The case for tin should be stronger every year... is the battery metals market asleep at the wheel?

Tin prices have enjoyed a strong but volatile start to 2023, lifting 12% to US$27,745/t but falling from January highs of more than US$32,000/t
The International Tin Association says at least 50,000tpa of additional tin supply is needed to service new markets in solar ribbon, EVs and 5G technology by the end of the decade
Hopeful tin developer Elementos thinks that deficit could be even more extreme, providing support for higher prices

Tin has a number of monikers. The ‘spice metal’ — because a dash of it seems to be in just about everything — and the ‘forgotten battery metal’ are two.

And it would be easy to forget it was one of the base metals which saw a volatile 2022, with prices rising to all time highs of around US$50,000/t early last year following Russia’s invasion of Ukraine.

That came around the same time as similar pops in nickel and copper.

Unlike nickel, which held most of its gains (barring one crazy day when trading was suspended at over US$100,000/t) throughout last year, tin went into a deep funk.

In the end prices fell almost 37% to US$24,808/t by year’s end and at one point temporarily traded sub-US$18,000/t, cutting into the profitability of many producers.

Since the start of this year prices have risen 12% to US$27,745/t, and had at one point in January lifted to over US$32,000/t, levels high enough to incentivise new sources of production.

The commodity’s strong January is multi-faceted.

Protests saw the suspension of production at Minsur’s San Rafael mine in Peru, the world’s second largest individual source of tin metal and 9% of global raw material supply.

Major producer Indonesia, successful in turning its nickel industry into the largest in the world after banning metal ore exports almost a decade ago, is considering an export ban on tin ores this year as well. That has placed uncertainty in the market.

Meanwhile, demand has been recovering in China along with macroeconomic forces that have been positive for commodity demand with the end of its Covid Zero policies late last year.

And many big industry names are starting to take notice of the long overlooked commodity.

Yamana Gold founder Peter Marrone last week said the metal — previously extracted in mines now more fashionable as lithium producers like Greenbushes — was a key focus for him after his company’s US$4.8 billion sale to Pan American Silver and Agnico Eagle.

Beyond the short-term volatility, what does the long term outlook for tin have in store?

Tin as it stands

Tin is typically used in small quantities in items like electronics, with around 49% of all tin produced and recycled each year turned into solder for electronic circuitboards, a market where it has outpaced lead to become the dominant raw material.

Lead free solders grew from 80% of the market in 2020 to 86% in 2021.

Compared to battery metals like nickel, lithium and especially copper, the tin market is extremely small.

In 2021, tin use totalled around 389,500t according to the International Tin Association.

The recycling input rate was around 28%. But new technologies are expected to dramatically increase their share of tin use by 2030.

Jeremy Pearce from the ITA says solar ribbon, a solder-coated copper ribbon visible on the front of all solar panels, has grown from a low base to 22,000tpa of tin use in 2022.

By 2030 that is forecast to rise to 55,000tpa. EVs are also more tin intensive than internal combustion engine cars, with more electronics and tin-copper electricals. The ITA forecasts an additional 10,000tpa by 2030 there, with another 10,000tpa potentially from digitisation 5G.

Pearce says there is an urgent need to invest in more of the critical but oft overlooked battery metal.

“(We see) no major increases this year but some new operations/expansions next year,” he told Stockhead from London via email.

“South America will steadily increase. Ditto Africa. Some new secondary supply is coming in through the copper circuit.

“Supply pressure depends on how long macroeconomic disruptions hold back (the) technology demand curve … we might expect significant deficits after 2025.

“There is an urgent need to invest in more capacity.”

Get tin on the radar

As the effective glue of modern electronics, the supply chain for tin and its uses has a large concentration in China, which both produces and uses around half of all tin, according to Pearce.

It has no net exports to write home about, but its tin mines have become static and supplies from neighbouring Myanmar have been declining, meaning it is increasingly hoovering up tin from around the world.

‘…there’s currently about seven cents of tin in your standard iPhone. So is Apple going to care if they suddenly have to pay 14c for the tin to go into their iPhone?
‘

But Pearce sees an increasing trend to source tin domestically or from closer trading partners over the next decade.

