Market forces have been at play with regards to tin price. Following major criticism over the increase of its tin-plate prices, which were adjusted yearly by 69 per cent to 78 per cent, ArcelorMittal South Africa (ACLJ.J) has bowed its head in defeat and toned down prices.

The South African steel group, which has its origin in India, has agreed to cut tin-plat prices between 26 per cent to 30 per cent from September 30, 2009. The company maintains that the slashing of price is in line with an agreement with its key customers in the packaging industry.

In other words, no one was buying the decision to hike prices. Also playing spoilsport was the weakness in the rand, which turned out to be one of the worst performing currencies globally in 2008, and the 25 per cent rise in international tin-plate prices.

Fobbing of criticism,  the company decided to adjust prices midway through the 2009/2010 contract period, a decision that was welcomed by the packaging industry. Lower tin prices are set to ensure that the prices of food and beverage packaging products would be reduced by 30 per cent and 26 per cent respectively from September 30 until the March 31, 2010.

Due to its low toxicity, tin-plated metal is used in a large scale for food packaging. Though the global recession has eased many costs for food and consumer-goods companies, the tin can has seen searing prices. Some tin-can makers are paying 50 per cent more for tinplate than last year, says Rodrigo Vázquez, an analyst for research firm Harbour Intelligence.

Challenge to cost

The leap in price created challenges for food packagers trying to cut costs to keep pace with consumers looking for cheaper food products. Food companies rely on light and durable tin cans for almost every kind of canned food, from fruit cocktail to baked beans to soup.

And with tinplate contracts and prices typically set in negotiations between individual tinplate producers and tin-can manufacturers once each year, the high cost was burning a hole in every pocket.

Packaging companies rose up in arms. Their criticism eventually reached the top echelons of government, which indicated its concern that the spike might lead to a significant increase in tinned food prices.

They also put forth another argument that the flow-through effect to poor consumers was particularly concerning, owing to the fact that price of a can could comprise as much as 40 per cent of the price of affordable foodstuffs.

Reasons for hike

Tin-plate prices, ArcelorMittal said, were calculated according to a long-standing formula that comprised a basket of prices from a number of international markets to which the ruling rand/dollar exchange rate was then applied.

“The adjustments announced are in terms of a so-called collar adjustment clause between ArcelorMittal South Africa and its customers in the packaging industry, which comes into effect if the basket rand price of tin-plate rises or declines by more than 10 per cent from its current levels,” the company explained in a statement.

“The 30 per cent and 26 per cent average reduction in prices reflects the strong performance of the rand over the past six months, whereas international tin-plate prices have been largely steady in the markets tracked by ArcelorMittal South Africa,” the group concluded.

What’s next?

With the tackling of the price issue, some analysts maintain that a strong US recovery is now crucial to maintain the rally in base metals’ prices, as most other factors, including Chinese demand, have already been factored in.

Tin price has yet to respond significantly to the fresh supply problems in Indonesia, but this may be partly due to the strong recovery in Chinese production, they state. An estimated 2,800t/month of refined tin will be lost through the closure of several small tin smelters in Indonesia, which would reduce surplus to near balance in 2009.

One thing is for sure, there is better foreign demand for tin. The Kuala Lumpur Tin Market (KLTM) is expected to remain high this week on better demand for the metal from overseas buyers, dealers said.

They said the tin price is expected to be kept above the RM15,000 per tonne level during the week on strong participation from Japanese, European and local traders.

During the week just ended, the market was steadier with strong buying interest from European, Japanese and local buyers. Tin prices on the KLTM surged to a 40-day high on Wednesday, spurred by strong demand on the local market.

The market was closed on Monday and Tuesday for the Hari Raya holiday. On a week-to-week basis, the price of the commodity was unchanged at US$ 14,700 a tonne.

Corporate news

South American focused explorer Lara Exploration (TSX-V: LRA), which has a portfolio of six primary mineral properties in Brazil, with on-going exploration programs for potash, nickel, gold, tin, copper, iron, lead and zinc mineralization, has signed a letter Of intent with Maxy Gold Corp (TSX-V: MXD), in respect of a proposed merger.

