First Berlin – Almonty Industries Inc. Research Update (03/02/2020)

First Berlin Equity Research has published a research update on Almonty Industries Inc. (ISIN: CA0203981034). Analyst Simon Scholes reiterated his BUY rating and increased the price target from CAD 1.35 to CAD 1.45.

Almonty has received a binding commitment letter for USD76m from KfW IPEX-Bank for the project financing of the Sangdong tungsten mine in South Korea. Meanwhile Oesterreichische Kontrollbank AG is committed to providing an Import Credit Scheme cover guarantee based on the 10 year offtake agreement concluded with Global Tungsten and Powders in 2018. The interest rate on the KfW loan of 2.5% plus LIBOR is far below the double digit rates charged for recent financing of competing tungsten mining projects. In our view, this reflects the mine's lowest quartile cost curve position, the over USD75/MTU gap between the offtake agreement floor price and cash cost per MTU, as well as the average mineralisation grade, which at 0.5% is twice the global average. We expect completion of construction of the mine in 2021, thereby paving the way for the start of large scale production. Potential mine-life stretches beyond the middle of this century with annual production at over twice Almonty's current output. We maintain our Buy recommendation and raise the price target to CAD1.45 (previously: CAD 1.35) to reflect the reduction in risk implied by the KfW commitment letter as well as positive adjustments to our valuation model following discussions with management.