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Andrada progressing well with its substantial lithium deposit


Andrada Mining [LON:ATM], the lithium mining company operating in Namibia has had a steady and solid year. As previously reported, Andrada has used its in-production existing Uis tin mine in the Erongo region of Namibia to finance the development of its lithium exploration.

Since we last wrote about Andrada last year, the company raised GBP7.7m in convertible notes in July 2023, which coincided with the completion of a lithium bulk sampling plant and tantalum production circuit.

As previously reported, the former tin miner, has repositioned itself from being a tin miner called AfriTin to become a player in the lithium market, along with developing assets including Tin, Tungsten, Tantalum and Copper at four sites, all reasonably close to one another in the Erongo Region of Namibia which has mining heritage in marble and uranium. Erongo is on the Skeleton Coast in the centre of the country and has Walvis Bay and Swakopmund as its major population centres.

The company chose to issue notes, as opposed to equity, as it believed that convertibles were less-dilutive – especially as the company was still in negotiations to raise finance from the Development Bank of Namibia (DBN) and fund manager, Orion Resource Partners.

The DBN money is earmarked for improvements to plant operations, and the company had already received GBP4.4m in debt from the development finance institution and should cover Andrada’s requirements until the end of this year. The proceeds of the notes will optimise the sampling plant and tantalum circuit and push on with more exploration.

$25m funding package for expansion programme

A month later, a USD25m funding package from Orion dropped, made up of USD2.5m in equity, a USD10m convertible loan note and USD12.5m in unsecured tin royalties and supplied the capital for Andrada to complete its Uis expansion programme and expedite the miner’s lithium implementation programme and expand tin production. Around the same time, Andrada secured USD5.8m in debt from DBN.

However, with the swings came roundabouts, and in Andrada’s end of year results (to end-February 2023) it reported a fall in revenue from GBP13.6m in 2022 to GBP9.8m and year-on-year earnings as a result of weakening global tin prices. Nevertheless, Andrada was getting more efficient, reducing its AISC (all-in sustaining costs) of production and maintaining GBP8.2m of cash in the bank and increasing tin production by 34% y-o-y to 960 tonnes.

Drilling progressed well during the year, in September Andrada updated the market on its exploration at the ML133 licence called Lithium Ridge confirming that the targeted pegmatites continue at depth and confirmed the presence of significant lithium and associated tin mineralisation within multiple pegmatites and in all the company explored a 6km mineral strike.

Potential of Lithium Ridge confirmed

Anthony Viljoen, Andrada’s CEO said at the time: “The second and final batch of drill results confirm the potential of Lithium Ridge. They confirm that the 6km of mineralisation at the surface continues at depth. As previously stated, these results for the remaining 2km of strike indicate intersections at higher lithium grades than those recorded at Uis and are commensurate with similar hard-rock resources globally. We are encouraged that these results also have tin grades similar to those at Uis which will be investigated for by-product potential.”

A month later, Andrada reported on its Brandberg West exploration licence, a former tin and tungsten mine that has some copper potential, where it was commencing an exploration programme to see if there was potential in the historic mineworks and looking further to establish if there was any further mineralisation beyond the previously mined site. The company was planning a 3km drill programme in the second half of the year.

As the year closed out, Andrada renewed its offtake agreements with Thailand Smelting and Refining Co. renewing its tin offtake agreement for a further three years and AfriMet Resources rolling-over its offtake agreement for tantalum for another 12 months.

Andrada gearing-up to expand its lithium exploration work

The highlight, and in many ways the point that Andrada was working towards over the year, was realised in November as its lithium pilot plant produced the company’s first lithium concentrate, producing 10 tonnes of commercial-grade lithium concentrate on-spec. The company moved towards a production ramp-up to 250 tonnes a month and also started looking at offtakers for its perlite. The company also started gearing-up to expand its lithium exploration work.

Viljoen said: “We believe that our efforts throughout the year have the potential to place Andrada at the forefront of lithium development in Africa. The discovery of additional lithium-within the company-owned Lithium Ridge and Spodumene Hill also underscores the possibility that Namibia’s Erongo region could be a key participant in the global lithium landscape, with the potential to host a cluster of significant mines.”

Things started looking up on the results front by the end of 2023. In November Andrada reported an 87% increase in year-on-year revenue for the first half of the year to GBP8.7m. Efficiency again increased, with a 19% decrease in cost of tin sales, but most importantly the company increased its gross profit by more than 100% to GBP1.5m (turning a GBP1m loss into profit). However, PBT was still in the red, with a GBP2.8m loss, albeit 25% less y-o-y.

Andrada tin production up 100%

As 3Q22/23 closed, Andrada reported a more than 100% increase in tin production to 346 tonnes. Progress was being noticed, and in March of this year Andrada secured a GBP7.3m facility with Namibian financial institution, Bank Windhoek uprating a previous facility with the bank. Last month Andrada reported that it had achieved a 60% y-o-y increase in ore processing, with a 54% y-o-y increase in tin concentrate production and improved plant availability to 91%.

Despite the progress, Andrada’s share price has lagged. Over one-year the miner’s shares were down 0.2% but could be at the start of a positive run, with year-to-date share price up 5.5%. The company has a market capitalisation of GBP86m.

Andrada remains one-to-watch. The company is already producing cash from its tin and is making significant progress on what is a substantial lithium deposit, and as the electrification of the transportation industry gathers pace, the Erongo region could well become a major future mining centre.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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