Tin and Turmoil

What are assets in a warzone worth? How should we think about such assets? What about assets in countries engaged in conflict but far away from fighting? These questions will become increasingly important for investors as the era of geopolitical naivety in investing ends. This is especially true for investors who seek out idiosyncratic opportunities in emerging markets and Eastern Europe.

For the Massif Capital Real Assets Strategy, the fund that Massif Capital runs, this question has become particularly pressing because of our long-standing investment in Alphamin, a single-asset tin miner located in the North Kivu region of the Democratic Republic of Congo (DRC). Management of the firm recently shut down production due to the ongoing conflict between the DRC government and M23, a Rwandan-backed, Tutsi-led paramilitary group.

The valuation question is also relevant for investors in firms such as Barrick Gold and Ivanhoe Mining, as both firms have assets in the DRC, and the loss or impairment would negatively affect the firm’s valuation. While market participants at large tend to treat wars or conflicts as omnipresent events with uniform impact across affected firms, the reality is more subtle and contingent. As such, the opportunity in such conflicts is potentially significant for investors willing to do the work to understand how the fog of war affects businesses at the operating level. In our analysis of Alphamin, for example, we believe that the long-term value of the company has fallen 38%, but the stock has fallen 56% since the November/December 2024 period when events on the Eastern DRC border got started.

Massif Capital tends to be attracted to investments in complex locations. We like complexity because it increases market inefficiencies. Complex locations, like complex events (bankruptcies, litigation, distressed assets, etc.), are often avoided by mainstream investors due to the time and expertise required to analyze them. This avoidance leads to mispricing, as fear or confusion drives prices below intrinsic value.

Furthermore, the chaos of complexity tends to depress prices far below conservative intrinsic value estimates. We believe this is true of Alphamin, which despite conflict, has a return potential of at least 127%.

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