{australien_flagge}Today, Friday, First Tin Limited (LSE: 1SN; FRA: 1SN) celebrates its stock market debut in London. It is fair to speak of a German-Australian-British joint venture: It is headed by former Aurubis executive Dr. Thomas Bünger (54); the companies two most advanced tin projects are located in Germany and Australia and the founders as well as the bulk of the investors are based in the City of London. First Tin has secured 20 million pounds (the equivalent of about EUR 24 million) for its Initial Public Offerring (IPO) funding the company for two feasibility studies and a drilling programme through until a construction decision in 2024. The company intends to take advantage of the emerging shortage in the tin market to bring its two advanced projects in Germany and Australia to production maturity by 2025.
The Tellerhäuser Project, located in Saxony has a history dating back to GDR times; the second project, Taronga, is located in New South Wales, Australia. Newmont Corporation (NYSE: NEM, TSX: NGT) owned and advanced the Taronga project back in the mid-1980s, but the collapse of the tin cartel and tin price in 1985 caused Newmont to walk away. With both Tellerhauser and Taronga projects, First Tin wants to prove that tin can be “green” – conflict-free, reliable and ESG compliant. The company motto is “Sustainable Tin for a Renewable Future.”
Tin is the glue of the energy transition
Why is tin important? Tin is a relatively scarce element with an abundance in the earth’s crust of about 2 parts per million (ppm), compared with 94 ppm for zinc and 63 ppm for copper. At today’s price of over $40,000 per tonne tin is about 4 times more valuable than copper around $10,000/ton.
Isn’t tin used in tin cans? True, but it is primarily the growing global interest in renewable energy and electric vehicles that should ensure a continued strong tin market in the coming years. With an annual production of around 380,000 tons, tin may be one of the niche commodities, but that doesn’t change its strategic importance. “Tin is the glue of the energy transition,” says Thomas Bünger. It is no coincidence that Germany and the USA have declared tin a strategic commodity. The example of the automotive industry makes it clear why this is so: a gasoline-powered car today requires an average of 400 grams of tin, while a comparable electric car needs three times that amount of tin, around 1.2 kilograms. Bünger expects additional demand of up to another 100,000 tons of tin in the coming years, but adds that he does not believe the market will be able to provide these quantities in a short time, let alone sustainably.
An estimated 75 percent of tin production comes from so-called placer deposits including off the coasts of Indonesia and Malaysia, tin is mined from the seabed using floating suction dredgers. This is not only not environmentally friendly, but also creates a dangerous dependency. Time and again, the Indonesian government threatens to halt exports, as it did with copper and nickel. For understandable reasons, Indonesia has a great interest in bringing the production of higher value-added tin products into the country. In November 2021, Indonesian President Joko Widodo said that he intended to ban the export of unprocessed tin ore by 2024. Only the smaller part of primary tin production comes from conventional mining, such as that planned by First Tin.
Three listed tin projects underway in Europe
There is currently no primary mine production of tin in either Europe or North America. And there has been no investment in the development of tin deposits in Europe for decades. That’s changing rapidly right now. Almost simultaneously with First Tin, British-Canadian Cornish Metals (LSE: CUSN; TSV: CUSN) is trying to refloat a historic tin mine in Cornwall. Right now, the company is raising £40.5 million, the first £25 million of which has already been committed by well known mining investor Mick Davis. Australia’s Elementos Minerals (ASX: ELM) is developing an open-pit tin project in Spain. Coincidentally, the stock market values of all three companies are almost on par at the moment: First Tin comes to market at a valuation of £80 million at the IPO price of 30 pence, Cornish Metals is valued at around 89 million pounds before the current £40.5 million capital round is completed, and Elementos comes in at A$135 million (about 77 million pounds). First Tin plans annual production of 6,000 tons, Cornish is not yet giving production figures, and Elementos expects to produce 3350 tons of tin per year, according to an optimization study.
The fact that there are several companies with European projects trying to bring their own tin production back to Europe in parallel and with comparable timelines speaks volumes. Cornish Metal even advertises quite directly as “a strategic asset for the UK”. In troubled times, ideas such as resilience and security of supply apparently take on a whole new weight. Moreover, the tin price itself is sending an unmistakable price signal. The LME price for tin has risen almost 200 percent in the past two years. Currently, the metal is trading at >$44,000 per ton on the London Metal Exchange. First Tin is targeting production costs of USD 12 to 14,000 per ton of tin and (like the other companies) is using long-term prices of USD 30,000 per ton for its profitability calculations.
Figure 1: Relative valuations of publicly traded tin companies. The graph shows the relative enterprise values in relation to the tonnes of contained tin resource in the ground.
The companies operating in Europe can hardly be described as competitors in the true sense of the word. Planned production is too low for this in relation to the overall market. Rather, they are “co-petitors”. However, the competition on the stock market could very well provide better visibility for the small sector. It is always better when investors can compare and the tin story is backed up by several companies rather than just one.
Bünger who holds a doctorate in metallurgy, wants to give equal priority to the two assets in Germany and Australia. Definitive feasibility studies and final permits are still pending for both projects. This is where Bünger sees his primary task: “In the end, we’ll see which project comes through first,” says Bünger. Regardless, it can already be said that the Tellerhäuser project will be special in that it will be designed as a zero-waste mining operation. All processing is to happen underground. In the best case, 50 percent of the mined raw ore could be processed or used for road aggregate. The rest would be backfilled underground after processing. The landscape of the Ore Mountains is to be affected as little as possible.
Bünger, who holds a doctorate from Freiberg University of Mining, knows the area and the people. As a former board member and COO, CTO at one of the world’s leading copper and multi-metal producer Aurubis AG, Bünger was responsible for production facilities with sales of around EUR 8 billion. That his strengths lie in the subject of metallurgy is clear from the detailed company presentation (see Figure 2). But the topic of approval procedures does not scare Bünger either – on the contrary. For Aurubis, he was responsible for the construction of inner-city production facilities in Hamburg.
Figure 2: Recycling as much as possible is the motto of the Tellerhäuser underground tin project. Four marketable products are to be created in eight processing steps: Gravel for roads, a magnetite concentrate and two other concentrates containing zinc, indium and copper, as well as Tin itself.
Conclusion: First Tin is developing advanced, high margin tin projects in the right places at the right time. The growing global interest in renewable energy and electric vehicles will foreseeably create a shortage in tin supply in the coming years. Sustainable sources of tin are in short supply anyway. True, the planned production of 6,000 metric tons of tin per year is just a drop in the ocean, given projected annual demand of up to 480,000 metric tons. But First Tin scores with conflict-free, reliable, ESG-compliant production at a foreseeably low cost of $12 to $14,000 per ton. Calculated net present values at tin prices of $30 and $40,000 per ton are $440 million and $770 million, respectively. And who knows today where the tin price will go given Industry forecasts of demand through 2030 being twice potential future supply of tin.
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