Alphamin Resources: Dipping My Toe Into Tin

Growing Production Into A Tin Bull Market, With A Side Of Geopolitical Risk

Overview

• Alphamin Resources is a low cost producer of tin with the highest grade tin mines in the world.

• The mines are located in Congo, which creates some geopolitical risk.

• The tin supply and demand picture shows a deficit that looks like it will widen moving forward.

• Alphamin pays a 5.5% dividend that is set to grow in coming years.

• They recently brought the Mpama South mine online, which boosts the company’s annual production by approximately 50%.

• Shares look cheap today, and I expect the increased production will show up in the financials in the back half of 2024.

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I haven’t made it a secret that I’m bullish on most commodities with a three to five year timeframe. I have been focused on oil and coal, but I have been looking for opportunities in other commodities as well. That has led me to the tin sector, and Alphamin Resources. The company has the highest grade tin mines in the world, and it is a low cost producer. The location of the mines in Congo does add some geopolitical risk, but if the company’s recent track record is any indication, management will be able to handle potential complications.

Alphamin trades on the Toronto Venture Exchange (ticker: AFM.V) or on the US OTC market (ticker: AFMJF). Shares have had a big run over the last six months as the tin price went higher, but I have been buying a bit with the recent pullback over the last month. The supply and demand picture for tin looks very favorable for a producer like Alphamin over the next couple years, and they just started production at the Mpama South in Q2, which is set to boost the company’s tin production by approximately 50%.

This is going to start to show up in the Q2 results, but it will become obvious in the results for the second half for 2024. I think we will see increased capital returns (likely in the form of increased dividends and potentially buybacks). Shares currently yield between 5.5% based on the last twelve months, and I think the forward yield over the next twelve months could be more than that. If tin prices run higher over the next couple years, I think we could be looking at a cash cow for investors. Alphamin is a small position for now, but I’m looking to add shares in coming weeks.

Political Risk

Like some of the other investments I have made over the last year, Alphamin does carry some political risk, due to the location of their mines in Congo. There was even an attempted coup in recent weeks, which involved three American citizens (allegedly with CIA ties). I am reluctant to invest in a situation like Alphamin where things could get spicy, but a couple things convinced me to start a position in the company:

• High grade, low cost mines

• The catalyst of the new Mpama South mine coming online and boosting production by more than 50%, which should lead to more dividends and potentially buybacks.

• There are very few other options for direct exposure to tin. A couple investors I follow have talked about Metals X (ticker: MLXEF), which is based in Australia, but I found Alphamin to be more attractive today.

Even with all those factors, the position is small, and will stay on the smaller side even if I buy more from here. For the readers that are on Twitter, you can dig up a lot of interesting information by typing Alphamin’s ticker into the search bar. This was especially helpful when I was trying to dig into the geopolitical risk and potential complications for Alphamin. For investors that are interested, this full thread stood out and it’s definitely worth a read here.

I have to give credit to Peter (whose pronouns are Tin/Baron :) for a detailed look on the current situation in Congo, and why he thinks it’s unlikely to impact Alphamin. He talks about there only being one route for M23 (the rebels) to get to Alphamin’s Bisie mine, which is very remote and has thick tree cover between the areas controlled by rebels and the mine.

Western people often quote distances between the conflict and Bisie, as though it's a 90 minute drive up the interstate…. Rubaya is a 50km/2hr drive from Goma. It takes so long, partially because the roads are shit, but there's lots of roads in/out. Bisie - I only posted the logistics camp below which is >30km from the mine - is more than 8 hours away with MUCH shittier roads.

- @Peter52834033 on Twitter

One other things he points out is how the Congolese and South African governments benefit from Alphamin’s production, and why they will protect their interest in the mine. The IDC, a government parastatal promoting industrial development (basically a South African NGO from what I can tell, and 10.9% owner of the Bisie Mine) and the Congolese government (5% owner) would like to avoid any issues from the current conflict expanding to the Bisie Mine. There’s lots of good information out there on Alphamin if you know where to look, but one of the biggest reasons I find the company attractive today is the supply and demand imbalance that looks like it is only going to get wider in coming years.

Tin Supply