“We see more localisation of tin smelting/production over the next decade. Not just for geopolitical but also ESG (reasons) as the only toll smelters are in Asia,” he said.

“Governments today do not realise the critical importance of tin, notably as solder that glues together all electronics but also in many essential quality of life products.

“We already mentioned solar ribbon as critical to renewable energy plans. Tin is starting to appear on the radar but should have a much higher priority.”

The ITA projects an additional 50,000t every year will be needed for the ‘technology supercycle’ by 2030, with a big investment in smelter diversification and over US$1 billion of new investment needed to reach 2030 tin demand. Where that will come from remains to be seen.

Miner says shortfall could be double official estimates

But there could be even more tailwinds for existing producers, according to one ASX-listed developer.

Elementos (ASX:ELT) is nearing the completion of a definitive feasibility study on the Oropesa mine next quarter. It plans to play big into the narrative around localising the production of critical minerals. Currently it says Europe supplies just 0.13% of global tin concentrate, with the main source of refined production coming from recycling plants in Belgium.

Located in the Andalucia autonomous region of Spain, home to the historic Rio Tinto mines and Sandfire Resources’ (ASX:SFR) MATSA copper and zinc complex, Elementos managing director Joe David says Oropesa alone could contribute to 1% of global concentrate production.

An optimisation study last year suggested the mine would deliver 3350tpa of tin metal in concentrate over a 13-year mine life, with a 2.5 year payback period and pre-tax internal rate of return of 46%.

With the DFS almost complete, David says the plan is to be in production by the middle of the decade. But he says much production to fill the void suggested by the ITA is uncertain.

“The ITA talks about an additional 50,000 tonnes needing to be found by about 2027-2028. But that’s also on the assumption that 50,000t is going to come online from developers like ourselves and other guys,” he told Stockhead.

“The ITA has got their explorers and developers group of which we’re a member, basically every listed tin company, junior explorer-developer is on that.

“A lot of them have pretty aggressive development pipelines. I certainly won’t name names or can other projects, but I would be quite challenged to believe that 50,000 tonnes is going to come on by 2027-2028 from the list of developers that are there.

“I think we’ll certainly be in production, but I’d say there’d be a handful of them that won’t be so I think the better way to say it is by 2027-2028, the industry needs 100,000 tonnes from where we are currently.”

Could tin scale US$50,000/t highs again?

Tin’s remarkable rise to ~US$50,000/t last year — around 60% above historic highs — was short-lived, with macroeconomic forces common to other base metals hammering it to a 37% loss for 2022.

While recovering supply and demand destruction from inflation played a role, in one sense it was disconnected from its fundamentals.

Warehouse tin stocks were down to just days’ worth in early 2022 and while they have recovered somewhat, they remain at a measure of weeks rather than months.

SHFE inventories rose sharply in the fourth quarter to a 20-month high of 7000t plus, Pearce said, but LME inventories peaked in October and dipped 50% to about 3000t in the fourth quarter.

As a miner, David is loathe to predict where prices will end up.

But he is confident in the US$32,500/t reference price Elementos used in an optimisation study last year.

“The ITA sometimes can be a little bit shy about giving their data but when you really dig into their numbers, they think we need over US$25,000 a tonne to maintain current supply and they think we need closer to 30 or above to incentivise new supply to enter the market,” David said.

“Our equity case that we’ll hang on to, so we’re going to deliver our DFS mid-year… we’ll be using an equity case of around that US$30,000, to be finalised.

“Obviously, the banks and debt providers will run lower cases than that, but certainly from an equity point of view, we believe there’s enough of a macro case there to support US$30(000) as a base case.

“I’m not a commodity forecaster, but there’s certainly more educated people than me on the supply and demand dynamics currently forecasting prices at and above that US$50,000 peak.”

And two interlocking factors that could make tin price inelastic is its essential nature to modern technologies and the miniaturisation of products using tin over recent years.

That means the actual quantity in each unit of technology using tin is relatively miniscule.

