Tin is going to be the next big thing - Kasbah shareholders should vote no.

Hey guys

I was making a lot of research about tin recently and hoping that AMR deal wouldn't go through then I could buy some KAS shares. I was happy to pay 4c for 5m Kasbah shares, but I wouldn't pay even 1c when it's gone with this AMR deal. Because it could be even less than 1c after this merger operation in my opinion.

You can see my research about tin market below. In case Kasbah remains in Australia I am still thinking to invest in Kasbah as it has one the best tin resources in the world according to my research.

TIN IS GOING TO BE THE NEXT BIG THING
I believe TIN IS GOING TO BE THE NEXT BIG THING as ENERGY METAL in the coming years. TIN IS VERY HARD TO FIND, even harder than lithium because of the geological setting.

There is only 5mt reserves in the world. While it is very hard to find new reserves, the 350kt/annual consumption is increasing every year. The existing reserves will last no more than 15 years.

There is only one mine project may (!) come into production in 2019
It's Alphamine, and it's in 2019 if they can be succesfull to contruct the mine which is very suspicious because it's in the conflict zone of DRC, no roads, no infrastructure at all.

Kasbah might be the only tin resource in the world which was close to production.
That's why Kasbah's resources are very important. It's one of the best tin resources in the world which is in a reasonably low risk country and close to infrastructure.

The tin price set to increase like a rocket.
Tin is going to be used in Li-Ion batteries and solar cell soon after the researches are completed. So the outlook for tin is very bright.

We can save KASBAH Resources if can come together.
We can keep it Australian.
I wouldn't expect Kasbah shares would have any value after this merger.

My bad experience with similar kind of management
Pala, which will come to own 38% of and therefore effectively control the merged entity. I wouldn't buy any shares of KAS if Pala was involved because I have a bad experience with Pala's involvement in my shareholding in Elemental Minerals (ELM, it's now Kore Potash K2P) in 2011.

The stock price of ELM went up to $3 with our good management (Mark Jones was CEO), then one of the big shareholders from South Africa unintentionally made a mistake and supported Pala's involvement, then management changed and Pala's money flowed to company. Because I made a good research about Pala that time and I couldn't see much positive effects of their involvements in most of the other companies worldwide. At that time I decided to sell out at $2 while the stock price already lost 1/3 of its value after Pala was involved. I couldn't find any certain evidence the decline of the sp was because Pala's involvement but the result was clear; the sp was going down. The stock price went to 20c in 3 years. Then Pala left but it was too late for the shareholders.  I made good profit as I bought in at 28c but many shareholder who bought and hold for long time lost a lot of money.

The proposed transaction is extremely unattractive to Kasbah shareholders for many reasons:

• The terms of the transaction are not favourable for Kasbah shareholders
• AMR is highly risky as a merger partner and brings nothing to Kasbah
• AMR’s Ban Phuc mine has been put on care and maintenance and has no remaining mineral resources IMO. Therefore AMR's value is much smaller than calculated in the deal.

Kasbah shareholders should ask;
Why would Kasbah merge with a company with a defunct nickel project (continuing ownership of which beyond two years is problematic) when LME tin stockpiles are at their lowest level since at least 2002 and the tin price is seemingly headed higher?

Action !
I think, if there is a strong group of shareholders around this issue, they can;

• Block the Scheme of Arrangement if it's not late (!)
• Remove the current board of Kasbah if they still support Pala's AMR (?)
• Appoint a new Kasbah board if needed
• Get on with developing Achmmach and building the business in a professional manner, and in the best interests of all Kasbah shareholders

Then I am happy to invest my hard earned money into this company.

Potential long term funding sources
I believe the company would be able to find new potential long term funding sources as below:

• Off-take with prepay metal traders
• Toyota off-take
• Resource Project Debt facility
• Sell down interest loans
• Emerging Market Lenders
• Equity




TIN RESEARCH

TIN PRICE IS STEEPLY INCLINING
We all know that tin price is dramatically going up since January this year. There are many reasons for that as we know. We know that China closed down some refineries, Indonesia put restrictions to exports, the grades degrading in Myanmar because of excessive production in open pit mining and heavy exports, etc, etc.

