Almonty’s $700M Convertible Note Stirs Dual Narrative: Growth Ambition Meets Near-Term Pain

Almonty Industries secures $700M+ convertible notes for Sangdong tungsten mine expansion in South Korea, driving stock decline of up to 21% amid hedge fund arbitrage, but analysts maintain bullish ratings.

Almonty Industries has pulled off one of the year’s largest convertible debt placements in the mining sector, raising $700 million through notes that carry a 2.25% coupon and mature in 2031. The offering was so heavily oversubscribed that underwriters secured an option to add another $100 million to the pile. The proceeds are earmarked to supercharge the Sangdong tungsten mine in South Korea — a project that, at full tilt, could supply roughly 40% of all tungsten demanded outside China. But the market’s immediate reaction was anything but celebratory.

Shares in the tungsten producer took a beating on Friday, with reports showing a decline of anywhere from 18.43% to 21.04%. One source pegged the close at C$22.70, another at C$23.45. The divergence may stem from different pricing moments or data feeds, but the message was uniform: the largest capital raise in the company’s history rattled short-term holders. The stock has still managed to hold onto a year-to-date gain of 88.69% and sits more than five times above its 52-week low of C$4.67.

The selling pressure is rooted in classic convertible arbitrage. Hedge fund buyers of the notes typically hedge their currency and equity exposure by short selling the underlying stock, creating mechanical downward pressure independent of the company’s fundamentals. To cushion the dilution for existing shareholders, Almonty is spending $83 million on capped-call transactions that limit the dilution effect up to a share price of US$41.36. The conversion price was set at about US$27.40, a 32.5% premium over the closing price on June 4. Net proceeds are estimated at $675.9 million, rising to $772.7 million if the full greenshoe option is exercised. Settlement is scheduled for June 9.

The bulk of the money — roughly $543 million — will go toward working capital and general corporate purposes, including potential acquisitions. Another $50 million is to refinance existing debt. But the real prize is Sangdong. Phase 1 of the mine began commercial processing in March, handling about 640,000 tonnes of ore annually to yield around 2,300 tonnes of tungsten concentrate per year. A Phase 2 expansion slated for next year aims to double capacity to 1.2 million tonnes, pushing output to approximately 4,600 tonnes. That would make Sangdong a chokepoint for Western supply chains desperate to reduce reliance on Chinese tungsten, which dominates the global market.

Analysts have largely looked past the one-day price shock. Oppenheimer raised its price target to US$25 on June 3 and maintained an “Outperform” rating, while D.A. Davidson and B. Riley Securities also hold targets in that range with “Buy” ratings. The relative strength index hovered near 40 — a sign the stock may be approaching oversold territory — and the annualized 30-day volatility climbed to 96.5%. A potential catalyst sits on the calendar for June 29, when Almonty is expected to be added to the Russell 1000 and 3000 indices. That could unlock passive inflows from index funds, offering a liquidity boost after a turbulent week.