Almonty Industries Inc. (ALM) Earnings Call Transcript & Summary

All right. So we go from a project generator in -- well, Canada, U.S., Europe, to someone that generated and created his own project, Mr. Lewis Black from Almonty industries. And Mr. Black, I think, left the premises. He is off his webcam. David, I cannot have -- I cannot kick anyone out anymore, so you have to leave by yourself. So you can continue enjoying the presentations. There you go.

Sorry. Small technical problems.

No, it's all good, Mr. Black. So how do you want to do this?

Well, firstly, please don't call me Mr. Black. I sound like an undertaker. You can call me Lewis. You can call me all kinds of things, Tungsten King, Mr. Tungsten. But Lewis is fine too.

What about I call you Al, from Almonty.

That's okay. Al will do.

All right. So how do we do this? Do you present? Do you just speak? Do we speak to each other? What do you want to do?

I mean, I think the -- unfortunately, once again, I arrive presentless. So there was another snafu in the communication system, which is sometimes Almonty is guilty of, and I don't have any pictures. I don't have a presentation. I've done this before without a presentation and I think we did rather well. But the good news is we don't need pictures because we're operating. And who wants to see a mine in operation, I mean, really, when it comes down to it? But what I will say is we will put up a presentation after this on our website so you can lovingly zoom in and out of pictures to make sure that all these pesky rumors that some of my competitors like to spread, that we're just really a mini golf course, are not true. So let's -- we can have a chat, about life, the meaning of life, God, spiritualism, whatever you like. What would you like to know? I'm also a bit under the weather today. I've been up most of the night with a bit of a bug, given by one of your counterparts from Germany. I had dinner with him last night. That cheap guy took me to a place I got food poisoning. But anyway.

Well, okay. That's a great start. Okay. So let's [ divide and conquer ]. Let's go geographically. Asia, South Korea, update, offtake, moly, go on.

Okay. So let me see. Sangdong, offtake was increased by 6 years and the price was increased across the entire contract. I think that was really a reflection of the West's largest oxide producer determining that the chances of many of the projects being presented probably have a limited ability to actually manifest themselves into the market. So they were just essentially ensuring they had more supply from Sangdong, if so required, which they, in fact, do require in the current climate. What we're doing at Sangdong is now we are knee-deep in our ramp. The good news is the grinding circuit is done. So that was -- and that was done like 2 months ago. We're now going through the finickity part of the adjustments of the flotation cell system, which is essentially a copper -- mostly a copper flotation system. So it's not something which isn't done on a regular basis. The ramp-up is relatively quick with these things, except everything that can break, can break, I mean -- will break. Two days ago, what do I lose? I lost the 3 pipes coming off my slurries. They were all damaged during installation. And so therefore, I got an overflow in my water treatment plant. I mean you couldn't make this up. I mean so we had to fly those in from Europe because they were the one spares we didn't have, which is typical. Of course, the only thing you don't have are the things you need. But they've arrived, they're installed, we're back to business. What's important is recoveries are right where we would expect them. So now we're upgrading the material to obviously fit into our compliance. But the most important to me, and I've said this repeatedly, is grind size. And that was a thing that kept me up. Could we get the grinds correct? Well, we've commissioned full throughput our grinding circuit, and we're happy that we can now focus on flotation. And I think that's really the key. And you have to remember, we've been doing this for a long time, but building anything is a nightmare. I mean it's just -- I can't -- I'm going to write a book, your hair will fall out. No one would want to build a mine in a democracy after they read this book. But ultimately, we run tungsten projects. That's what we do. Now we're in the sweet spot. We've got the plants built, it's open, it's commissioned, and now we're doing what we've done for 136 years, we're running a tungsten mine. So this is the part where all the usual theaters and dramas of the engineers and all their excuses, these are the ones I've heard for the last 20-odd years. But this is what we do. And I think it's a very important distinction to know that we've migrated from the risk profile of building really the world's largest tungsten -- the largest construction in tungsten done since the '70s, on the side of a mountain, totally Equator Principles compliant throughout the entire process, not just one area, highly automated and, ultimately, of a scale that really the West hasn't seen for a very long time. We're over that now. That risk has been mitigated. It's done. It's finished. It's open. Now we do what we do, which is run tungsten mines. And if you look in our history, whether it's mines we built or whether it's mines we've acquired and fixed, this is what we do. We run tungsten mines and we run them well. And we're used to running them in very low price environments. And so we adopt the same principles and concepts to this mine. But I'm feeling, look, I have longer nights now and earlier mornings because now it's data-driven. There's only so much I can do when they're telling me, I don't know, the ball mill liner has to be replaced. But now we're into data. Now we're into feed grades, recoveries, finish grade, availability. This is where we start -- I start squeezing. But this is what we do. So that's Sangdong.

And maybe one thing on that. So basically, for someone that's never visited the mine or that don't know crushing, grinding, flotation and so on, when you're talking about adjustments, this is not binary, from working to not working. This is percentile: 0.1, 0.7, 0.3. This is very small adjustments, correct me if I'm wrong, but into optimizing and getting the output that you want. Is that correct?

