First Berlin – Almonty Industries Inc. Research Update (17/05/2019)

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 1.25 to CAD 1.35.

Q2 18/19 revenue at CAD13.1m (Q2 17/18: CAD17.3m) was close to our expectation but EBITDA from mining operations at CAD7.3m (Q2 17/18: CAD7.6m) was clearly above our forecast of CAD4.7m. This is a strong performance given that shipment volume and pricing were down 3.9% and 16.7% respectively, and is due mainly to a 41% q-o-q reduction in production costs. Over 60% of the cost reduction was attributable to the Los Santos mine where costs fell further than we had expected due to the transition from mining of fresh ore to processing of tailings. Meanwhile, development work at Sangdong demonstrates that the block models in the most recent technical report on the project (August 2016) are conservative. In our view this work is derisking the project and could facilitate funding at more favourable terms than would otherwise have been available. Pilot production of commercial grade concentrate is due to begin next month. We maintain our Buy recommendation and raise the price target to CAD1.35 (previously: CAD1.25) due mainly to the reduction in the cost base at Los Santos.