“I think the one thing you need to point out about tin is it is used in such small quantities, so really there is little incentive for pushback from downstream manufacturers,” David said.

“The quote people always put out there is there’s currently about seven cents of tin in your standard iPhone. So is Apple going to care if they suddenly have to pay 14c for the tin to go into their iPhone?

“It goes into such high end technology there just doesn’t seem to be much pushback and this happened when they were at US$50,000/t. The ITA was coming back to us and saying there’s very little substitution of tin anywhere in the downstream markets when the tin price goes up.”

Elementos (ASX:ELT) share price today:

Who else is in tin on the ASX?

In Australia your best play for exposure to changes in the tin price comes in the form of (Metals X (ASX:MLX).

Its 50% owned Renison-Bell tin mine in Tasmania continues to be a strong contributor more than 130 years after its discovery.

Renison-Bell produced 8,404t of tin in concentrate at all in sustaining costs of $27,738/t (Australian) in 2022, though costs peaked at more than $31,000/t in the second half.

LSE listed First Tin has also been floating around the Australian tin industry of late.

It has projects in Germany and Australia, including the 57,000t Taronga project in New South Wales purchased for $34 million, mostly in shares, from ASX-listed Aus Tin Mining (ASX:ANW) in 2021.

Given the small size of the tin market and its rarity there is only a small pool of explorers to bet on in the Australian space.

One, Venture Minerals (ASX:VMS), owns the relatively advanced Mount Lindsay tin and tungsten project near the Renison mine.

The junior started exploring the asset 15 years ago and has spent $35 million on exploration including 83,000m of drilling, but it faded into the background after a 2012 open pit feasibility study as tin prices declined.

Now that prices are recovering and tin is beginning to emerge as a critical metal for the green energy revolution, Venture is more bullish on its flagship asset, which contains 81,000t of tin metal and 3.2Mt of tungsten at a tin equivalent grade of 0.4% at a 0.2% cutoff.

It is working on a new study on developing an underground mine at Mount Lindsay with the ESG benefit of its connection to hydro power.

Elsewhere silver explorer Thomson Resources (ASX:TMZ) owns the Bygoo Tin Project in New South Wales, which surrounds the Ardlethan mine, the Aussie mainland’s largest tin producer historically at 31,500t.

It hit “outstanding” results in recent diamond drilling at Bygoo, reported last week, including 2.2m at 4.0% Sn from 81.6m depth, 13.6m at 0.6% Sn from 103.42m depth and 71.3m at 0.5% Sn from 58m depth.

“The Bygoo Tin Project continues to deliver outstanding tin results reinforcing the potential of the project and the Lachlan Fold Belt,” executive chairman David Williams said.

“The constant review by the team continues to reap rewards and provides a greater understanding of the mineralisation at the Bygoo Project.

“The continuing presence of high-grade tin mineralisation demonstrates the importance of this project.”

Stellar Resources (ASX:SRZ) also has an early stage project in Tasmania at Heemskirk.

Elementos is also floating around Tasmania’s vast tin reserves with its secondary Cleveland project, but its focus at the moment is on Oropesa.

David says an update to the confidence level of the resource is expected in the next week or so ahead of the DFS announcement.

It is also looking into trading pathways for its future tin concentrate.

“We’ve got a heap of NDAs out, that ranges from everyone from the global traders that trade tin, which is probably generally one level below the biggest guys but it does include Trafigura, Traxys, Transmines, Murray Group and these guys, they trade tin,” David said.

“But we are talking directly to smelters. Now traditionally the tin smelting industry is all located in Asia and Southeast Asia, so Malaysia, Thailand, Taiwan, and the south of China are the major smelting hubs.

“We’ve made a strategic decision to continue to engage with everyone, we’ll make the right economic decision, but we’re very focused on trying to keep our tin in Europe.

“So we’re focusing our discussions on European smelting companies that we can potentially work with … we’re assessing all the forms at the moment.

“Due to the geopolitical risk in the world, and due to the EU and Spain and all the critical decision makers in this part being so focused on securing their raw materials, we really want to develop a mine to metal solution that keeps it all in Europe.”