Yes. I mean you never really stop. You never really stop adjusting. I mean in Portugal, we're doing 136 years, you're always seeking to do it a little better. Sometimes it works and sometimes it doesn't. But ultimately, you end up with a very efficient and very high-quality results. Portugal is the greatest example. We have the highest recoveries of any gravity plants in the world from that project, and we produce the most sought-after variant of tungsten because it's so homogeneous, at very high grade and very efficiently put together. We were eliciting in the last quarter over 63% margin, which is unheard of for any mine, let alone one that's as old as Panasqueira. So what happens is we'll look over time through our pilot plants in the run-up to this where we think we get greatest efficiency. So it doesn't necessarily mean producing the highest-grade concentrates. Because there is a journey to get to say, I don't know, 68%. But we may decide what we have decided that, in fact, for Sangdong, a 60% grade material is the most efficient, because it allows us to essentially maximize the efficiency of the throughput. It means that we can pass through a slightly lower grade, which means we can manage our blends better. This is what we do. I mean this is our expertise. The reason why people invest into Almonty is not because of our charm or our wit or even our presentation skills or lack of. It's because we know tungsten. And I've said, as the largest individual investor into Almonty, I've said repeatedly, don't do it if they don't -- haven't done it before. Because tungsten is a really difficult metal to process. And the case in point is that people that we work with and people that we are close with, even if they don't really like me, which I understand. I completely subscribe to that, but they acknowledge the one thing that we do is that we deliver. And yes, I complain and I moan and I squeeze and I want more for doing less and all the usual things that I'm meant to as a CEO, but ultimately, we execute. And it's one of our greatest strengths is that we know how to run and process tungsten mines, [indiscernible] open pit, underground, combination of flotation and gravity, we've done it all before. So this is just another extension of that.

That's quite clear. That's quite clear. And continuing on that. So you touched on Los Santos, you touched on this asset. What are the news on there? What is happening? What is the [indiscernible]?

Well Los Santos is an interesting thing because -- we've always tried to be quite innovative to survive. And it's very apparent to us that Europe is not exactly bang-down the doors of mines to be built. They're not saying no, they're just not saying yes. This is sort of a European approach to a problem. And so we thought, well, you know what, I mean, the fact of the matter is we have to rehabilitate Los Santos. We've done so with 3 of the 4 pits. We left the fourth pit because we were going to put the old tailings in there before we reclaimed it. And we thought if we really worked on this problem and looked at various techniques that we are familiar with, and we expand them, could we pass tailings commercially? Now of course, in a lower price environment, that's a lot greater challenge. But if we had a contract with a proper off-taker, and if they were willing to help contribute to what we were doing to sort of limit our downside and give us a floor, which meant that if the price did correct, we weren't left holding our -- nothing but the underwear we came in, would it be possible? So we spent 4 years working on this. And we got to a stage where we thought, you know what, I think this could work. It was working fine in the laboratory and the pilot plant. So this will be the first time anyone has done it commercially. If it works, it's opened up a whole new chapter for us to supply internally into Europe. Because, of course, taking old sites and reclaiming them, no government in Europe is going to complain. No one is going to say, "Oh, you can't do that." So straight away, you've got a very low cost entry. Plus, we have 136 years' worth of tailings at Panasqueira in Portugal, it's rather a lot of [ feed ] to work from. But I also like probably broadening that footprint to other places as well. So let's see how Los Santos goes, and we're very fortunate to have the offtake that we have who are very environmentally focused. And so this is -- it ticks a lot of boxes. But we don't know whether commercially it's going to work yet. We have a good idea, but let's see. If I'm right, we're geniuses. And if I'm wrong, I end up reclaiming a [indiscernible] claim anyway. So that's -- it's a no-brainer for me.

Absolutely. And there could be even more options, water reserve. I know in Spain, it's [indiscernible] up there and South and so on. And I want to bring them -- so we're going to move from there into the next one, which is U.S. And before moving to the U.S., will hop on to geopolitically. So in Spain, the Los Santos sector now is locked down. The government has found what you guys are doing so interesting and so on, that they have taken upon -- they have taken action for other companies to come, claim, try to speculate, try to do a lot of things with what one could say either unqualified or [ pump and] -- or other type of promoters than real guys wanting to put into production. So can you comment a bit on that part and then lead into what's happening in the U.S?

