Almonty reported solid Q315 financial results, with an adjusted EBITDA loss narrowing to C$0.9m compared to C$1.0m in Q215 and C$1.5m in Q115, against the backdrop of a falling APT price. The results were supported by the continuing strong performance from Los Santos, which benefited from improved plant recovery and higher processed grade. Having incorporated Sangdong, the reported results and updated tungsten price assumptions into our model, we revise our valuation of Almonty from C$1.00/share to C$1.26/share.
Almonty reported a 15% q-o-q reduction in total revenue to C$8.7m, on the back of lower WO3 sales (down 1.6% q-o-q to 34.5kmtu) as well as falling tungsten prices. Headline EBITDA improved from C$0.2m in Q215 to C$1.8m in Q315 due to a 34% q-o-q decline in cash production costs and a further 21% q-o-q reduction in G&A. Taking into account production costs allocated to tailings inventory and capitalised waste mining, we calculate an adjusted EBITDA loss of C$0.88m compared to losses of C$1.0m in Q215 and C$1.5m in Q115.
Despite a 14% q-o-q reduction in the realised tungsten price, Los Santos generated a 6% increase in revenue to C$7.1m, driven by a 23% growth in production. This was due to the plant recovery improving to 61.2% in Q315 vs 58.7% in Q215 and the higher estimated processed grade. The improved operating performance has helped Los Santos’ production costs to reduce further, with the reported cash operating cost falling 9% q-o-q to US$79/mtu (excluding waste mining) and the allin unit cash cost dropping 11% to US$143/mtu (including capitalised stripping and costs allocated to tailings inventory).
Having incorporated the updated tungsten price assumptions and also included the financed valuation of the Sangdong project in our model, we revise our SOTP valuation of Almonty from C$1.00 to C$1.26/share. We now expect the benchmark APT price to average US$250/mtu in FY16, US$300/mtu in FY17 and US$350/mtu in FY18. We also take a more conservative stance on the near-to medium-term operational and cost improvements at WCM. Meanwhile, Sangdong adds considerable value at a 10% discount rate and assuming a 50/50 equity/debt funding split. Overall, we believe that Sangdong’s attractive economics coupled with a relatively large and high-grade resource base makes the project a valuable addition to Almonty’s current asset portfolio, especially given the current commodity price downturn that favours exposure to low-cost assets.