Primarily used as solder in electronics, the value of tin has doubled over the last twelve months, and the relatively small number of tin stocks have proven to be valuable investments. However, the top two producers, Yunnan Tin Co., Ltd. (SZSE:000960) and PT Timah Tbk (JKSE:TINS), are not so accessible to western investors; fortunately, the highest-grade tin mine on Earth is listed on the Toronto Venture Exchange thanks to Alphamin Resources Ltd (TSXV:AFM).
Following a season of record-breaking sales and revenue from major semiconductor manufacturers, with some reporting 100% YoY growth, the Semiconductor Industry Association (SIA) reports that demand for semiconductors is on-track to grow 20% YoY on the back of the dramatic rise in the consumption of electronics products driven by the Covid-19 pandemic.
KPMG reported that companies invested an extra US$12bn a week into technology during the first wave of the pandemic alone, and with tin being widely known as “the glue of electronics”, inventories declined and investors reached for their wallets. However, there is no primary mine production of tin in Europe or North America, making Alphamin the only pureplay exposure on a western stock exchange.
Why Tin
The world consumes around 380,000 tonnes of refined tin per year, over half of which is used in solder. The SIA projections suggest that an additional 30-40,000 tonnes of metal will be consumed in 2021 from electronics soldering alone.
The ensuing boom had catapulted prices to all-time-highs of US$35,000 a tonne by August. Demand from the electronics industry continued to climb, but supply remained somewhat stunted by the last remnants of covid-related logistics problems, spurring on the tin price beyond that of other related commodities.
In addition, factors that curbed rallies in other markets, such as gold and copper, did nothing to deter the escalating price of tin. Gold did run up, but was thwarted by an improving US economy and talk of early inflation rises. Similarly, the copper rally ended when China released 170,000 tonnes of state metal reserves (primarily copper, aluminium and zinc), ostensibly to bring down prices.
The tin market managed to dodge every single bullet, however, and given that new mine production is incentivised beyond $25k a tonne, investor interest heightened around springtime. By April, the high price had reduced buying at smelters, limiting refined supply further; while shares were rallying, market participants were beginning to feel the pinch. In an interview with The Wall Street Journal in May, a US solder manufacturer attested to the extreme level of demand, adding that he had never seen a shortage of tin so acute.
Why Alphamin
The boom in electronics demand is old news by this point, and has largely been priced into semiconductor stocks. It is the raw material producers who will be filling the resultant gaps in the market for years to come. Demand for electronics is expected to return to normal sometime in 2022, and while a correction in stock prices should be expected, the value of refined tin could remain elevated for years.
Very few tin projects are in the pipeline, even fewer are available to most western investors, and none of them come close to the existing or potential output of the Alphamin site. Cornish Metals Inc (TSXV:CUSN) and Avalon Advanced Materials Inc (TSX:AVL) have some decent tin projects underway, but neither company focuses exclusively on the metal and both are very much in the pre-production stage.
Aurubis AG (LSE:0K7F), Europe’s largest copper producer, has a relatively small exposure to tin via its ownership of Belgian recycler Metallo Chimique. While MQ produces just ~20% less material than Alphamin annually, Aurubis is predominantly exposed to the copper market and is already a super-stock, trading at CA$112+ and unlikely to be massively affected by the value of 9,000 tonnes of tin each year.
Alphamin is already producing 3% of the world’s tin supply from the highest-grade tin deposit known, with a 100% offtake agreement for the next five years and abundant scope for expansion. Unsurprisingly, the company share price has increased almost four times to CA$0.80 over the last year, but remains firmly in the realm of the penny stock; at least for now.
It takes approximately ten years to launch a mine, and so it will almost certainly fall to the existing top producers to grow output. Western investors looking for pure tin exposure have only a few options: join a brokerage that grants access to Asian stock exchanges, become a Chinese national, or buy Alphamin on the TSXV.
The Project
Alphamin’s flagship property, Mpama North, has a mine life of 12.5 years and provides the company with great cash-flow and a base from which to develop the remainder of the area, which some say has historically produced upwards of 10% of global tin supply.
Crucially, Mpama North features a grade of approximately 4% – four times higher than most other operating tin mines. The site produces more than 10,000 tonnes of contained tin per year at a cost of around US$10-12,000 per tonne, planting it firmly in the lowest quartile in terms of cost, and providing Alphamin with margins in excess of 50%!
The especially rich resource has easily been able to shoulder the cost of industrialising the heart of the license area, and additional operations can be bolted-on to the established infrastructure of the Mpama North operation, which includes a fully-operational separation plant used to produce the concentrate.
Most of the hard work has been done; the company is well into production, well-funded, and is presently engaged in extending an uncommonly prolific resource. Now that global consumption of tin is on the rise, the scope for Mpama’s profitable expansion is immense.
The Future
A further three mining licenses relating to the surrounding land have also been granted, and exploration is well underway at Mpama South, which has so far revealed a number of exceptional targets with potential grades appearing comparable to the northern site. Over the whole area, Alphamin expects to eventually have four functioning mines.
In the near-term, the goal is to double production to take advantage of rising demand. The company also recently commissioned a US5m fine tin recovery plant that is operational and processing tailings to increase yields by 5-10%. That’s upwards of US$15-30m a year in additional revenue before any production increase has occurred, let alone four active mine sites developed.
For 2021, Alphamin’s Q2 EBITDA was US$34.1m, but this considered a tin price of US$28,308 per tonne. On the day of the news release, the actual price was approaching US$35,000 per tonne. As a result of its outstanding financial performance, the company is targeting to be completely free of debt by the end of this year, and may begin to pay dividends as early as 2022.
Additionally, former mining activity at Mpama has left compelling evidence of the presence of mineralised material far beyond the area pertaining to the current resource estimate. Management are resultantly confident that the mineral reserves can be grown far beyond the initial 4 million tonnes (measured, indicated & inferred).
Final Thoughts
China is the world’s number one consumer of tin concentrates by far. The country is now largely out of lockdown and able to return to full production just as demand for electronic goods in Europe and America is rising; but key producing nations, particularly Indonesia, continue to experience restrictions.
This is expected to sustain elevated prices in the tin market, at least in the medium-term, and Alphamin should experience very little resistance indeed on the way to fully realising the Mpama vision.
Summary of potential tin exposures:
Alphamin Resources Ltd (TSXV:AFM)
- Top-ten global producer
- Owns an 84.14% share in the Bisie tin project in conjunction with the Congolese government and a South African government parastatal.
- Highest grade deposit known
- Pureplay producer
- Accessible to western investors
Yunnan Tin Company Ltd (SZSE:00960)
- Top producer by volume
- Share price growth of 40% over 12 months
- China’s only tin production operation
- Stock is completely inaccessible to non-China nationals
PT Timah Tbk (JKSE:TINS)
- Second largest global producer
- Indonesia’s largest producer
- Share price growth of 70% over 12 months
- Shares accessible only via a Jakarta Stock Exchange broker
Avalon Advanced Materials Inc (TSX:AVL)
- Has one tin/indium project at the PEA stage
- Focuses on lithium, cesium and rare-earth oxides
- Not actively producing
Cornish Metals Inc (TSXV:CUSM)
- Multiple prospective copper/tin sites in the United Kingdom
- One silver/tin project in Alaska
- Not currently in production
To learn more about Alphamin, click here
