Classification of Sphene Capital GmbH to Almonty Industries Inc.

Molybdenum gains strategic importance for Almonty

As outlined in our previous updates, the underlying molybdenum deposit at Sangdong was not factored into our valuation and was considered a potential upside. This upside has now materialized through an exclusive offtake agreement with SeAH Group for the full molybdenum production from Almonty’s Sangdong Molybdenum Project, developed by Almonty’s Korea Moly (AKMC) subsidiary. With this agreement, Almonty becomes a leading supplier of two valuable minerals—tungsten and molybdenum—warranting a revaluation of the stock. The secured offtake agreement ensures a stable revenue stream, that is now included into our two-stage Discounted Cash Flow (DCF) model. Our model incorporates both current and future producing assets—Sangdong (tungsten and molybdenum), Panasqueira, and Los Santos—along with the discounted value of the Valtreixal development project. As a result, we significantly raise our target price from CAD 3.21 per share to CAD 5.20. Given an expected share price performance of 344.5%, we reaffirm our Buy rating for Almonty shares.

With a production volume of 2.2 mn tons in 2023, SeAH Holdings is one of South Korea’s leading steel producers. As a holding company, it oversees SeAH’s subsidiaries and manages its investment asset portfolios. One of these subsidiaries, SeAH M&S, operates the only molybdenum roasting facility in Asia outside China and owns the world’s second-largest molybdenum oxide smelter. SeAH M&S's primary product is ferro-molybdenum alloy, a rare metal essential for various applications (for example specialty steels and semiconductors).

The Sangdong Molybdenum Project has secured all necessary permits for mining and environmental operations. Production is set to begin by the end of 2026e, with the mine expected to remain operational for up to 60 years. At full capacity, it is projected to produce 5,600 tonnes of molybdenum annually, according to the company.

The offtake agreement includes a hard floor price of USD 19 per pound of molybdenum, which is below current market price of USD 29.40 per pound. According to the company, the floor price provides a stable basis for financial planning, while the offtake agreement in our view enables Almonty to access low-interest domestic bank debt.