Despite a volatile market and an erratic share price in 2023, Alphamin (TSX.V: AFM) remains the prime mover in the tin mining space. While most of the world’s top tin mines have been under the cosh in 2022 and 2023, Alphamin has consistently produced high-grade tin from its Mpama North deposit, while upgrading its Mpama South resources substantially through intensive exploration drilling on what has been confirmed as the world’s second highest grade tin resource- second only to Mpama North.
Mpama South is currently being developed and Alphamin expects that the operation will produce approximately 7,200 tonnes (t) of contained tin per year from 2024, thereby increasing the Bisie Complex’s combined annual tin production to approximately 20,000 tonnes.
Renison battles with processing
Metals X’s Renison mine in Tasmania, Australia, on the other hand, needs to put a torrid 2022 behind it and rebuild confidence as it deals with mounting operational issues in 2023. Although things are looking up for Renison, processing constraints continue to hamper production.
Renison has been battling to deal with high grades of talc in the mine’s ore since Q3 in 2022. As a result, grades and recoveries continued to decline in Q4. Nevertheless, the mine improved its throughput and produced 1,925 tonnes of tin during the last quarter of 2022, which is up 4.2% from Q3 in 2022.
According to Metal X, external consultants are now working on trials to identify the most appropriate methods of dealing with the high talc grades. If resolved this will increase grades and recoveries to prior baselines.
In addition, major progress was made on the Area 5 Upgrade in the fourth quarter, which on completion will lead to higher-grade material being processed. With the addition of higher-grade stopes from Leatherwoods later in the year, costs are budgeted to continue falling.
The ASX-listed group hopes to increase Renison’s current production of about 7,000t of tin-in-concentrate per year, to more than 10,000t per year from the middle of 2025.
High grades offset country risk
Alphamin’s real strength lies in its superior geology. The grades at Alphamin are spectacular and almost unheard of. While many question the DRC as a jurisdiction, Alphamin’s experienced management team is adept at operating in the DRC. Having grades of more than 4% Sn clearly offsets country risk and logistical challenges.
Renison, as a direct comparison, for example, operates in a less risky environment but only mines average grades of close to 1.45% Sn. Even when Alphamin entered what management referred to as a lower-grade area in its underground mine, it averaged about 3.5% Sn.
Drilling results indicate that Mpama South runs at an average grade of 2%, while Mpama North’s grades remain exceptional being upwards of 4% Sn, which truly sets the mine apart from any of its current competitors in the international world of tin mining.
Alphamin’s spectacular returns
Even if Alphamin’s share price was down a tad over recent months, returns over the last three years have been nothing but spectacular. In fact, the share price has gained a massive 406% since the company became profitable in February 2020.
The transition to becoming a profitable operation is normally an inflection point that justifies a strong share price gain. In addition, Alphamin’s Total Shareholder Return (TSR) looks extremely healthy. The TSR normally gives a much better picture than the total share price return, which only reflects the change in share price. Alphamin’s TSR over the last three years was a whopping 459%.
Not only has Alphamin’s share price and dividends rewarded shareholders generously over the last three years, the outlook for tin in general and for Alphamin, in particular, is looking increasingly positive, in contrast to a number of global tin mining operations that look more and more timid.
On the 15th of April news out of the East told of tin giants in Myanmar and Indonesia looking to constrain exports. Going forward we expect to see further potential for a deficit tin market that bodes well for Alphamin, which is already geared up to take advantage of the next tin bull market.
Market fundamentals will prevail
While supply and demand fundamentals will prevail in the medium term, the short term is exposed to sentiment, manipulation of a small market, and higher stocks in China. Although China was a net importer of tin in 2022, the country is back in business and the economic growth in 2023 is exceeding all expectations.
China is the largest producer of tin in the world, and the Chinese government’s zero-Covid policy over the last three years decimated Chinese tin operators and processing facilities, resulting in a sudden demand collapse and gradual stacking of growing stockpiles. Opening the economy has resulted in short-term flooding of the Chinese market and caused the tin price to dip again after considerable record peaks in 2022.
The South American producers were also badly affected by regional political instability, unstable market conditions, and changing geopolitics.
Minsur’s San Rafael de Puno tin mine normally produces about 9% of global tin but was forced to close operations in January 2023 after protests erupted following the December ouster and jailing of former President Pedro Castillo.
The mine is near many of the most intense protests that have engulfed the country’s Andean south since the removal of Castillo, who had attempted to illegally dissolve Congress and rule by decree.
San Rafael first closed temporarily in what it described at the time as a gesture of solidarity with victims of an especially deadly protest but later announced it was forced to shut its doors indefinitely because of security concerns.
Peru is the world’s second-biggest copper producer, and the tin it supplies is used to coat a variety of metals to prevent corrosion as well as in alloys.
Meanwhile, Brazil, also a significant tin producer, is enforcing tighter export regulations which have affected its tin exports, and in Indonesia there has been a delay in export quotas with threats of tin export restrictions severely impacting downstream beneficiation.
To add to the woes and the looming supply deficit, new tin projects, of which there are few and far between, will require consistently higher tin prices and less volatility to secure development funding.
Moreover, new tin projects are still years away from production and the tin market volatility and recent price decline will add to the lag in seeing new economic tin added to the supply curve.
It normally takes about five years of lead time, at the very least, for greenfield projects to progress through the feasibility stage into funding, development, and production. Apart from Alphamin’s Mpama South development, there is no new tin project in the world that is expected to come online before 2027.
There is reason for concern about an imminent supply cliff as the world’s major tin-producing regions continue to come under pressure amid tighter regulatory constraints, supply chain challenges, and political and economic instability and volatility. Four countries produce 73% of global tin concentrate. Although China’s tin producers remain the mainstay of global supply, the country’s mined tin output has remained flat for more than a decade. At the same time, Indonesian on-shore mining has been declining for a number of years with damaging export restrictions looming.
In addition, onshore alluvial resources, historically the swing producer, are close to depletion while off-shore mining operations have been forced to move deeper with associated cost increases as the mining companies scramble to find and mine smaller deposits.
Myanmar, traditionally the highest-grade tin producer of the world, has seen a remarkable depletion of its high-grade surface material and in an effort to maintain output, mines have been venturing underground to access and mine lower-grade ore deposits. In an effort to restore its declining production profile to levels last seen 10 years ago, Peru has commissioned tailings retreatment.
Tin supply is heading for a fall and Africa’s tin mines could be the saviors. All the great tin mines of the world have been through the geopolitical maelstrom during the last three years, and Alphamin’s Bisie Complex is waiting in the wings to significantly increase tin production into a likely widening market deficit.