Four mining assets plus several value triggers for Andrada Mining
“…Further exploration is underway, funded by the fresh revenue channels opened this summer. Production at the pilot plant continues to ramp up. And an off-take agreement may be not too far down the road…”
Andrada Mining Limited (AIM:ATM) has been a rare ray of light in the small cap natural resources sector this year, taking purposeful strides towards defining the potential of a set of assets prospective for lithium located in the south-western African state of Namibia. Up nearly 45pc over the past 12 months since rebranding as a lithium exploration and production company, ATM’s ongoing tin production has also recorded robust results. Is future progress priced in, or is this a trade with further upside?
ATM has four mining assets, all located in the Erongo region running along the Namibian seaboard. The company’s flagship Uis licence is a fully operational mine producing more than 1,000 tonnes of contained tin each year. With significant lithium and tantalum by-produce, ATM believes the mine has the potential to become a global lithium supplier. The company is working to increase the licence’s current Mineral Resource Estimate (MRE) of 138 Mt to at least 200 Mt.
Lithium Ridge and Spodumene Hill, both located within 35 km of Uis, are historic tin and tantalum producers, but also prospective for lithium-bearing minerals including spodumene, petalite, and lepidolite. Brandberg West, a largely under-explored 35,000 hectare licence, was in production during the second half of the last century, peaking at 1,249 tonnes of tin and tungsten in 1978. ATM believes the deposit is open-ended, at depth and along the strike.
The company’s primary targets are all key transition metals. Ever increasing demand for lithium is being driven by its use in electric vehicle batteries and renewable energy storage, but it is also essential for ceramics, glass, lubricants, metallurgical polymers, and pharmaceuticals. Tin’s high ductility, corrosion resistance, and low toxicity make it suitable for the production of electronic devices, circuitry, semiconductors, soldering, lead-acid batteries and food packaging. Tantalum is used in high-tech devices such as smartphones, laptops, and gaming consoles. Its corrosion resistance, high melting point, and ability to store and release electrical charges make it critical for high-performance and high-temperature applications like aerospace.
ATM is led by CEO Anthony Viljoen, familiar to TMS readers as a co-founder of Bushveld Minerals (AIM:BMN). He is also a former CEO and founding director of Australian-listed Lemur Resources. Non-Executive Chairman Glen Parsons is CEO of Awale Resources, a TSXV-listed West African gold explorer.
AfriTin becomes Andrada
ATM’s reorientation was set in motion by significant lithium discoveries at Uis, Lithium Ridge and Spodumene Hill last year. The company believes all three mining licences contain prolific pegmatite occurrences host to lithium, tin, and tantalum mineralisation. Petalite and spodumene appear to be the dominant lithium minerals. The company changed its name from AfriTin Mining to Andrada Mining last December, a nod to José Bonifácio de Andrada e Silva, the Brazilian mineralogist and professor who first categorised petalite and spodumene.
ATM is looking for a strategic partner with appropriate technical and financial capabilities to help the company accelerate the development of its lithium opportunities on the way to becoming ‘a 10 million tonnes per annum Run Of Mine Company of global significance’. It raised $22.8m last September to fund exploration campaigns across all of its licences, setting as a key objective for 2023 the commissioning of a lithium pilot plant at Uis able to process at a rate of 20 tonnes per hour and produce at least 2,400 tonnes per year. Such a plant would have the potential to generate annual revenue of $5m, assuming an average grade of 4pc lithium oxide and a petalite price of $2,000. The company also undertook to seek off-take agreements for petalite.
By expanding production beyond tin ATM hopes to guard against its present vulnerability to swings in the price of a single commodity. As the price of tin fell by a third the company’s financial results for the 2023 financial year (ended 28 February 2023) reported a decrease in revenues despite higher production.
A expansion in its crushing and screening circuit helped ATM record a year-on-year 23pc increase in tin concentrate production to 960 tonnes, and an 22pc increase in contained tin to 586 tonnes. Exports were up, with 33 shipments compared to 29 shipments in FY 2022. Processing plant production capacity increased by 70pc. But a 34pc decrease in the value of tin reduced revenue to £9.8m (FY 2022: £13.6m), and pushed EBITDA to a £5.9m loss (FY2022: £2.6m loss).
ATM doubles down on lithium
This year, however, the company has made good on its promise to aggressively pursue its lithium venture.
Following a 7,000 metre drilling programme undertaken last year to expand and increase the main ‘V1/V2’ pegmatite deposit currently being mined at Uis, ATM began 2023 by announcing an updated lithium, tin, rubidium, and tantalum MRE for the mine. The total MRE for the V1/V2 deposit inclusive of mining depletion increased to 81 Mt from 72 Mt, with Measured and Indicated lithium resources up 47pc to 38 Mt. Lithium and tantalum was upgraded to a Measured and Indicated classifications, and the lithium average grade increased to 0.73pc from 0.63pc, with total contained tonnes up by 30pc to 587,000 tonnes. In addition, the mine’s tin average grade increased to 0.15pc from a previous average of 0.134pc, with contained tin metal content of 120,000 tonnes, and a maiden resource was declared for rubidium (used in photocells) of 109,400 tonnes at an average grade of 0.14pc.
