AfriTin Mining Limited (LON: ATM)

AfriTin Mining Limited is an FTSE AIM All-Share listed Guernsey-based mining company. The Company is focused on mineral development with a portfolio of vanadium, tin, coal assets and other interests in Southern Africa. The Company’s projects include the Uis Tin project and Mokopane Tin.

Growth Prospects

• Significant Progress in Uis Tin Project: ATM had made significant progress to potentially increase the current lithium and tantalum inferred resource and confidence level for potentially significant by-product elements. Moreover, the Company had to bring mineral deposits into production by declaring an ore reserve and bringing the Phase 1 pilot plant into production at the Uis mine site.
• Strong Liquidity Profile: The Company’s current ratio of 3.46x remained significantly ahead of the industry median of 1.80x during H1 FY22. Moreover, the Company had a negligible net debt on the balance sheet as of 31 August 2021.
• Robust Tin Production: The operation of the Phase 1 pilot processing plant achieved production of 368 tonnes of tin concentrate during H1 FY22, more than the expectations.
• Positive Industry Dynamics: Tin Futures surged by around 103% over the last one year, which may benefit the top-line revenue of ATM.

Key Risks

• Volatile Commodity Price: The high volatility in commodity price could have an adverse impact on the top-line revenue of the Company.
• Expected Federal Reserve Tapering: The expected Federal tapering at the pace of USD 15 billion per month starting later this month may adversely impact the equity markets. Moreover, the Bank of England decided to keep interest rates unchanged in its latest meeting.
• Environmental Compliance: The failure to adopt or apply ethical standards and environmental compliance may affect the reputation of ATM.
• Operational Risk: The growth trajectory can be impacted by various factors, such as increasing freight rates and operational risk regarding production stoppages or equipment failures.

Now, we will analyze the Key Fundamental Statistics & Shareholding Pattern of AfriTin Mining Limited.

Canaccord Genuity Wealth Management is the most significant shareholder as it holds nearly 130.47 million shares as of 30 September 2021.     

H1 FY22 Financial & Operational Highlights (for the six months ended 31 August 2021, as of 27 September 2021)

 (Source: Company result)

• Significant Jump in Total Revenue: ATM’s total revenue surged by around 468% to £5.1 million during the period.
• Positive Free Cash Flow: The Company had generated a positive free cash flow of around £560,000 during H1 FY22.
• Decent Cash Balance: The Company had a decent cash balance of £6.3 million as of 31 August 2021.

Share Price Performance Analysis

 (Source: REFINITIV; Analysis done by Kalkine Group)

On 10 November 2021, at 08:42 AM GMT, ATM’s shares were trading at GBX 5.00, up by around 2.04% from the previous day closing price. Stock 52-week High and Low were GBX 7.40 and GBX 2.05, respectively.

From a technical perspective, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, reflecting an upside momentum in the stock price.

Over the last one year, ATM’s stock price had delivered a positive return of around 136.36%, while the FTSE AIM All-Share index (benchmark index) had produced a return of about 26.01%, and FTSE All-Share Industrial Metals & Mining (benchmark sector) had generated a return of approximately 62.38%.

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative) 

Business Outlook

The Company had made significant progress on Lithium and tantalum test work programmes to raise the confidence levels of their by-product potential. Meanwhile, ATM has initiated Uis Phase 1 expansion project, and the commissioning of the project is anticipated to get completed by Q2 2022. More Recently, the Company had finalised a flowing design for a pilot tantalum concentrate production facility at Uis, with implementation planned for Q4 of 2021. Considering the penny nature of the stock, ATM may undergo adverse corrections because of the rising interest rates prospect, global inflation, and Evergrande fiasco. Thus, it may depend on the risk appetite of the investors to take a reasonable position in this company having several operational growth catalysts.

Considering the accelerated progress of the Uis expansion project, robust revenue jump during H1 FY22, more-than-expected tin production, positive free cash flow, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on AfriTin Mining Limited at the current price of GBX 5.00 (as on 10 November 2021 at 08:42 AM GMT), with lower-double digit upside potential based on 5.64x EV/NTM sales (approx.) on FY22E sales (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peers/ Industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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