By Kishori Krishnan Exclusive To Tin Investing News Share

Local commodities like tin, rubber and steel could be heading for a short-term rally in the near future bolstered by active buying interest from institutional and fund managers on most major world commodities, dealers said.

Manufacturers worldwide were seen building up inventories to take advantage of the current weak US dollar, traders said. The weak greenback makes commodities attractive as a hedge against inflation. It makes purchases affordable for China and India, the two key engines helping to spur growth in demand for world commodities.

Traders indicated that the fundamentals were looking good for local commodities, which closely track the prices of crude oil, copper and aluminum, which have been hitting highs for the past two to three months.

The Kuala Lumpur Tin Market (KLTM) closed firmer on Wednesday by US $100 at US $14,700 per tonne on strong overseas demand, especially from Europeans, a dealer said. He said the tin price on the London Metal Exchange (LME), which normally influences global trade in the metal, was however down by US $200 to US $14,500 per tonne. The price differential between the KLTM and the LME widened to a premium of US $430 from US $130 on Tuesday.

Kasbah Fund

Meanwhile, ASX-listed Kasbah Resources is to bring forth a rights issue to raise some A$2.7 million to fund further drilling at its Achmmach tin project in Morocco. The cash will go towards 15,000 metres of diamond drilling in the Meknes Zone aimed at identifying a JORC indicated resource.

The work is part of a plan to produce a feasibility study on the project by June 2011, in line with a recently extended agreement with the Moroccan government, which will allow it to exercise an option to acquire 100 per cent of the project in the El Hajeb region of Morocco.

The agreement also has provision for Kasbah (ASX:KAS), at its election, to utilise a further 12 months from June 2011 to optimise the study if required. On exercise of the option the energy and mines ministry will transfer the Achmmach mining permits to Kasbah in return for payments of US$ 1 million on transfer and thereafter, annual payments of US$ 1 million for four years. The total transfer price is US$ 5 million plus a 3 per cent net smelter royalty.

Indonesia’s Permit

A new Indonesian smelter have got an export licence. Indonesia has approved an export permit for a new tin smelter in East Java, bringing the number of smelters allowed to export the metal to 28, a trade ministry official told Reuters. The official, who declined to be named, did not give any details on the capacity of the smelter, PT HP Metals Indonesia.

HP Metals has been active in tin for over a year, although its main business is in the production of aluminium alloys and extruded products. It is the first company outside the traditional tin producing provinces of Bangka-Belitung and Riau to obtain an export licence. The company has a smelting and refining capacity of 600 tpm of 99.95 per cent tin, although actual production varies according to availability of slags and concentrates.

Bolivia Builds

Another report suggest that a plan to almost triple ore processing capacity at Bolivia’s largest tin mine has been approved, according to a report quoted by BN Americas. Empresa Minera Huanuni (EMH) and state mining company Comibol will spend US$40 million to build a new mill which will raise daily ore throughput to 3,000 tpd from less than 1,200 tpd currently. The mine produced 7,875 tonnes of tin-in-concentrate in 2008.

Work on the expansion will begin in the second half of this year, mining director Freddy Beltrán was quoted as saying by state news agency ABI. Increased production of low-grade concentrates will commence in the beginning of 2010. However, Beltrán said there are still 15 days remaining to reach a final decision on equipment to be installed.

Russian Tin

In corporate news, Novosibirsk Integrated Tin Works (NOK), Russia’s sole producer of the metal, reported that first quarter sales volumes declined by 72 per cent from the year-earlier period as demand slumped, Reuters reported. First quarter sales totalled 122.3 tonnes, compared to 432.3 tonnes a year ago. However, the company said it expects demand to revive in the near future.

Last year the group produced only 1,405 tonnes of tin, down from 2,480 tonnes in 2007, due mainly to a shortage of tin concentrate. NOK said late last year that it had stopped receiving concentrate from the Sakhaolovo mining company in the second quarter and was unable to offset the shortage with supplies from other sources. Sakhaolovo is the largest tin mine in Russia and is now believed to be exporting its concentrates to SE Asia.

Chinese Revival

To top it all, Chinese tin production has revived in April. Provisional data released by China’s National Bureau of Statistics showed that refined tin production continued to recover in April. April production was reported at 12,472 tonnes, up 8.5 per cent year-on-year. This is the first month this year that output has been higher than in 2008. Cumulative production in January-April, at 32,970 tonnes, is still 20.4 per cent lower than in the first four months of 2008.

The pick up reflects improved demand and raw materials availability compared to most of the first quarter, although capacity utilisation at solder companies and other consumers is still estimated to be no more than 70-80 per cent (versus 40-50 per cent in January-February). Concentrate supply has improved as a result of the re-opening of small mines and the April production figures have probably also been boosted by the re-refining of metal imported in March.

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