I have been staring curiously at this space for quite a while, and all I see is more red flags than a May Day parade. Maybe the metal recyclers have less risk? Just started looking...
It's a time period of rolling bubbles in the commodity supercycle, just gotta have exposure to lots of elements, and hope that one of your elements is the next squeeze I suppose.
Might the supermajors-- who own bits of everything-- be a valid play for "minor metals"? I started nibbling into them a few years back attempting to break my "two guys and a dog in a pickup truck exploration fantasy" addiction.
I think most metals will benefit from the commodity supercycle. I am a small cap investor because I believe mispricing is more likely there. But if I put on my macro hat, sometimes the bigger names are the best way to invest in a macro theme, because a small cap might stay mispriced and miss the theme. I'm not against the supermajors, it's just not my style. Any change in tin prices won't move the needle on a major lead miner. But at the Covid lows, Freeport MacMoran was $6, so you can certainly do well in the big names.
correct me if i'm wrong, but i seems that you are viewing shares in these 2 companies as lottery tickets, or more politely we could say they are call options on tin. an important question is whether the jurisdictional/regulatory issues are such that the call options have a probabilistic expiry.
since i don't have enough money to take meaningful positions in EVERY idea, that devolves to whether this is a better bet than the many alternatives available. given all you've said, it appears to me that your own answer would be "no, not a better bet."
I've gotten a lot of responses to this article, some very passionate. The free cash flow yield on these mines, even at current prices is very decent. So it's not quite a lottery ticket. The expiration date is an interesting concept, but tin could easily get put on a critical minerals list for Australia, and the Congo situation is somewhat stable. I've got too much oil and not enough metals. I'm not 100% happy with my copper pick HBM, but I'm not 100% happy with these picks either. I haven't started a position in these yet, but the idea is growing on me. I would probably 50/50 split the two.
This is what I did: 50/50 a few years ago. So far, very happy with my dividends on AFM, nonplussed on how MLX is doing. Still think it’s worth 1% positions.
Funny way of looking at MLX — it seems you haven’t decided whether to value it based on peak or trough earnings.
May I humbly suggest focusing a bit more on the present? Even at a tin price of USD 28k (i.e., today’s price) and quarterly production of 2,500 tonnes (i.e., 10% below Q3 production based on somewhat lower grade assumptions), MLX should generate an annualized FCF of over AUD 50m (based on its 50% share of Renison). Net cash and listed shares at the end of Q3 amounted to as much as AUD 207m. (Yes, even the current net cash of AUD 197m is over AUD 54m higher than the cash figure you provided.)
Thus, with 897m outstanding shares at AUD 0.40, the EV is just AUD 150m, resulting in a FCF yield to EV of 33% at current prices. If anyone knows of a higher-yielding, long-life operation (more than 10 years) in a Tier 1 jurisdiction, I’d be very interested in a hint.
The downside risk is limited to management’s use of cash. Yes, they have been prudent, but this means they are clearly reluctant to overpay. Their buyback kicks in at AUD 0.40. They purchased most of the First Tin shares at GBP 0.04, and despite the interim slump in the tin price, those shares still trade at GBP 0.054. Additionally, they launched an opportunistic offer to acquire 41% of the Renison JV, which would be highly value-accretive if they succeed.
My vote is for AFM. The management is next level good. The mine is safe, the surrounding community absolutely loves them, the geology of Alphamin is a freak of nature, nowhere else in the world do you get those grades. Not all African countries are the same, the CEO hostage situation was not DRC. Best part at current levels you get around a 9% div yield.
I have been staring curiously at this space for quite a while, and all I see is more red flags than a May Day parade. Maybe the metal recyclers have less risk? Just started looking...
It's a time period of rolling bubbles in the commodity supercycle, just gotta have exposure to lots of elements, and hope that one of your elements is the next squeeze I suppose.
Might the supermajors-- who own bits of everything-- be a valid play for "minor metals"? I started nibbling into them a few years back attempting to break my "two guys and a dog in a pickup truck exploration fantasy" addiction.
I think most metals will benefit from the commodity supercycle. I am a small cap investor because I believe mispricing is more likely there. But if I put on my macro hat, sometimes the bigger names are the best way to invest in a macro theme, because a small cap might stay mispriced and miss the theme. I'm not against the supermajors, it's just not my style. Any change in tin prices won't move the needle on a major lead miner. But at the Covid lows, Freeport MacMoran was $6, so you can certainly do well in the big names.
correct me if i'm wrong, but i seems that you are viewing shares in these 2 companies as lottery tickets, or more politely we could say they are call options on tin. an important question is whether the jurisdictional/regulatory issues are such that the call options have a probabilistic expiry.
since i don't have enough money to take meaningful positions in EVERY idea, that devolves to whether this is a better bet than the many alternatives available. given all you've said, it appears to me that your own answer would be "no, not a better bet."
I've gotten a lot of responses to this article, some very passionate. The free cash flow yield on these mines, even at current prices is very decent. So it's not quite a lottery ticket. The expiration date is an interesting concept, but tin could easily get put on a critical minerals list for Australia, and the Congo situation is somewhat stable. I've got too much oil and not enough metals. I'm not 100% happy with my copper pick HBM, but I'm not 100% happy with these picks either. I haven't started a position in these yet, but the idea is growing on me. I would probably 50/50 split the two.
This is what I did: 50/50 a few years ago. So far, very happy with my dividends on AFM, nonplussed on how MLX is doing. Still think it’s worth 1% positions.
Funny way of looking at MLX — it seems you haven’t decided whether to value it based on peak or trough earnings.
May I humbly suggest focusing a bit more on the present? Even at a tin price of USD 28k (i.e., today’s price) and quarterly production of 2,500 tonnes (i.e., 10% below Q3 production based on somewhat lower grade assumptions), MLX should generate an annualized FCF of over AUD 50m (based on its 50% share of Renison). Net cash and listed shares at the end of Q3 amounted to as much as AUD 207m. (Yes, even the current net cash of AUD 197m is over AUD 54m higher than the cash figure you provided.)
Thus, with 897m outstanding shares at AUD 0.40, the EV is just AUD 150m, resulting in a FCF yield to EV of 33% at current prices. If anyone knows of a higher-yielding, long-life operation (more than 10 years) in a Tier 1 jurisdiction, I’d be very interested in a hint.
The downside risk is limited to management’s use of cash. Yes, they have been prudent, but this means they are clearly reluctant to overpay. Their buyback kicks in at AUD 0.40. They purchased most of the First Tin shares at GBP 0.04, and despite the interim slump in the tin price, those shares still trade at GBP 0.054. Additionally, they launched an opportunistic offer to acquire 41% of the Renison JV, which would be highly value-accretive if they succeed.
All good points, thank you! I valued at peak because tin barons believe in the macro story.
My vote is for AFM. The management is next level good. The mine is safe, the surrounding community absolutely loves them, the geology of Alphamin is a freak of nature, nowhere else in the world do you get those grades. Not all African countries are the same, the CEO hostage situation was not DRC. Best part at current levels you get around a 9% div yield.
All good points. Thank you
Regarding Alphamin
DRC has got a good deal with this company.
5% ownership free of charge and ahigh tax rate of 30% plus an excess rate if tin prices exceed a certain level which will be 35000 nest year
Look at the copper companies in the country.
Slavery has ended and sharing of profits in underdeveoped counteies will be more common
Yeah, Africa is the new frontier, fortunes to made and lost