Production at the company’s Uis Tin Mine in Namibia had experienced some disruption as a result of coronavirus-related supply chain disruptions and lockdown restrictions, but a recent easing of those restrictions has allowed the operation to return to “full scale” production.
The ramp-up, which was ongoing when the coronavirus crisis hit, is now back on, and Viljoen is quietly confident that the rate of tin production from Uis can hit the 60-to-65 tonne per month target either towards the end of the third quarter of this year or into the fourth quarter.
Much depends on how much of an effect the virus is still having by then, but much too on the efficiency and ability to operate in difficult circumstances that AfriTin has already demonstrated.
“Namibia is a relatively easy place to curtail the spread of a pandemic,” says Viljoen.
“There are only two million people in the entire country, and there have only been 34 cases of coronavirus. Our mine is 200 kilometres from a major town.” That’s helpful when it comes to keeping a mine going in the context of a global pandemic, but what’s also helpful is Uis’s long track record of historical production. Namibians know this operation, they know what it does, how it works, and what the benefits of having it up and running are.
“They are very cognisant of the importance of mining,” says Viljoen.
In short, the Uis mine is back in business and if any mine anywhere has a good chance of staying in business then this is it.
So, what will that mean for shareholders?
For one thing the share price is now well off its March lows, although a sparse following in the retail space does mean that there’s not quite as much volume as Viljoen might like.
More importantly, it means cash is coming in and will continue to come in.
AfriTin despatched its fourth shipment of tin concentrate earlier this month, and with the ramp-up now underway again, product will be going out with increasing frequency.
That in turn will allow for the second phase of the mine’s development, the aim of which is to bring to bear the value of the huge resource base that still exists at Uis.
Phase one has two distinct aims: to iron out pressure points in the production process, and more importantly to demonstrate commercial viability.
“We’re making huge strides in terms of the optimisation of the plant,” says Viljoen.
“We’re expecting a 20% margin, and that’s just on the tin, with the tin price at around US$15,000. Add in the tantalum and the margin goes up quite substantially. Our C1 costs are running at around US$13,800 per tonne, but the bigger we make the throughput the more lucrative this operation will become.”
That newly arriving cashflow and the associated confidence in the margin allows Viljoen and his team the well-earned luxury of looking ahead to contemplate expansion.
“We are already working on the scoping study for phase two,” he says. “And I think we’ll be able to do it relatively quickly because of the knowledge we’ve gained in phase one.”
It seems likely too that the market will soon wake up and start rewarding this hard-won experience as the revenues start rolling in. The net present value for Uis phase one now stands at £100mln, which in itself is not to be sniffed at. How much more value will be added in phase two remains to be seen, but it’s likely to be highly significant.
In the meantime, AfriTin’s market capitalisation stands at a relatively modest £15mln or so, so it’s hard not to see a disparity in valuation.
In the background, of course, is the tin price, which has seen its ups and downs over recent months. Looking ahead though Viljoen is confident that the future’s relatively bright. He can foresee a price in the late teens before too long, he says, or even one that goes up into the early twenties.
True, the coronavirus continues to cast shadows across all sorts of horizons. But there are a few bright spots too. For a start, many US companies are now talking about repatriating semiconductor production from China, and to do that, they’ll have to start looking for their own sources of tin.
In that context, it’s a nice time for AfriTin to be hitting what Viljoen calls its “sweet spot.”
“Things are really starting to happen,” he says.