ATM said the drilling programme had ‘exceeded our expectations, delivering higher grades, and has increased the overall tonnage by 13pc when compared to the previous resource estimate from 2019 and 30pc more contained lithium.’ The updated MRE, solely from V1/V2 pegmatite, highlighted ‘the significant untapped potential of the wider Uis pegmatite swarm across our licence area.’ The next phase of exploration would investigate other proximal pegmatites at Uis with the end goal of repeating the process and ultimately expand the mine’s resource towards the exploration target of 200 Mt.
In May ATM reported that the company’s off-site pilot test programme to investigate the metallurgical potential of its pegmatites had produced lithium concentrate in the form of a high purity petalite concentrate. The 85pc pure petalite concentrate assayed 4.16pc lithium oxide, sufficient for potential offtakers to indicate ‘that this concentrate composition represents a desirable lithium product’. The concentrate will be used to conduct test work with interested offtakers, including petalite conversion to lithium carbonate and lithium hydroxide.
ATM took another important step forward over the summer, duly completing and commissioning its lithium pilot plant, allowing it to expedite bulk pilot test work and increase pilot production of lithium concentrate. The testwork programme will determine the optimal processing facility for extracting consistent, homogenous, saleable concentrate for both the chemical and industrial lithium markets.
In parallel, the company has continued to define the lithium potential of its other assets. Assay results for the inaugural drill programme undertaken over pegmatites located within the Spodumene Hill Project, published in July, reported that all drill holes had intersected mineralised pegmatites, indicating continuity at depth. High grade lithium intersections suggested ‘the presence of significant spodumene mineralisation’. The intersections were also positive for tantalum. ATM said the identified high-grade lithium intersections within the pegmatite could be separated through ore sorting to provide a potentially high-grade pre-concentrate for the lithium processing plant.
In August ATM reported positive lithium assay results for a channel sampling and geological mapping programme undertaken within the Lithium Ridge licence area. The programme was designed to fill in data gaps between known lithium occurrences within the licence, and to define the width and length of the mineralised trend. When combined, the weighted average of the 27 highest lithium grade channel lines amounted to 179 metres at 1.20pc lithium oxide. The data confirmed the existence of continuous mineralisation at surface over a six kilometre strike length, and that lithium was present within the pegmatites in all of the company’s licences.
Assay results for the remaining exploration drilling results of an initial scouting programme undertaken within the Lithium Ridge mining license area, published in September, were also positive, indicating that the targeted pegmatites continue at depth, and confirming the presence of significant lithium and associated tin mineralisation within multiple pegmatites. The results also indicated tin grades similar to those at Uis, which will be investigated for by-product potential.
ATM’s ongoing exploration is supported through multiple fundraising channels. In July the company raised £7.7m through the issue of convertible loan notes to new and existing investors to support ‘the expansion of the tin, tantalum, and lithium exploration and production circuits’ and a lithium feasibility study. The following month it signed a $25m funding package with investment fund Orion Resource Partners, which the company said would ‘provide sufficient capital to complete our expansion programmes at our flagship Uis operation.’ The funding ‘will expedite our lithium implementation programme, expand our tin production, and concurrently bring a highly respected new investor onto our register.’ And in September ATM confirmed a $5.8m drawdown facility with the Development Bank of Namibia to expedite Uis exploration.
Increased tin production
While forging ahead with its exploration programmes the company has continued to record increased production.
ATM’s operational update for Q1 2024 (the period to 31 May 2023) reported a 50pc year-on-year increase in tin concentrate to 359 tonnes (Q1 2023: 239), and a 42pc increase in contained tin metal to 216 tonnes (Q1 2023: 152). All-in-sustaining-costs (AISC), at $21,377, were below management guidance for the year of between $25,000 and $30,000 per tonne of contained tin. Its Q2 2024 update (for the second quarter ending 31 August 2023) reported an 86pc year-on-year increase in tin concentrate to 398 tonnes (Q2 2023: 214 tonnes), and a 79pc increase in contained tin metal to 238 tonnes (Q2 2023: 133 tonnes). Operations costs were still below management guidance for the year, and the company’s fundraising allowed it to report a positive cash balance of $7m.
The Q2 update also reported that initial test campaigns conducted at the lithium pilot plant were producing a consistent saleable grade of lithium concentrate, and drill results for Spodumene Hill and Lithium Ridge had reported intersections of up to 2.32pc and 2.13pc lithium oxide respectively. ‘High grade’ tantalum mineralisation was also recorded. Further results are ‘expected shortly’.
Outlook
ATM’s price really began to motor this spring, soaring from 3.65p in March to a high of 8.6p by June. It has held relatively steady since then, valued at 6.45p at the time of writing (spiking upwards again in the past few days) taking the company’s market cap to just under £100m. As noted above, some of ATM’s anticipated progress over the remainder of the year may be priced in, but this is a share loaded with several value triggers. Further exploration is underway, funded by the fresh revenue channels opened this summer. Production at the pilot plant continues to ramp up. And an off-take agreement may be not too far down the road. The conditions are in place, then, for further upside as ATM continues to build the foundations for becoming an established producer of one of the world’s most sought-after commodities.
