Jennings Capital as Head Grades, Cash Costs Improve at Tungsten Mine

Jennings Capital analyst Ken Chernin has kept his buy rating and 12 month target price of C$1.70 a share for Almonty Industries (TSE:AII), after the tungsten producer released its first quarter results on Thursday.

For the period that ended December 31, Almonty reported cash flow per share of 4 cents, versus Jennings' estimate of 3 cents and compared to 5 cents in the fourth quarter of 2012.

The company operates the Los Santos tungsten mine in Spain. The analyst notes the producer saw higher head greades during the quarter, mining 127,928 tonnes of ore at a weighted-average head grade of 0.37% tungsten, versus 114,647 tonnes of ore with a grade of 0.3% tungsten in the fourth quarter.

At the end of the quarter, Almonty was achieving recoveries of 64.8%, with Chernin noting that recoveries are continuing to improve. Plant recoveries for the first quarter averaged 63.3%, compared to 60% in the fourth quarter.

The analyst adds that his firm expects recoveries to improve to around 70% with the installation of additional gravity tables. If an additional flotation circuit is installed, Chernin says Almony could yield recoveries as high as 76%.

Cash costs are also continuing to decline, with there still being "room for improvement", the report notes. For the first quarter, Almonty's average cash cost of tungsten concentrate was US$146 per MTU, versus US$159 per MTU for the fourth quarter and compared to Jennings' estimate of US$148 per MTU.

The company is planning to connect its tungsten project to the national grid in March of this year, which could reduce power costs by C$1 million and C$1.3 million annually.

The Los Santos project is a tungsten mine located about 50 kilometers from Salamanca, in western Spain.

Shares of Almonty were changing hands Friday at around 90 cents.

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