Lara is making a 1-for-8 stock offer to Maxy shareholders, which represents a 35 per cent premium on Tuesday’s closing price. The transaction will involve Lara issuing a total of approximately 4.3 million shares to Maxy shareholder’s equating to around 18 per cent of the new company, subsequently Lara will have 23.5 million shares in issue.

The acquisition will add Maxy Gold’s highly prospective portfolio in Peruand property interests in China to Lara’s existing operations in Brazil and Colombia. Maxy’s projects in China will add greater geographical diversity to Lara Exploration’s existing operations.

Maxy’s activities in China are focused on the Midu joint venture with Chinese partner, the Yunnan Mining Geology Group. Maxy Gold has a 75 per cent interest in the Midu project, which covers 189km in the Yunnan Province, south western China. The Midu venture has identified gold mineralization zones defined in East-West trending structures and trenches with associated high grade values in colluvial sediments.

Eurotin Inc (CVE), a Capital Pool Company, announced that on September 18, 2009 it entered into a letter of intent with Stannico Resources Inc, to complete a business combination, whereby all of the issued and outstanding securities of Stannico and all of the outstanding securities held by third parties of Stannico’s subsidiary, Minas de Estano de Espana, would be exchanged for securities.

Stannico is focused on exploration for base metals. In particular, Stannico is currently exploring for tin in the Andalucia region of southern Spain, and is also exploring for tin in the Region of Extremadura in central Spain, where it holds the right to acquire an 85 per cent interest in certain properties.

Tin firms charge ahead

Due to domestic demand for domestic steel price, the price of tin plate has soared. The latest monthly EXW price of Xindzhong Steel Sheet in the East China region showed continued stocking increasing up CNY 200 per tonne around over last month.

Currently 0.2×800mm of tin coil price is CNY 6,900 per tonne including tax, accumulatively lifted about CNY 400 per tonne in 2 months. The company said that with the growth of other steel prices, the tin plate price also increased.

However, sources added that Baosteel-made tin plate price dropped this month over last month, such as 0.2×800mm of tin plate, down from CNY 8,000 per tonne to CNY 7800 per tonne.

At the start of this week, tin closed at a near-two week high at $14,000 from $13,240, while nickel touched a near-three week high at $16,470 before closing at $16,225 from $16,125.

Strong bounce-back?

For decades the tin market has moved from one crisis to another, and the current world recession is now raising new challenges for all stakeholders in the industry. In the short-term the market is again oversupplied, but in a few years the situation could change dramatically.

Although world tin consumption is forecast to start recovering in 2010, a strong bounce-back is only likely from 2011, analysts state. A return to longer-term trend growth rates in 2012-2013 would result in annual consumption rising to 385,000 tonnes by the end of the forecast period. Almost all the growth in demand is likely to be in China and other emerging Asian markets, ITRI has noted in its latest report, with both solder and tinplate usage increasing.

World mine production surged to an historical peak of over 320,000 tpy in 2005 and 2006, but has subsequently been declining. The fall has been accentuated by the global financial crisis, which has also caused delays or cancellations of new project development.

Indonesian mine production has slipped from a 2005 peak of close to 140,000 tonnes to below 90,000 tpy. Although there is ongoing investment in new offshore dredging capacity, depletion of easily accessible reserves currently worked by small-scale miners is likely to result in a continuing decline in output, note traders.

Australia powers ahead

Sydney-based Resource Capital Research (RCR) notes that the global demand for tin has fallen rapidly to an estimated 350,000 tonnes in 2008. But the 15 tin companies listed on the ASX have done well.

RCR flags that several tin companies could be gearing up to raise more money- Wolf Minerals (WLF) for one is re-opening the Hemerdon Ball mine in Cornwall, as well as for Australian projects owned by Consolidated Tin Mines (CSD), Malachite Resources (MAR) and Metals X (MLX).

Macquarie Harbour Mining Ltd (MHM) was up AUS$0.09 on July 22. The company provides exposure to gold, copper, nickel, zinc, iron ore, tin, silver and platinum group metal projects.

Minemakers Ltd (MAK) was down AUS$ 0.48, with a 52 week high of AUS$ 1.65. Minemakers has established a portfolio of exploration projects, located in various parts of Australia. These include the West Southdown and Frankland River Iron project and the South Yilgarn nickel/gold project. The company has also acquired Australia’s largest fluorite deposit at Moina in Tasmania.