But one thing is certain is that the climbing of the sp is quite steep and attractive.




OIL & TIN PRICE CORRELATION
“Tin price no longer follows oil prices”

Now let's have a look at Tin-Oil price correlation. The important point I am bringing up here is “tin price no longer follow oil prices”.

If you look at the oil & Tin Price correlation chart closely you will see that the decline in price was not dramatic when oil price collapsed in 2014. Also, tin price climbed to $21.900/t back which is very close to its price $23,000/t on July 2014 (see the chart attached for only tin prices). You can also see the same separation on the oil & in price correlation chart I sent before.

The chart  starts from 2006 together however tin price makes higher gains than oil price when oil price goes up.

That means, the correlation between oil and tin price is weakening.
This could be because of one very important thing which is the key point; Tin is becoming an energy metal!

And tin is hard to find, it’s not easy to find like oil. Also, oil reserves are increasing.

Tin-Oil price (Poitive) & Tin-US Dollar (negative) correlations;

Normally most of the commodities follow oil price and/or US dollar’s weakness or strength. This is a known fact in resources sector. Especially the energy intensive metals like aluminium, etc. always and have to follow oil prices. Also the strong US dollar causes commodity prices to decline as it’s happening now. Tin was also one of these metals following oil price and US dollar. Tin price has come under $20,000/t yesterday because US dollar appreciated against all foreign currencies. (It is certain that tin price will always remain in negative correlation with US dollar). However we can see that tin is not exactly following the oil prices anymore.



TIN PRICE IS PERFORMING BETTER THAN OTHER METALS
You can see from the below chart that tin price is performing much better than other LME (London Metal Exchange) stocks.  The reason for this which I have found is very is very interesting;

1) Tin reserves ar declining (this is a know reason)
2) Tin is becoming an energy metal..!



Dramatic oil price collapse was political but not economical; Oil price will rise, so is tin price, even much more.

The low oil  price is political but not economical. (US is trying to kill Putin). It will go up because consumption is increasing dramatically every year (over 93m barrel/day). Putin and Saudis agreed now for freezing the production. So the oil price will go up. Only the Iran is problematic because they want to increase their market share which was declined because of long term embargo. (The political issue on this matter is very deep and we can talk about this for hours)


World tin consumption is continuously increasing also




Forecast by ITRI shows supply will decrease and price will increase



By the way tin is becoming an energy metal;

Tin should not be considered as an ordinary industry metal anymore; it should be considered as an energy metal!

It’s usage in the areas below increasing by the day and a lot researches are going for tin usage in related areas.

• Soldering material usage is increasing because the electronics is increasing their space in our lives and there is no substitutes for tin as soldering material aft lead-free solders have now become common. (Soldering has 43.5% share in consumption of tin)
• Battery storage technologies: Lead acid, Li-Ion, Magnesium Ion, Sodium ion, Supercapacitors, Aluminium Air, and Fuel cells
• Power generation technologies: Solar cells (Copper zinc tin sulphide), Solar storage (molten tin) and Thermoelectric (tin selenide, magnesium stannide)
• Hydrogen: Methane to hydrogen (molten tin) and water splitting (tin oxide, tin sulphide photo catalysts)
• Clean fuel: Biodiesel catalysts (iron tin oxide) and fuel catalysts (tin antimony alloys)

See in this table how the consumption increased in soldering applications over the time by increased electronics usage. This will never stop and will even get more as there is no substitute for tin in soldering.



World Tin Supply - Indonesia and China >60% global supply


Jan. 2016 - China’s tin producers announced coordinated supply cuts in Jan-16, totaling 17kt (12% of China’s 2015 production; 5% global output). Refined production may also decline in 2016 on reduced ore supply from Myanmar. Rapid growth of Myanmar’s tin industry (17kt, 2015; up from 2kt in 2012) undermined tin’s price mid-2015; but grades are peaking and current production rates are believed to be unsustainable.
China’s producers are lobbying the government for the development of a tin stockpile as a way of providing industry relief for subdued domestic demand – in particular, in China’s construction sector.

