Commodity gem Almonty experienced a significant price setback on Tuesday. But yesterday’s recovery shows that there is no reason to panic. The Company is on its way to becoming a tungsten superpower. CEO Lewis Black left no doubt about this during his latest presentation to investors. According to him, the tungsten spot price could rise to USD 1,000 per MTU. Analysts expect significantly less, and Almonty is already achieving strong margins at USD 300. The fact that investors can react very sensitively after massive price gains was demonstrated by DroneShield’s stock. But now the recovery rally is underway. Things are also happening at Standard Lithium. The Americans appear to be well on their way to securing billions of USD for the construction of their first lithium mine.
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Almonty Industries: Tungsten price soon at USD 1,000?
Shock for Almonty (TSX:AII) shareholders. On Tuesday, the share price briefly slipped below the EUR 6 mark. The short-term capital increase implemented by the renowned Bank of America caught some people on the wrong foot. Yesterday, the commodity gem’s share price was back up to EUR 6.05. There is no apparent reason for panic. Existing shareholders were diluted by less than 10% and the Company generated gross proceeds of USD 112.5 million from the issue. The net proceeds will be used in particular to finance exploration and development work at the Gentung Browns Lake tungsten project in the US, expansion work at the Panasqueira mine in Portugal, and exploration work at the Sangdong molybdenum project.
The investments should soon pay off for Almonty and its shareholders. In his presentation at the IIF last week, CEO Lewis Black left no doubt that Almonty is facing a golden future. According to him, the price rally for tungsten could continue. The spot price is now over USD 800 per MTU. Black even believes USD 1,000 is possible. There are numerous reasons for the high prices. The US wants to stop sourcing this metal, which is critical for defense, aerospace, and technology, among other things, from China. At the same time, China – which has accounted for over 80% of global production to date – is repeatedly restricting exports. In his presentation, Black pointed out that Chinese mines are facing increasing problems. Decades of state subsidies are coming to an end, and the mines are so outdated that they can only survive on the free market if prices are high.
This means that Almonty, with its mines in Portugal, South Korea, and the US state of Montana, will not only be by far the largest Western tungsten producer, but will also be a frontrunner in terms of cost leadership. To put this into perspective: At USD 300 per MTU, Almonty can already achieve a very respectable margin. Analysts’ forecasts are based on prices well below the current level. Cantor Fitzgerald, for example, calculates USD 450 and has a price target of USD 10 per share. As soon as it becomes clear next year that Almonty can sell at significantly higher prices, this will provide scope for price target increases.
Standard Lithium: Financing secured?
While Almonty has secured financing for its tungsten projects, Standard Lithium is still struggling to raise capital to begin construction of mines. There was a recent update on this.
According to its own statements, Standard Lithium is making great strides in financing its South West Arkansas (SWA) project. The Smackover Lithium joint venture – a joint venture with Equinor – has received expressions of interest from three major financiers, including the US Export-Import Bank and Export Finance Norway. In total, this involves more than USD 1 billion in senior secured project financing for Phase 1 of the lithium project in the Smackover Basin. At the same time, discussions are underway with international commercial banks for total project financing of up to USD 1.1 billion.
The project loans are intended to partially cover the estimated total investment of approximately USD 1.45 billion for the SWA project, including financing costs. Standard Lithium and Equinor intend to finance the remainder with equity capital and a USD 225 million grant already committed by the US Department of Energy.
Management sees the strong interest from financiers as confirmation of the strategic importance and de-risking status of the project. Smackover Lithium is on track to become a “regional champion” for low-cost, sustainable lithium production in the US. At the same time, financing is not yet a done deal: All expressions of interest received to date are non-binding and subject to further due diligence, internal credit decisions, contract negotiations, and clearly defined conditions until financial close.
DroneShield: Recovery rally underway
DroneShield shares are experiencing a noticeable recovery rally after their crash. After the price had fallen by more than 70% at times since its high in October, bargain hunters have recently been snapping up shares. Yesterday alone, the drone defense specialist’s stock shot up by over 10%. We can only speculate about the triggers: technical factors such as short covering and the search for “fallen angels.”
However, the massive price slump that preceded it was no ordinary setback, but a severe shock to confidence. After a previous price surge – driven by high order intake and strong Q3 figures – sentiment took a turn for the worse when CEO Oleg Vornik and other top managers sold shares worth around AUD 50 to 70 million within a few days, fueling the impression of a “cash-out” at the peak. This was compounded by governance issues. For example, an existing US order was incorrectly presented as a new order. Subsequently, the US CEO resigned unexpectedly and sold his entire share package.
There is currently no reason to panic about these three stocks. At Almonty, nothing has changed in terms of the factors driving the share price. If the price remains this high, analysts are likely to raise their forecasts soon. Standard Lithium appears to be well on its way to actually bringing its first project into production. DroneShield remains a hot potato, but at least seems to have found its footing.
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