Venture Minerals Ltd (VMS), an Australian-based mineral exploration company has raised $8 million to advance the Mt Lindsay Project. The raising follows Venture’s recent announcement which detailed results from the company’s first independent scoping study which confirmed that the area would deliver seven years of mine life and over $700 million in net cash.

Following the successful completion of the $8 million capital raising and the recent receipt of favourable results from the scoping study, the company now plans to complete a major drilling campaign over the coming months.

Tin purchases in China may be early signs of a turn around

By Kishori Krishnan Exclusive to Tin Investing News

Stockpiling of metals in China is set to raise the bar. The central China city of Chenzhou in Hunan province plans to buy a selection of industrial metals to soak up surplus stock as commodity prices continue to slip, an official with the Chenzhou City Economic Committee said. He said the city authorities are to stockpile tin, silver, lead, zinc, tungsten, and bismuth.

Chenzhou authorities were planning to buy 2,000 tons of silver, 50,000 tons of lead, 5,000 tons of tin, 50,000 tons of zinc, 5,000 tons of tungsten and 3,000 tons of bismuth this year. Chenzhou is known to be rich in nonferrous metals, with more than 70 kinds of mineral resources, and reportedly has among the largest reserves of tungsten, bismuth, molybdenum, tin and zinc in China.

A powerful rally in Chinese stocks Wednesday, led by big mining names has spreads West, ahead of China’s new stimulus package, due on Thursday. Wednesday’s rally in Chinese stocks was led by names from the mining sector, with gains of 10 per cent and more for Shanxi Xishan, Jiangxi Copper, Pingdingshan Tianan, Shanxi Guoyang, Yunnan Tin, and Yunnan Chihong. Chinalco, which is busy forging further links with Anglo Australian miner Rio Tinto, rose by 9 per cent, while Zijin, China’s biggest listed gold stock, was up by 4.3 per cent.

What also buoyed sentiment was that China’s biggest tin producer Yunnan Tin Co said it was selling 6,000 tonnes of tin to the Yunnan provincial government. The provincial government said last month that it could buy up to 30,000 tonnes of tin from the producer.

Point to be noted: One swallow does not a summer make.

Reuters reported that the Canadian government issued a warning Wednesday to foreign companies considering massive layoffs to think twice before backing out of investment agreements made with Ottawa during better economic times. Tony Clement, Canadian industry minister said that the government is investigating to see if US SteelCorp was sticking to commitments it made to Ottawa in 2007 when it bought Stelco, one of Canada’s biggest steelmakers.

Clement told reporters, “I am trying to send a signal out through you to every other company out there. We take these undertakings seriously and we expect every company that has made an undertaking to the people of Canada, through the government of Canada, to live up to those undertakings.”

He said that “Ottawa will conduct a quick review of the undertakings the company made under the Investment Canada law when it bought Stelco before determining the government’s final position.”

This clarion warning was issued following US Steel’s announcement to temporarily shut down most of its operations at two big former Stelco plants in Ontario, affecting up to 1,500 jobs. US Steel said it was temporarily shutting down most of its operations at the plants in Hamilton and Nanticoke. It blamed worsening market conditions.

The fact of the matter is that the past 12-month performance of 947 listed resources stocks around the world has shown unequivocally that gold and silver stocks not only dominate relative outperformance within the broader resources sector, but that these stocks also qualify to rank as the top outperformers across all equity subsectors. The global sector is led by the SPDR Gold Shares ETF, which currently trades – like dollar gold bullion – just 10 per cent below its highs, and now holds $30.3 billion worth of the yellow metal.

Analysts expect that zinc, tin, copper, uranium and potash miners follow next on the list. Over the past six months in particular, miners have taken all kinds of drastic action, followed by some equity investors with a taste for risk who appear to be taking early bets on the possible payback for miners, that have had the wherewithal to remain in business.

In tin, a small global sector representing the smallest of the base metals, performance has been hugely dominated by Yunnan Tin, which has seen its stock price bounce nearly 100% from the bottom.

Reuters has reported that Indonesia expects production of tin to rise by 47 per cent in 2009 to 105,000 tonnes despite a plan by authorities to cap output below 100,000 tonnes. In January 2009, a mining and energy ministry official said that the government aimed to cut the target cap on tin output in 2009 due to slowing global demand that has triggered falling prices.