Well, I mean, look, everyone is going to jump on the thing because it's an easy way to get into production. The issue is, of course, is that it only works if you actually contribute to the environment. And so having a whole bunch of people just saying, "Oh, I can do that." No, you can't. It doesn't recover -- you can't recover tungsten tails like gold tails. It's brittle. It shatters. If you use any kind of centrifugal approach that they do in gold, it doesn't work. And then you end up just making a reclamation site worse. No, there has to be some level of professionalism attached to this. And I believe governments will very much look at this and say, well, okay, but we want to see the plan. We want to see the approach. So I have confidence that European governments will ensure this doesn't become like a rush to exacerbate existing environmental problems. But for us, I think if it works, it's a wonderful way of supplying our European customers. But there are certain negatives to tungsten recovery from tailings. You can only produce a low-grade concentrate. And that really limits who can consume it. But ultimately, that's all part of a picture where when you work extensively with the industrial base rather than try and work for a headline, you've already got all that planning in place and you're doing it in partnership. I know that we don't make a lot of noise a lot of time and I should be out there and I should be shaking hands and kissing babies. Someone said to me the other day they hadn't seen me since February, really out there as much. I said, well, yes, because we were commissioning Sangdong. What do you want me to do? I mean it's -- ultimately, I'm a shareholder. I need value. And I still remember what the Koreans told me when I first bought Sangdong, build like a submarine. This is -- I can't stress how important that is. And that's given us a lot of credibility with the industrial base. Whether they like me or not because I'm always asking for money, what can I do, I can't help it, it's just my nature, asking for more money, is that we actually execute. And so this tailings project, I think, is exciting for me because it finds a solution, it innovates a solution in a jurisdiction that I think mining is going to be very difficult to actually undertake.

Absolutely. And that brings us to the U.S. question. What is happening in the U.S.? What are the plans? Simple as that?

Well, going back to my build like a submarine, it's -- I've seen 3 projects now get whacked by the NGOs in Montana. I don't intend to be one of them. We've bought pretty much all of the land around the mine. I'm just working through the last piece so we're completely out of sight, out of mind. It's a longer-term project. No matter what anyone tells you, the federal permits are certainly available much quicker. But state permits have a predefined route to completion. It takes time, and there's no way and should there should be no way around it. There is a process. And Montana is no different. I think ultimately, Montana is still a great project. I like it very much, but it is twice the price to mine and operate in the U.S. compared to Europe. But I like the projects. I like the community we're in. Of course, we've moved our headquarters there, which is -- believe me, if you get a chance, go to Dillon, you'll love it. It's -- I mean, it's a beautiful, beautiful place. But I think it's a slow and steady there. We are not going, and even with Sangdong, race to a headline. We walk to the finish line. You will wake up one day, and we will say, who wants Montanian material? But right now, it's -- we've got a good team in place. We're working through the various permits discretely and respectfully and making as little noise as possible. The NGOs in the U.S. are well funded, are angry and are aggressive. Let them go after [indiscernible] making noise, and I'm just the guy with a pickup truck, a dog and a shotgun in Dillon. That's how you should view us.

All right. Well, that brings us to Rwanda. So I guess that -- I don't know if the same description applies to Rwanda. But it's been in the headline. It has made a lot of noise. So yes, go with your update.

Well, again, it's about innovation. What do you do to fix a short-term or short to midterm problem of a supply chain for material? Because you can't build a mine in 2 or 3 years. That's unfortunately the reality. But it's not so easy for a U.S. company, that's us, to make a deal with the sovereign government, that's Rwanda, without a lot of assistance from the United States government, especially as it was their idea. Now it seems simple. It's really not. There is all kinds of sovereignty issues. It's -- you may -- it's essentially look at it as a tungsten treaty between a company and a government. It's not so easy. But we had quite a lot of hurdles on the way. It took longer than I would like. And it's not finished. This is kind of like stage one, but we have a blueprint now, which we can now transplant to other jurisdictions where there are small-scale mining of tungsten, with the assistance and help of the United States government. I think the most important thing is that we bring a level of technical and compliant approach to helping small-scale miners expand, to be more compliant. It gives us an opportunity to get our teeth into exploration there, to look, to build a sector, because they have no doubt there is tungsten in that -- in Rwanda. There's no doubt there's a lot of tungsten. And there's a lot of people who know nothing about tungsten in tungsten in Rwanda. So the government looks at it this way that it would be fantastic if we could help the entire sector elevate itself. Now ultimately, I think we are very aware of risk capital. We are already collecting material. So we got right into it very quickly. And I've been told apparently that as of next month, we'll be the largest exporter of tungsten out of Rwanda, which means less than 2 months after we got -- finalized the deal. So we've got a lot of support from the Rwandan government for this program. Our customers are happy, both in Europe, United States and even South Korea. But I think it's a work in progress of an innovative approach to finding material in a difficult environment of permitting for mines. The duration of this, my feeling is, is that we want to set in motion an industry that will sustain itself. Because ultimately, it goes back to the fact that if my customers die from lack of availability of material, I die too. So whether I like it or not, I remember I've said this repeatedly, in the next 24 months, I'm open, my doors are open. Strangely enough, not one junior miner has called me. But then I probably know what I'm looking at, so it's probably best if they don't call me. But ultimately, we're just looking for solutions on behalf of the industrial base and we're being supported by the industrial base to do it.

Perfect. Lewis, what about we do fire questions? I go through all of the questions on the chat, almost...

Do we have a lot?

Not a lot. Too much. Like all the time, too many.

Okay.

Have you shipped concentrate from Sangdong?

The first vessel is booked for October 24.