Capital expenditure at Alphamin’s Mpama South project was expected to exceed the budgeted $116 million (about R2.2 billion) by 10% this year, owing to higher logistical and import costs, the JSE AltX-listed company said Friday.
Alphamin produces 4% of the world’s mined tin from the Democratic Republic of Congo (DRC), where its production for 2023 was marginally up by 1% at 12 568 tons.
In the fourth quarter to December, Alphamin’s DRC production amounted to 3126 tons, while sales stood at 2046 tons, impacted by “poor road conditions, which have subsequently improved” post the period.
Its Ebitda earnings guidance for the 2023 full year of $136m, at an average tin price of $26 009 per tonne, has, however, been “negatively affected by a temporary delay in fourth quarter tin” sales volumes. Nonetheless, the company had secured a $50m tin prepayment arrangement in addition to lower marketing commissions.
The pre-payment agreement falls under the company’s off-take agreement with Gerald Group, which has been extended by a further four years to 2028. Alphamin will benefit from a 60% reduction in tin marketing costs.
The tin prepayment arrangement is effective immediately, and will be utilised for tin concentrates in transit, but not yet exported, as well as for up to $10m for tin concentrates produced, but not yet loaded for departure.
The facility carries an interest rate calculated at 10.3% currently.
Alphamin is now betting on bumping up its output, with incremental production from the Mpama South project in the DRC. It currently operates on the Mpama North project, which operated on an all-in sustaining cost per ton guidance of $14 259 and $14 645 for the year and quarter ended December 2023, respectively.
The Mpama North’s on-mine operating expenditure surged by 5% during the 2023 full year period under review. This has been attributed to a 32% increase in underground development metres at Mpama North and higher diesel prices. Additional Mpama North underground development has resulted in increased developed reserves, higher run-of-mine ore stockpiles and improved future operational flexibility.
Development of the Mpama South project is expected to drive production from 12 568 tons to between 17 000 and 18 000 tons. Capital expenditure at Alphamin’s Mpama South project is expected to creep up by 10%.
The Mpama South capital expenditure cost to steady state production, including operational readiness costs, are expected to exceed the $116m budget by approximately 10%, “primarily as a result of weather-related delays, higher logistical and import costs as well as minor scope changes”, said chief executive Maritz Smith.
In terms of capital allocation, the Alphamin board was considering a “combination of investment in growth, ongoing exploration and a high dividend yield” as a robust value proposition.
The company had thus prioritised funding of the Mpama South expansion project, shareholder distributions and DRC income tax payments during the year to the end of December 2023.
“The allocation of capital in FY2024 will be prioritised towards completion of the Mpama South project in Q1 2024, significantly lower DRC income taxes on the basis of large advance provisional payments made during FY2023, and ongoing shareholder distributions,” Smith said.
Alphamin has previously said it would make a final full year 2023 dividend decision in April 2024.
In 2022, the DRC, which is also a bigger producer of other industrial and manufacturing metals, recorded 32 854.59 tons in tin production, according to data from the Technical Unit for Coordination and Mining Planning in the country’s Ministry of Mines. This earned the mineral rich African country around $428.8m.
BUSINESS REPORT