Bambang Gatot Ariyono director of mineral and coal enterprises at the energy ministry said that “These are production proposals from tin producing regions. But we will see the progress. If production falls, we will review the target after the first quarter.”

Indonesia produced 71,610 tonnes of refined tin in 2008. The price of tin has fallen around 58 per cent from an all time high of US $25,500 per tonne in May 2008 as global economic crisis continues to bite.

Peru, the world’s largest producer of silver, the third- largest miner of copper, zinc and tin and number five for gold, is having a crisis on its hands. Peruvian miners may go on strike on March 15 for more than a month to protest “unjustified” job cuts as companies say the global financial crisis lowered metal prices, said Luis Castillo, head of the Mining Federation. Exports from the Andean country fell 33.6 per cent in December from a year earlier, prompting the trade surplus to shrink to $42 million from $1.1 billion a year earlier.

Meantime, the Queensland Small Miners Council says there were thousands of alluvial gold, tin, sapphire and opal miners across the state 10 years ago, but numbers have now dwindled to about 200 professional teams. Opal miner Kev Phillips says it is not the global economic downturn affecting small miners but native title delays, new environmental fees and a lack of government support for the sector. “It’s not a formal policy of the state but it is certainly an underlying agenda to get rid of small scale miners,” he said.

“We’d rather have big companies that we can easily extract royalties and what not from – it shouldn’t be the way, we’ve been here for hundreds of years supporting this state and country so let us survive, it’s a unique way of life.”

For Lara Exploration Ltd. (TSX:LRA), further progress has been announced on its Sao Lourenco tin project in northwest Brazil. The company has now outlined a significant body of exposed primary tin mineralization on the adjacent Isaac and Irene targets, with an average grade of 0.61 per cent tin. An agreement has also been reached with the underlying owners of the Sao Lourenco mining rights to extend the company’s purchase option through until 2012.

The company has been sampling two granite stocks, Irene and Isaac, that stand out as hills within a wide area of past placer tin mining. Artisanal workings have exposed a wide area of fresh and weathered (saprolite) granite that has now been grid sampled with channel samples. Coarse-grained tin mineralization in the form of cassiterite (tin oxide) is hosted by vein-like zones of alteration known as “greisens” that form a dense stock-working over most of the exposed area and extend into the metasedimentary country rocks. The exposed area represents only 40 per cent of the granite hills and the known mineralization is open in all directions.

Tin may recover quickly if Chinese demand picks up

Sydney-based Resource Capital Research has hit a gold mine, with their comments: “We think tin will be one of the first metals to recover once markets stabilise.” Don’t disregard the comment. Resource Capital Research (RCR) does have a point.

Unlike most of the other base metals, there is no growing tin surplus. Inventories held at the London Metal Exchange now sit at 8,820 tonnes, against a 52-week high of 11,430 tonnes. The RCR case is that a rebound in Chinese demand, coupled with the closing of mines in Indonesia, could trigger supply shortages.

So, there you have it. Shortages portend high prices. The future points to strong demand and short supplies. Copper, and lead have potential as well. It is time to pull down the hatch and adopt a wait-and-watch policy.

Even dealers said the tin market would keep an eye on supplies from Indonesia after China slapped a 10 per cent duty on exports of primary refined tin from January 1 — a move aimed at discouraging exports and ensuring local supplies. Tin is used in electrical solders and as a corrosion-resistant coating for other metals.

“The development in China is supporting the price. We don’t expect anything to come out of China, which means if something happens in Indonesia, it will affect prices,” said a dealer in Malaysia’s northern state of Penang. “There’s a chance tin will revisit the highs,” he said.

Incidentally, the various Australian stock exchanges that have been home to many tin companies over the years, are now gaining critical mass. There are around 15 companies that have a substantial tin interest. The biggest player is Metals X (MLX) with its Renison mine. Gippsland (GIP) has advanced to a bankable feasibility study at its Egyptian tantalum-tin project. North Queensland Metals (NQM) has gold revenue to finance its tin projects, while those classed as in the advanced exploration stage by RCR are Consolidated Tin Mines (CSD), Kasbah Resources (KAS) (with a potentially world-class deposit in Morocco), Venture Minerals (VMS) (with Australia’s third largest resource in Tasmania) and China-controlled YTC Resources (YTC).

