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While confusion reigns about the Wa State in Myanmar’s controversial ban on tin production which came into effect on the 1st of August, two of the world’s top tin mines outside of Asia have hit the straps.
Alphamin’s Bisie Complex in the DRC and Metal X’s Renison Tin Operation in Tasmania, Australia, both announced promising results for the second quarter ending June 2023.
This comes at a time when the market anticipates a shortage of supply due to the impact of the Wa State’s decision to preserve the area’s natural resources for the future. The announcement in June resulted in a brief spike in the tin price of more than 11%.
Myanmar is the world’s third-largest producer of tin. Most of the white metal is mined in the Wa state, which produces close to one-sixth of the global tin supply. China will have to start casting their net wider should the ban continue for much longer.
About 47% of global tin supply was consumed by China in 2022 and more than a quarter of that supply came from Myanmar. That is a substantial gap to fill with many other tin operations, especially in China itself, which is still experiencing operational and logistical challenges.
Tin mines face challenges
Africa and Australia appear to have been less affected by geopolitics and supply chain constraints although Metal X’s Renison was still grappling with a persistent high talc and sulfur content earlier this year (a problem which seems to be behind them, although the processing plant is closely monitored).
On the other hand, it has been all plain sailing for African-based Alphamin, the highest tin grade mine in the world, with steady production at close to record levels and at monstrous grades in Q1 and Q2 of 2023. Alphamin’s Bisie mine in the DRC currently produces more than 4% of the world’s mined tin.
Alphamin swept the floor in 2023 and the grades continue to astound. The company achieved excellent tin production of 3,151 tonnes for the quarter ended June 2023. Year-to-date tin production of 6,338 tonnes exceeds the run rate to achieve market guidance of 12,000 tonnes for the year ending December 2023. The run-of-mine and crushed ore stockpiles ahead of the processing plant were at record levels at quarter-end, being 27,439 tonnes at an average tin grade of 6,74% (Q1: 15,011 tonnes at 5,98%).
Renison, on the other hand, processed tin at an average grade of only 1.79% after new high-grade material was extracted from Area 5 and fed into the processing plant. Nonetheless, the mine had a strong second quarter, with vastly improved ore grades and recovery rates recorded compared to a disappointing first half of the year.
For the June 2023 quarter, Renison delivered 2,292 tonnes of tin-in-concentrate, marking a 15% increase from the first quarter. Despite headwinds caused by the elevated talc and sulfur grades in the first quarter, the company said in a statement that interventions were successfully introduced, raising Q2 recovery rates to 76.05% from the previous 74.20%.
While Alphamin and Renison are both listed as pure tin plays, with strong fundamentals, we know that Alphamin remains significantly more possible. Alphamin enjoys a much lower cost per tonne, and higher EBITDA and Dividend Yield. In a world where cash is king, the fact that Alphamin is paying regular dividends shows up its competition.
Alphamin forges ahead with expansion plans
While tin mines around the world are trying to consolidate and eliminate niggly operational issues, Alphamin is forging ahead with its expansion plans.
The Mpama South expansion project is expected to increase annual tin production at the Bisie complex from about 12,000 tonnes to approximately 20,000 tonnes.
According to a statement by Alphamin, close to 1,460m of underground development at Mpama South has been completed to date, of which 603m was achieved in Q2 2023 and 418m in Q1.
The company said that development has accelerated during Q2 2023 as additional underground equipment has arrived on site. During July 2023, the underground development connecting Mpama North and Mpama South has reached the intersection point where the new Mpama South adit from the surface will connect.
The Mpama South adit has intersected a 6m wide area of extremely poor ground conditions which is delaying advancement. The adit is now expected to connect with the Mpama South underground workings during November 2023, in time for the tramming of ore to the new processing facility. The new processing facility is progressing well and is on target to be commissioned in December.
By quarter-end, Alphamin had spent US$75 million cash on the Mpama South project of which US$30 million was in Q2 2023. The project is forecast to be substantially completed within its $116 million budget.
Declining Chinese imports
While Alphamin ramps up, a marked decline in China’s tin-in-concentrate imports is projected for August as the market comes to terms with the implications of Myanmar’s tin ban.
China’s raw material supply for smelting is anticipated to decrease, creating challenges in maintaining the production levels they achieved at the beginning of the year. China’s unhealthy dependence on Myanmar for tin-in-concentrate imports remains a headache for that country. Although shipments of tin-in-concentrate surged to 5,000 metal tonnes in July, it was only traders offloading inventories ahead of the ban.
The ban in Wa State could have dire impacts on traders in China if it continues indefinitely. As China scrambles to find alternative and more reliable sources of supply, there is no light at the end of the tunnel for mining companies in the Wa State.
The ban has resulted in a cessation of all mining activities in the Wa State from the 1st of August and has seen ore transport vehicles grounded and hundreds of local workers temporarily laid off.
At the time of writing, the ban remains in full force and the situation for miners remains uncertain. One of the changes proposed by the Wa State Central Economic Planning Committee (EPC) is that the ownership of ore mined and brought to the surface before 1 August will remain with the mine owner. Conversely, all ore still in the mine, including that which has already been extracted, now belongs to the EPC.
Upon obtaining the requisite approval, processing plants can process their ore concentrates externally. The processing of ore still owned by the mine owner is subject to a 30% tax-in-kind. The Central Affairs Committee will oversee the verification of taxes paid, with stringent penalties for any discrepancies, including the potential for confiscation.
Although there are more than a handful of early-stage tin exploration projects across the globe that look prospective, none are even close to production. Several historic tin mines are being revived, but that exercise is capital intensive, the grades are extremely low, and at current tin prices, not worth pursuing.
With the Wa State’s prolific tin mines still in the dark and not producing, and many of China’s operators fighting their own demons, it seems that the tin market is heading for a supply deficit at a time when demand is increasing. Tin is on the US’s critical metal list and has become important in the manufacturing of new technology and renewable energy applications. Where the market is heading, and whether there will be a correction when the Wa State comes online again, only time will tell. Nonetheless, if Alphamin continues mining at grades of 4%, it will become the dominant global player and its hold on the market will be difficult to break.