July 2016 - Chinese tin supply has decreased after environmental inspections resulted in the temporary closure of domestic smelters.
China was the largest producer of tin together with Indonesia. While Indonesian tin exports down for the 4th consecutive year due to tighter licence conditions, the Chinese administration began environmental inspection at eight major provinces starting July 19th, leading to smelters in China either suspending or cutting back production. The recommended plant relocations and maintenance operations are expected to keep smelters idle for more than a month in some cases, with many mills not yet clear on possible restart dates.
Affected smelters account for some 45% of China’s annual tin production, or around 110,000 metric tons of capacity. The cuts will result in a sharp drop in refined tin output in July and August by Chinese tin smelters, leading to the ongoing upward pressure on domestic tin prices.

China has dramatically increased refined and non-refined tin imports from Myanmar! Sucking out all the cheap reserves of Myanmar!
Also, a recent report from Reuters stated that China could increase imports of refined tin in the near future. The reason? Upcoming environmental inspections at smelters, which could derail local output.

“It should have a huge impact on the whole (tin) industry,” a trader at one Chinese tin smelter told the news source. “It’s … part of long-term supply side reform not just for the private sector or special smelters.”



Myanmar Tin Production Peaking?
Tin production in Myanmar has surged more than ten-fold over the past four years, accounting for more than 10% of global tin mine supply and helping to make up for falling Indonesian tin exports.

However, according to a recent study released by the International Tin Research Institute, it appears that Myanmar tin production is peaking at some 50,000 mt per year, although there is still significant potential for the discovery of new ore resources.

Moreover, the ITRI believes that the increase in China’s imports by Myanmar this year, up 88% on the year to date, is a result of a depletion of tin ore inventory accumulated over the past few years, hiding a decline in mining activity.

According to the group, the longer-term outlook for production in Myanmar mainly depends on whether there are new resource discoveries in the next few years. Otherwise, production may be near peak to then decline.

If ITRI is right about Myanmar’s outlook for tin production, tin bulls might continue to find reasons to push prices up, given that Indonesian’s tin exports have declined over 25% for the first half of the year.


World’s biggest exporter Indenosia’s tin exports down for the 4^th consecutive year due to tighter licence conditions



Tin exports have dropped every year since 2013 due to stricter regulations. Shipments dropped 7.6 percent in 2015 from a year earlier, according to Trade Ministry data compiled by Bloomberg. Overseas sales plunged 57 percent to 2,486 tons last month from December 2015, the data showed.

PT Refined Bangka Tin, Indonesia’s second-biggest smelter, has ceased operations in support of the government’s commitment to preserve the environment, and its facilities on Bangka island will become a conservation area. The move will cut exports by about 14 percent, an industry group said.

The possibility of other smelters filling the shortfall will depend on their business plans and approval from the Bangka mining office.

The shuttering could reduce exports from Indonesia by at least 10,000 tons this year. The country shipped 70,155 tons in 2015, the smallest amount since at least 2008.

Also, the government has imposed curbs on production and overseas sales, tightened up on taxation and quality standards, and obliged exporters to trade the metal on a local exchange before shipping.

Monsoon rains and floods have also disrupted mining and ore supplies. Indonesia’s main tin-producing province of Bangka Belitung was flooded late-Jan.

Environmental constraints have been imposed on offshore mining and affected the nation’s biggest tin smelter, PT Timah, which halted offshore mining last month in response to complaints from local fishermen.

​

Two other smelters, PT Stanindo Inti Perkasa, and PT DS Jaya Abadi, are producing at below 70 percent of capacity due to a halving in ore supplies because the government rules imposed in November that tin ore must be originated from licensed mines.

Both companies are “currently only exporting about 100 tons per month. The smelters expected to raise output to about 80 percent capacity by mid 2016.



No significant investment in new mine production

On the below table, you can see that Kasbah Resources’s (KAS) deposit Achmmach is the second best one.