It may be noted that that during the past 12 months, the listed companies on the ASX with tin projects have regained considerably from their share price lows, one of the best performers being Stonehenge Metals (SHE), along with Macquarie Harbour Mining (MHM) and Malachite Resources (MAR). For the record, the other tin plays are Minemakers (MAK), Wolf Minerals (WLF) and Auzex Resources (AZK).

Mincor Resources (MCR), which engages in the mining and exploration of mineral resources in Australia, owns and operates four nickel mines: Miitel, Redross, Mariners, and Wannaway in the Kambalda Nickel District of western Australia. Mincor Resources also holds a 100 per cent interest in the Gascoyne Tungsten prospect, Tottenham Copper prospect, Widgiemooltha Gold prospect, and Lake Cowan Gold prospect.

Shares in Mincor Resources have risen as the nickel miner committed to a dividend payout despite posting its first ever loss in eight years. In its interim report released on Wednesday, Mincor reported a net loss of $22.7 million for the six months to December 31, 2008. Mincor said the loss includes a provisional pricing adjustment charge of $9.3 million, a one-off impairment charge of $17.3 million and $6.7 million in exploration costs.

Revenue for the period dropped from $164.87 million, reached in the prior corresponding period, to $100.39 million on the back of a sharp fall in the nickel price. Over six months, the average nickel price dropped from $14.05 per pound to $7.99/lb. Funnily enough, Mincor was upbeat about the results, saying the net loss comes despite record production and “best cost performance” in more than two years.

Not a firm to be beaten. What also buyoed sentiment, was that despite the head of Indonesia’s second-biggest tin smelter, PT Koba Tin, being detained for alleged illegal mining, the production process and exports remain unaffected. Kamardin Md Top, the president director of Koba Tin, has been detained since February 16 for mining in a protected forest area, and is being held at Bukit Semut prison on Bangka island for further investigation.

The detention is the latest twist in a long-running series of investigations by the authorities in Indonesia’s main tin-producing islands, source of nearly a quarter of the world’s tin. While the saga disrupted output in early 2007 and continues to worry markets, it hasn’t affected output. “Shipments are not affected,” Koba Tin director Darmansyah Nawawi told Reuters. “That means all things are running as planned and approved by the government”.

The crack down on tin mining on the islands comes amid growing pressure to protect Indonesia’s environment and forests, which are being destroyed by illegal logging, mining, and the rapid expansion of plantations firms, as well as a concerted national campaign to stamp out corruption.

Exports Down

Indonesia’s refined tin exports fell nearly 38 per cent from the same period a year ago, trade ministry data showed. Indonesia exported an estimated 6,185.74 tonnes of refined tin in January, down from 9,914.40 tonnes of refined tin in the same month a year ago. But the volume was nearly double that in December, when 3,805.50 tonnes were exported. “Exports fall because of slowing demand from overseas buyers and low tin prices,’ said an official at the trade ministry. A drop in tin prices has cut margins for small smelters and prompted them to temporarily suspend operation since October. The price of tin, which is also used in food-packaging, has fallen nearly 57 per cent from an all-time high of $25,500 a tonne hit in May 2008, reflecting the impact of the global economic crisis.

Company News

Silver Standard Resources Inc. (TSX:SSO) has announced its wholly-owned Pirquitas Mine in Jujuy, Argentina, is on schedule to commence concentrate production in the current quarter. Initial production will focus on the processing of over 400,000 tonnes of run-of-mine grade jig tails from historic operations and then transition to material from the open pit. To date, approximately five million tonnes of material has been moved from the Pirquitas open pit and stockpiling of ore has commenced.

At current metal prices, the silver and tin concentrates account for over 95 per cent of the anticipated revenue from the mine. As a result, the silver circuit will be optimized first, followed by the tin circuit. A decision to complete the zinc circuit is dependent on the results of metallurgical testwork to be received on increasing silver recoveries. With production ramping up through Q2, Pirquitas is expected to produce in excess of six million ounces of silver in 2009 with full production in excess of 10 million ounces in 2010.

The world’s leading tin miner, PT Timah has announced it may restrict refined tin production and instead ramp up output of higher grade tin-based products such as tin chemical and tin solder in an attempt to counteract falling prices.

