TORONTO (miningweekly.com) – Tin’s muted performance across 2014 obscured the potential for price rises and robust margins in the coming years, Hallgarten & Co principal and mining strategist Christopher Ecclestone told an audience at the Prospectors and Developers Association of Canada conference last week. In addition, the lack of shelf-ready tin projects would mean a gap in matching supply with demand.
Current conditions had been complicated by the effect of Indonesia’s export restrictions on unelaborated tin, which were introduced in early 2014. At that time, it was believed that shortages stemming from this would push prices higher.
The price certainly rose, but not to the heights many predicted. Ore stockpiled before the restrictions came into effect was sold back into the market across much of 2014 and into 2015, pushing down the gains that had been made.
Longer term, the pattern of subdued prices had led to a drought in project investment, Ecclestone noted. There had been some interest in the old Australian and Cornish tin regions, although the price had not yet justified the capital and operating expenditure needed to make these projects viable.
Other notable tin jurisdictions, such as Bolivia or Burma, had high political risks attached, while the US had conflict mineral concerns, relating to tin sourced from the Democratic Republic of Congo and Burundi.
Indonesia and Malaysia and their alluvial tin spaces were currently closed markets, with both governments favouring locally-owned companies as part of their national interests. China, both the largest tin producer and consumer, was also a closed shop.
Most commentators and market participants believed that current prices represented a trough, Ecclestone said. In addition, the weight of stockpiled supply entering the market had started to be whittled down, removing an important weight on prices.
Whether the tin price moved up steeply or gradually depended on the pace of global economic recovery.
In considering this, Ecclestone highlighted the International Tin Research Institute’s five-year price projections, which were unveiled in November 2014. “These range between $20 000/t and $50 000/t. At $50 000/t there’d potentially be a gold rush into the tin space, although I’d add that gold rushes have gold to go after. With so few tin projects around, there’s not much in the way of salvation for a tight tin market,” he advised.
And because of the capital expenditure (capex) involved, it would also take several years for the most favourable tin projects available to shift from development into production.
Ecclestone urged many companies to reduce project scales to shrink the capex required. It might introduce higher all-in costs for output but a project would still be viable, with fair margins, as long as these were kept around $13 000/t. It would then have a much better chance of securing the necessary financing to move into production.
“But, overall, we have things set up for a pretty bullish-looking scenario in tin for the next few years,” he concluded, adding that financing just needed to be there for the sector when it woke from its slumber.