Kristie Batten: Sky’s the limit for Tallebung in hot tin market

One of Australia’s top mining journalists, Kristie Batten, writes for Stockhead every week in her regular column placing a watchful eye on the movers and shakers of the small cap resources scene.

At a time of strong tin prices and growing demand, Sky Metals (ASX:SKY) owns one of only a handful of tin development projects in the world.

The company’s focus is the Tallebung project, about 70km from the New South Wales town of Condobolin.

Tallebung’s tin production dates all the way back to the 1890s and there was once a small town on the site.

The project was mined into the mid-1980s though the hard rock tin source remains intact and largely unmined.

The tin mineralisation is extensive – now defined over 2km – and visitors to Tallebung last week heard that the company, under managing director Oliver Davies and study geologist Peter Smith, is still working to understand the deposit.

“At the risk of coining a phrase that someone might have come up with before, it’s a Cinderella slipper situation where Pete’s gone through and picked out these structures and things, and then he’s put it into our resource model, and then it just makes the resource model make sense,” Davies said during the site visit.

“It’s kind of like putting Cinderella’s slipper on – somewhere it fits and you get the girl.

“We think we’ve got quite a robust model building.”

Tallebung has an indicated and inferred resource of 15.6 million tonnes at 0.15% tin and 0.03% tungsten trioxide for 23,200t of contained tin and 433,940 metric tonne units of tungsten trioxide.

The company has also set an exploration target of 23-32Mt at 0.14-0.17% tin.

Sky recently completed a 143-hole reverse circulation drilling program, which hit high grades of up to 0.96% on the southeastern margin.

“Ideally, this last round of drilling would have brought us up to an updated resource,” Davies told Stockhead.

“But now that we found high-grade zones on the margins, we’re coming in to fill those out and then see if we can close them off, to make sure when we do come to updating the resource, that we’re doing it justice.”

A drill rig will be on site any day now to kick off a new program of more than 100 RC and diamond holes to expand the high-grade zones and infill drilling.

While Sky previously planned to update the resource this year, it will now be pushed back to early next year.

“We’ve been delayed by our success,” Davies said.

Studies to accelerate

As Tallebung is a brownfields site with historical shafts and pits, it already has good road access and powerlines to site.

The updated resource will feed into mining studies.

“Provided we’ve got enough indicated resources in that, then we can release the scope of studies to market,” Davies said.

“We’ve very much backend-engineered this project, because it’s very important that we bed down all of our low-cost engineering solutions.”

One of the engineering solutions is TOMRA ore-sorting, which has shown the tin grade can be significantly upgraded.

Sky completed a 75t bulk sample earlier this year to be processed through a full-scale TOMRA XRT Ore Sorter in a two-stage circuit.

The stage one sorting upgraded the tin grade by 13 times to 2.32% tin with a 94.8% recovery, while stage two saw a further 4.6 times increase to 10.8% tin at a 70% recovery.

Over 93% of mass was rejected in the first stage, which Sky said would lead to substantial reductions in capital and operating costs.

Sky has already advanced environmental studies to accelerate permitting.

Davies estimates the project could be in production in 2-3 years.

“Probably more like three years, and that will depend on a smooth processing route,” he said.

Sky was invited last month by the NSW government to present at it Critical Minerals Investment Showcase in Sydney.

“There seems to be strong indications from the New South Wales government that they’re keen to support projects like this,” Davies said.

Silver sweetener

In September, Sky reported the discovery of high-grade silver-tin zones with grades of up to 686.3 grams per tonne silver.

Very high-grade silver zones within and adjacent to tin deposits are a common feature of the tin deposits within the Andean tin belt, including the Potosi tin-silver deposit.

Stage one ore-sorting upgraded the silver grade by 10 times from 7.44g/t to 75.9g/t with more than 80% recovery.

“We’re looking at how much of the silver we can recover, and what that will mean, but we think there’s a significant amount of silver in the system, and we’re obviously finding more as we come to that southeastern margin, so we’re excited now to get drilling into that southeastern margin and drill it out and see how much silver is there,” Davies said.

“And very importantly, tin is a strategic mineral, and then the tungsten and silver put us on the critical minerals list, and in particular, silver is a high priority critical mineral in New South Wales, so we anticipate that, given the historic production at Tallebung, that it’s an existing mine site, and we’ve got these critical minerals there, then it’s probably a really great project for the New South Wales government to get done quickly.”

Tin shortage

Tin was the best performing base metal last year and is making a late run to get that title again this year.

The tin price recently rose to above US$37,000 per tonne in late September for the first time since 2022 and remains above US$36,000/t.

The tin market is facing a supply crunch due to years of underinvestment, while demand is rising due to its use in electric vehicles, renewable energy, artificial intelligence and new solar photovoltaic technology.

Citi Research is bullish on tin and its base case scenario sees the price rising to US$40,000/t in the current quarter and remaining there through 2026.

“Tin is leveraged to similar upside drivers as copper and aluminium from an expected 2026 cyclical growth rebound and structural energy-transition demand, despite near-term growth headwinds,” the bank said in its LME Week base metals update last month.

“While we expect a gradual recovery in Myanmar mine output over the next year to facilitate stronger China refined production, we think Indonesian production will remain under pressure.

“Market vulnerability to policy led supply disruption risks remains high and we assume continues to constrain supply growth.”

Citi’s bear case scenario is that tin averages US$30,000/t if supply growth is strong and demand dips.

However, its bull case scenario is for tin to reach US$50,000/t next year.

“In this scenario, we assume physical scarcity conditions re-emerge due to a combination of significant supply constraints and a robust bullish global growth environment (with market pricing a very soft US landing and China supporting demand with incremental stimulus),” Citi said.

“A broader US debasement trade supports a sustained rally in base metals as investors seek greater exposure to hard assets.”

Davies said global tin supply was fragile.

“And it means that if anything comes offline, there’s a deficit in tin supply, and we’ve seen that with a very strong tin price,” he said.

“Inventories are low. But demand is surging with more and more uses for circuit boards, things like AI, obviously need a lot more tin, and with that demand backdrop, it means that we just need a lot more tin.

“We’re not producing enough already, so that is going mean a widening deficit between supply and the need for the growing demand.”