The symbol for Tungsten is W on the Periodic Table of the Elements, derived from its original and widely-used name, Wolfram.
Tungsten is another critical element, utilized in AI and Defense, which is in scarce supply. From a strategic standpoint for the US, 90% of Tungsten comes from China, North Korea, and Russia, with demand overwhelming supply in the near-term.
The US needs more Tungsten, from reliable sources, and it needs it YESTERDAY.
Enter Almonty Industries Inc. (ALM).
There’s a lot to unpack from the slide above, but the key points to keep in mind are:
1. Tungsten Gas is essential for the fabrication of semiconductors. As Almonty CEO, Lewis Black, puts it:
“No tungsten gas, no chip, no semiconductor. And no semiconductor means no AI… The only way AI has come to fruition is because of Tungsten Gas. It not only conducts electricity but dissipates heat, which means you can pump more processing into chips. That’s been the secret sauce of this entire [AI] revolution.”
2. Tungsten Metal is a foremost defense material. Its high melting-point and density, along with its electric and thermal conductivity, make it an optimal material for armor-piercing bullets, armor & artillery shells, bullet-proof vehicles, grenades, balance pinballs in missiles & aircraft, nuclear weapon shell protection, and more.
Tungsten is one of NATO’s 12 Critical Raw Materials. Because of this, the US Government has mandated that on January 1, 2027, “a quiet but seismic shift will hit the American Defense Industry.”
Essentially, US Defense Contractors will be prohibited from using ANY Chinese-origin rare earth magnets or metals in ANY weapons system.
“…the impact is tectonic. Fighter jets, missiles, naval ships, and satellites all rely on the very components Beijing currently dominates. The Pentagon has drawn a line in the sand: no more Chinese magnets.
3. With its two Tungsten mines – Panasqueira mine in Portugal & Sandong mine in South Korea – Almonty has positioned itself to be one of the ONLY US-based Tungsten producers.
Panasqueira is already producing high-quality Tungsten concentrate and Sandong boasts “one of the largest and highest-grade Tungsten deposits outside of China.” The Sandong mine is projected to begin production in 2025 and will have quadruple the capacity of the Panasqueira mine.
What’s more, an expansion phase is in the works, which will double the Tungsten output at Sandong by 2027.
ALM currently trades for a ~$1.16B market cap and nearly a $1.3B enterprise value. Yes, the stock has moved a ton and a lot has been priced into the story.
Yet, we think there is a lot more to go in the next 12-24 months.
Let's compare Almonty up against MP Materials Corp. (MP) – the biggest leader in the space – and look at each company’s projected estimates by 2028:
So, essentially a third of the revenues and a third of the EBITDA.
Now most of Almonty’s supply will come from South Korea. Clearly, a discount is warranted with the geopolitical risk prevalent there – i.e. an unpredictable North Korea next door.
So, does it deserve a third of MP's market cap? Probably not.
Does it deserve 25% of MP's valuation, based off of what is coming in 2028? We think it does.
Almonty will have the biggest conflict-free Tungsten supply in the world by the middle of 2027. We think that is very valuable.
Right now, Institutional investment is almost non-existent in the name. As Almonty begins to ramp over the next few quarters, we believe this will quickly change:
We see strong potential for ALM to re-rate to a $3B market cap or ~$13/shr the next 12-15 months as revenues and earnings inflect in earnest during 2025.
The Almonty story carries a number of risks, including:
Given the move, ALM has had over the past two months, we plan on buying a very small position at current levels and will look to buy on any dips to $5.15-$5.50.
Stop Loss: We plan to give ALM a 2-3 Quarter Time Stop. This will allow the Almonty thesis to play out as we expect multiple catalysts to unfold over the next few quarters, especially the South Korean Sandong mine coming online by the end of the year.
Conviction Level: 8.
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Disclosure: We are long ALM stock and calls. We may change our positioning at a moment’s notice, without notifying you of any such moves.
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