The Bisie Tin Mine in the eastern Democratic Republic of the Congo originally made global headlines for all the wrong reasons when human rights organisations declared the tin a ‘conflict’ mineral. In short, the revenues generated by artisanal miners that were paid as little as $1 a day to mine and transport the tin, were being used to fund paramilitary activities of groups with no loyalty to the government in Kinshasa.
But today the story is far different. The mine, now under the control of Alphamin Resources, is being developed into a world-class operation that will begin steady-state production in 2019. It will also become the largest taxpayer in the North Kivu province employing locals in far more humane terms than the previous ‘operators’. South African investors will soon have the ability to participate in the project when Alphamin lists on the AltX in the next few weeks. We caught up with CEO Boris Kamstra recently to get a better understanding of what is happening on the ground – WT.
WARREN THOMPSON: Following the announcement on Tuesday that Alphamin Resources, the owner of a property in the North Kivu province of the Democratic Republic of the Congo, specifically the Bisie Tin Mine, has secured funding of US$80 million and will be undertaking a listing on the JSE’s AltX market, I’m joined by its CEO, Boris Kamstra, to tell us a little bit more about this fascinating project. Boris, good to have you with us.
BORIS KAMSTRA: Thank you very much, Warren.
WARREN THOMPSON: Bisie Tin Mine has a rather infamous history, at one point it was being mined by very basic methods and it became quite synonymous with the challenges that countries like the DRC have experienced with respect to having a commodity that is not really formally developed or exploited but used by various different factions within this particular part of the world to finance certain activities. But that’s all begun to change now, just give us a little bit of a history of this particular mine.
BORIS KAMSTRA: This mine is in the centre of the Walikale forest, the only way there when it was under artisanal production was by walking and they told me it was a one-day walk. They lied, it took me two days and ten toenails, it was a very beautiful but very hard walk. It did produce about 4% of the world’s tin for two years and that was completely artisanally.
Initially we suspect there was a scree slope, the parent rock was eroded away and the ore body collapsed down a scree slope, which enabled them to be able to cart away high volumes of tin. The mineralisation is cassiterite and our grade is just statistically an improbability. So this funded at least one, maybe two, armed groups and when the authorities in Kinshasa sent in the military to restore law and order, the military had maybe been paid intermittently and when they got there they decided that tin mining was far preferable.
So Bisie was probably one of the factors that brought conflict minerals into Dodd-Frank legislation, which was really Wall Street legislation, and that started materially changing the fortunes of Bisie in that it was very hard for people to sell the tin, there was no market for it and at the same time, the artisanal miners had depleted the surface material and were now digging down very small tunnels – some of which I have tried to get into but I can’t fit – and had gone through the water table, which made mining for them incredibly difficult. So the artisanal population dropped from 16 000 to about 2 000 and it now sits at about 350 or 400 men. That presented the opportunity for us to transform Bisie from what was once a source of incredible problems in the eastern DRC to one that is going to be catalytic to the economic development of the North Kivu region.
WARREN THOMPSON: You mentioned that you are already becoming the largest taxpayer in that province of the country. The transaction that you’ve announced and the presentation of which indicates that you will be receiving $80 million via debt funding but you will also be undertaking an equity listing on the JSE. Just give us an idea of how much money you are aiming to raise and then how that will fund the development of the mine?
BORIS KAMSTRA: The total mine requirement with added contingencies and cost overrun facility that the lenders required is around $172 million. Our intent was always to try and get a split of half debt and half equity just to lighten the load for our shareholders who had been carrying us this far. We’re delighted to have secured that facility of $80 million. The remaining component, we have two anchor shareholders, three actually, but two have indicated that they have credit committee approval to follow their pro rata rights in this next raise and that is the IDC, who is invested in project level and Tremont Master Holdings who are invested in the Alphamin level. So the total that we need to raise in the market is around $50 million, of which $25 million Tremont has put up their hand, the remaining $25 million will be split between our intended listing on AltX and our current listing on TSX Venture, it will be by way of an issue of new shares through selected institutions and brokers who then will subscribe to those shares.
WARREN THOMPSON: When do you anticipate doing that?
BORIS KAMSTRA: I would like to have it complete before the end of the year, so we are in the process of running through all the regulatory requirements to be able to do a listing and starting to talk to some of the institutions that have displayed an interest in pursuing an investment in Alphamin.
WARREN THOMPSON: Ultimately, with the development of the mine, what sort of production are you expecting to ramp up to and over what period, just give us an idea of what the plan is there?
BORIS KAMSTRA: We are currently busy building the mine, our critical path is our mine, it’s an underground mine, and our miners are about 55 metres in at the moment and progressing well. Next year we’ll build the processing plant and start commissioning in the middle of next year or early 2019 and by the end of 2019 we are hoping to be in steady state production, which will be around 9 600, 10 000 tons of tin in concentrate per annum, we will make a 62% concentrate, which will be bought by traders from Goma and they will ship it out to smelters either in Malaysia or Thailand. Then it goes out into the world and it’s primarily used as the glue that holds the tech world together, every component on a circuit board is soldered into position with a tin solder.
WARREN THOMPSON: Just one last question, so that’s a very quick ramp up if you’re going to hit steady state by 2019 but a little bit about the tin price it’s in the thousands of US dollars, the product that you’re aiming to produce what sort of discount would that trade at to the tin price?
BORIS KAMSTRA: We actually get an LME price, it’s a very transparent basis, our pricing is based on a three-month forward price and all that we have to cover in there. So we sell it across to the trader and the trader will provide us with 90% to 95% of the contained tin value once they uplift the cargo from Goma. Then they will factor in the transport costs to get it across to Penang or wherever else the smelter may be, the smelter charges whatever penalties are on there and a small marketing fee. So the pricing and what we get is a very transparent LME check against it. Yes, tin is currently running at about $19 450, it is expected to rise to between $22 500 to $25 000/ton to bring in all the marginal producers who will be required to meet the demand requirements of tin going forward.
WARREN THOMPSON: Very interesting and we’ll be looking out for that listing in due course. Boris, thank you very much for your time.
BORIS KAMSTRA: Thank you very much for the opportunity.
WARREN THOMPSON: That was Boris Kamstra, the CEO of Alphamin Resources.