“If prices are still lower next year, we may limit refined tin output and push for more high-priced by-products,” said company spokesman Abrun Abubakar. “It’s useless to flush the market with refined tin.”

Because of plunging prices, PT Timah expects tin output to remain flat throughout next year. The company anticipates between 45,000 and 48,000 tonnes of refined tin production this year, slightly below their initial target of 50,000 tonnes and significantly down from last year’s 58,325 tonnes.

The planned cutbacks in production are an attempt to stabilize prices in the tin market. “We expect tin prices won’t fall further. If they can stay at $15,000 that is good,” said PT Timah finance director Krishna Syarif.

PT Timah’s production curbs are representative of a growing trend in Indonesia, the world’s second largest tin producing country (25% of global production) and home to some the largest deposits of tin on earth. Tin smelters across the nation are halting production.

The Indonesian government’s crackdown on illegal tin mining has already heavily impacted the nation’s tin industry. The government imposed regulations coupled with significant decreases in production will no doubt help to place much needed upward pressure on tin prices.

Tin Price to Recover?

In May of this year, global tin prices reached a record high $25,500 before falling victim to the current worldwide economic crisis. On Tuesday, tin on the London Metal Exchange was quoted at $12,650 per tonne. The tin price is forecasted to remain under pressure and uncertain as the markets remain volatile. Movements in price will most likely reflect global commodity and US dollar movements.

Many remain confident that China, whose economic growth was greatly responsible for driving commodity prices over the last few years, will bounce back from the current economic crisis. “China’s resurgent demand for raw materials is already surprising the market,” said Diggers and Drillers editor Al Robinson. “It reverted to ‘net importer’ status in all base metals for October, according to the London Metal Exchange. China already needs more resources than it can get its hands on.”

Some analysts are certain that the actions taken by central banks around the world are beginning to produce movement in global capital, which may be seen as a sign that commodity prices are beginning to bottom. This could be the start of bargain hunting in the resource sector, especially for mining shares.

Metals X Limited

Australian miner Metals X Limited [ASX:MLX] is bound to catch the eye of many a bargain-hunting investor. The company is Australia’s largest tin producer and has a portfolio consisting of nickel, zinc, copper, gold and uranium as well. Metals X’s tin properties are some of Australia’s largest and best known hard-rock tin mines and prospects.

Metals X reported a cash position of $25.4 million for the third quarter ending September 30, as well as a net working capital position of $21.7 million and no corporate debt. Due to current market conditions, Metals X is refocusing its efforts on its revenue producing assets and preserving its cash reserves. The company’s tin projects include: Collingwood, Renison, Mt. Bischoff and Rentails.

The Collingwood Tin Project is wholly owned by Metals X and is the largest tin producing operation in Australia with production rates around 5,700 tonnes of 60% grade tin concentrate a year. Concentrate product from Collingwood is shipped to Malaysia for refining and smelting. The finished product is then sold on the Kuala Lumpur Metal Exchange.

The Renison Tin Project includes the historic Renison Bell Mine and process plant, which in the past produced over 200,000 tonnes of tin. Metals X acquired the property in March of 2004. In the third quarter of this year, commissioning of the Renison plant was completed and commercial tin production commenced. The company expects to reach full capacity by the end of this year. Renison is currently generating regular cash flow and Metals X expects the project will reach a cash positive position in the fourth quarter.

Metals X plans to incorporate the Mt. Bischoff property into the Renison Project to provide ore feed to the Renison Tin Concentrator. The property has a moderately sized open pit resource and the potential for further tin discovery and mining. Metals X is awaiting statutory approvals in order to begin mining on the property.

The Rentails project involves re-processing and recovery of tin and copper from 18.2 million tonnes of tailings left over from tin ores processed at the historic Renison Bell mine. The tailings have an average grade of 0.42% Tin and 0.20% copper.

“With shortages of tin stocks and China becoming a net importer of tin and Indonesian tin output falling, tin prices should recover despite weaker demand in the short term,” said Proactive Investors Australia director Andrew McCrea. “MLX’s share price is leveraged to changes in the price of tin.  Trading near a three year low, MLX could be a good upside bet at current prices.”

Shares of Metals X Limited were at .09c on the ASX Tuesday, down from a 52-week high of .48c.<–>

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