Barry FitzGerald: Why this undeveloped tin project has a Stellar future
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Stellar Resources has the highest grade undeveloped tin project on the ASX and its time may be about to arrive, writes Barry FitzGerald in his Garimpeiro column.
Tin has been getting good press of late, giving some hope to ASX-listed tin juniors that their day in the sun might finally be around the corner.
Last week Rio Tinto, which is not a tin producer and is not about to be one either, put up a slide at a battery metals conference in Perth.
The information on the slide was the work of the materials smarties at the Massachusetts Institute of Technology (MIT).
It ranked the metals most impacted by the new technologies.
Rio was showing it to illustrate that its Jadar lithium project in Serbia had a future, given MIT ranks lithium as the second most impacted metal by new technologies.
But sitting proudly in first position was tin — by a big margin too thanks to the often forgotten metal’s applications across a range of disruptive technologies – autonomous and electric vehicles, advanced robotics, renewable energy, advanced computation and information technology.
The common theme for tin in those technologies is solder, an electrical contact material which currently accounts for about 48 per cent of global tin consumption, followed by chemical uses at 17 per cent, tinplate at 14 per cent and lead-acid batteries at 8 per cent.
But increasingly tin alloys and tin-based chemistries are being named in a flood of patent applications for the next generation of lithium-ion batteries.
It all adds up to tin to be the next metal to benefit from electric vehicle (EV) and energy storage revolution.
Will it move the dial on current annual global tin production of 350,000 tonnes? No one is quite sure.
But as the industry body, the UK-based International Tin Association, suggests, tin’s EV credentials could well be the cherry on the top in a market where tin stockpiles are near all-time lows, and where existing supply sources are under pressure.
Those factors have behind a strong price improvement for tin from a low in early 2016 of $US13,085 a tonne to last year’s (annual) average of $US19,874 a tonne, and to $US20,800 a tonne most recently.
The current price is down from $US22,000 a tonne earlier in the year but at an exchange rate of US77c, the local price of $A27,012 is nevertheless in interesting territory for Aussie tin juniors looking to break in to the industry.
Tassie tin junior Stellar Resources (ASX:SRZ) is one of those.
Trading at the princely price of 1.7c for a market cap of $6.4m, Stellar has been patiently working away at its Heemskirk tin project, 150km south-west of Burnie near the historic mining town of Zeehan.
It is the highest-grade undeveloped tin project on the ASX but its development has been held up pending the improvement in tin prices which now seem to be unfolding.
The company has put the delays to good use by increasing confidence in the underlying resource base, testing new ore sorting techniques, and “right-sizing’’ to a more do-able project in terms of initial capital requirements.
The mineral resource estimate across a cluster of deposits that make up the Heemskirk project stands at 6.35 million tonnes grading 1.13 per cent tin for 72,000 tonnes of contained tin.
The only higher-grade operation in Australia is the operating Renison tin mine, 18km to the north-east.
Stellar started a resource drilling program last year with the aim of understanding the exploration upside at Heemskirk, as well as proving up a maiden mining reserve that will feed in to a definitive feasibility study to support financing activities.
Theoretically at least, first production could be possible in 2019.
Whether first production comes from a wholly-owned processing plant or from toll-treatment by third parties remains to be seen.
What is more certain is that with its modest market cap, Stellar is highly leveraged to the tin price/exchange rate.
Even a modest operation producing 1500 tonnes of contained tin (as identified in the group’s last optimisation study) would be a company-maker — particularly so if tin’s growing status as a metal of the future sees its price move into the $US25,000-$US30,000 a tonne range.