afr article

Some good exposure


APRIL 24, 2013 ARTICLE 13 OF 31
Tin’s fortunes hit a market sweetspot

Tin is in a commodity sweetspot, used not just in construction but electronics and catalytic convertors. Photo: Tamara Dean
EDITED BY AYESHA DE KRETSER

As far as commodity markets go at the moment there aren’t many sweeter spots than tin.

The malleable metal is used in the electronics industry as a solder, as well as to coat steel for food packaging. But the market for tin is also growing through catalytic convertors, meaning its use is somewhat linked to platinum group metals.

However, potential buyers should beware – tin’s fortunes are also historically not dissimilar to those of nickel, in the sense that it has been something of a “boom-bust” story.

Australia is home to only 1.3 per cent of the world’s known tin resources and 85 per cent of that is located at Metals X’s Renison Bell project in Tasmania.

China’s Yunnan Tin is the world’s biggest producer and China is home to 27 per cent of the world’s tin resource, according to Geoscience Australia.

One company hoping that history won’t repeat – even though it has a pretty good chance of withstanding any downturn that could eventuate – is Kasbah Resources.

The junior ASX-listed explorer is sitting on one of the world’s few high-grade undeveloped tin resources.

Perth-based broker Hartleys reckons Kasbah’s Achmmach deposit in Morocco is well-placed to navigate the tricky funding landscape currently facing most junior miners.

Japan’s Toyota Tsusho is a JV partner in the project, for which a definitive feasibility study is due at the end of the year. Toyota Tsusho can earn a 20 per cent stake in Achmmach once the DFS is filed at the end of the year. It currently holds 18 per cent and is keen to secure offtake.

Toyota Tsusho trades 8 per cent of the global tin market and the Japanese are keen to secure supplies. The trader has the ability to attract finance from Japanese banks, given the government there lists tin as a strategic metal. That makes sense given China is the world’s biggest producer and while it has exported tin, it is also importing concentrates.

High-grade, low-cost advantage
The other big supplier on a global front is Peru’s Minsur, where production has been declining because depths are increasing while grades fall.

Kasbah’s Achmmach deposit is high grade, at 0.85 per cent tin. (For investors not familiar with tin, 1 per cent tin is equivalent to a gold grade of 4.5 grams per tonne, or a copper grade of 3 per cent.).

Kasbah is also potentially a low-cost miner. Hartleys puts its C1 cash costs at $US12,000 a tonne or all in costs at $US15,000 a tonne.

The current tin price is sitting around $US21,000 a tonne, from a low of $US9,775 a tonne in December 2008 and a high of $US33,300 in late 2011.

But it’s not just the Japanese that make the register look exciting, with global non-ferrous metals trader, Transamine holding a 3.3 per cent stake and Thai smelter Thaisarco holding 2 per cent, lending even more confidence to the $49 million capped Kasbah finding the $200 million-odd it needs