support an expanded production scenario that will significantly add tantalum and, more importantly, lithium to the equation.

For many years in the second half of the twentieth century, Uis was one of the most significant mines in Namibia and one of the most significant tin mines in the region, if not the world.

Times change, however, and the fall in tin prices that brought an end to tin mining in Cornwall in the late 1990s also benefited Uis.

But then, a few years later, along came Afritin CEO Anthony Viljoen with a group of energetic young entrepreneurs.

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

But Viljoen recognized what he saw in Juis as a “once-in-a-lifetime opportunity,” and he wasn’t going 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. This box can be set, the money is coming in and the track record of success is accumulating.

But now there is a new twist that none of the old timers would have ever predicted. When UIS was first operated on, no one needed lithium. But everything has changed for the boy.

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

Which is good news for Afritin. Because in addition to tin and a small amount of tantalum, Uis also contains a very significant supply of lithium.

“This resource is turning into something very special,” says Viljoen. “It is one of the five largest tin, lithium and tantalum resources in the world. Our target resource is 200 million tons of ore.”

Typically, when lithium, tin, and tantalum occur together in pegmatite mineralization, the structures are narrow and fairly short.

But in Namibia, the Afritin ore body is hundreds of meters thick and stretches for hundreds of miles. This makes it both one of the largest single tin ore deposits and one of the largest standalone lithium ore deposits in the world.

Simply put, this means that in all likelihood the company will be able to effectively mine its lithium for free, with all costs covered by the sale of tin.

And as if that wasn’t enough, it all happens very quickly.

Since sheet metal production is already established, the company has already removed many of the potential hurdles other young startups face.

He knows the government, he knows the logistics, he knows the geology and to a large extent he knows the processing that will be involved as well.

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

And if anyone doubts the size of the foundation Afritin has laid in Uis after completing this first phase, consider that at one point last year EBITDA margins were around 50 percent.

This is a company that is already in business and has significant expansion plans.

Well, first of all, there are plans to expand resources from the existing 71.5 million tons to this 200 million.

Part of the money that was recently raised will go towards the completion of this work, which itself will form the basis of further detailed economic research.

But Aftritin already has some idea of ​​the parameters it will likely be dealing with when Phase 2 is launched.

An earlier preliminary economic assessment showed the project had a net present value of $2 billion and an internal rate of return of 75 percent.

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

Under this scenario, lithium would account for slightly more than 60 percent of revenues, annual EBITDA is expected to be more than $600 million, and margins are expected to be more than 64 percent.

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

Of course, in the world of junior mining, such a number would be out of reach for most companies anyway.

But not like that, Afritin. On the one hand, this is a company that is being built piecemeal. The market capitalization has already jumped to more than £60m (at 4.1p) over the past few years, and has been well above what it has been for much of the summer.

Some value has already been recognized, and the gap between market capitalization and project funding doesn’t seem as insurmountable as some might think.

But more than that, as the latest round of funding shows, there are already potential funding partners.

Big names such as Standard Bank and Orion have signed on to what is a relatively early stage operation. why? – because they want to get a position when the real action starts.

And that meshes well enough with Viljoen’s approach.

“We will not take small steps,” he says. “We’re going to be pretty bold in what we do.”