By Kishori Krishnan Exclusive To Tin Investing News

Tin prices gained a whopping 18 per cent on the LME in the month of April, despite a huge gain in LME inventories by almost 15 per cent. Global production, however, is expected to fall 6.5 per cent by 21,000 tonnes, to 304,500 tonnes in 2009. According to the International Tin Research Institute demand for tin is expected to fall by 10.5 per cent in 2009 amid the global economic crisis. Hence, the market could be in surplus by 5,000 to 10,000 tonnes in 2009.

Demand is not the key factor behind the rising tin prices, traders said. It is the production cutback that have played the role of a catalyst in pushing prices higher. The overall rally and bullish sentiment across base metals has also supported the trend.

Global production of tin is expected to decline this year due to the cutbacks implemented over the last few months. Producers have cut production given the grim demand situation. Most traders said recovery could be expected only in the second half.

Tin price on the Kuala Lumpur Tin Market (KLTM) ended higher on Tuesday, by gaining US$260 to settle at US$14,150 per tonne, supported by strong overseas demand, dealers said. The uptrend was also in line with gains on the London Metal Exchange (LME) that provided a further boost to the local market, they said. The tin price on the influential LME increased by US$100 to US$14,000 a tonne. In Kuala Lumpur, turnover added 90 tonnes compared to 73 tonnes last Friday. The dealers said the market traded firmly, with demandcoming from Japanese, European and local traders.

At the opening level, buyers made bids for 120 tonnes, while offers were at 50 tonnes. Price differential between KLTM and LME widened to US$380 from US$220 previously.

Indonesia’s weather woes

Few tin smelters in Indonesia, the world’s top exporter of the metal, will be able to crank up output to exploit higher prices because wet weather and depleting reserves have crimped access to ore, industry officials said on Monday. Last week the price of tin, used in food packaging and soldering of electronic components, surged to a near six-month high at $14,249 a tonne, driven by shortcovering and fund buying.

However, prices of the silvery, malleable metal MSN3, which stood at $14,000/14,050 a tonne on Monday, remain 44 per cent below an all-time high of $25,500 a tonne struck in May 2008.

Smelters in the Bangka-Belitung islands, Indonesia’s main source of tin, said supplies of raw material were limited. “It’s getting more difficult now to mine tin because reserves are depleting,” Patris Lumumba, director of PT Bangka-Belitung Timah Sejahtera, a consortium of 7 small smelters, told Reuters. “We are keen to increase production as prices are recovering…but we don’t have enough raw material,” he added.

Company news

Geodex Minerals Ltd. (TSX.V: GXM), a Canadian-based resource company, is focused on the exploration and development of two significant property areas in New Brunswick, Canada. Its flagship project, Sisson Brook, has a superior open-pittable structure with existing infrastructure in place positioning the project to become one of the largest and least expensive tungsten mines in North America.

The company has appointed Mark Fields, P Geo, B Comm as President and CEO. He replaces Jack Maris who had announced his retirement. Last month, the company had entered into an option agreement to acquire a 90 per cent interest in the Flume Ridge property, located in Charlotte County, New Brunswick. The property is comprised of 63 claim units optioned from Southfield Resources Ltd. and Campfire Resources Ltd. Minimum work commitments by Geodex are $20,000 in year one and $100,000 by the end of year three.

The largest tin producer in the world China Yunnan Tin Minerals Group Co Ltd has announced that it has signed an agreement to acquire a metal mine located in Guangdong Province for HK$610 million. The mine in Guangzhou has deposits of magnetite, copper and lead, and its total value is around HK$630 million.

HK$550 million of the consideration will be paid in cash, while the remaining HK$60 million will be paid by issuing convertible notes. After the issuance, convertible shares will account for 11.94 per cent of the company’s outstanding shares.

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.<–>

On Friday, tin futures for three month delivery on the London Metal Exchange (LME) closed at a low of US$11,750/tonne after falling to US$10,300/tonne, its lowest level since January of 2007. On Monday, tin briefly reached a high of US$15,200 to close at US$13,600/tonne. Tuesday morning, tin was up 5 per cent over Monday’s close to $14,300/tonne. A rebounding Euro against the dollar led to gains in commodity prices across the board.

Since the beginning of 2008, tin prices on the LME have fallen over 70 per cent. In October alone, tin prices have lost almost 50 per cent, far from the US$25,500/tonne high reached in May.

Although lower tin prices may appear to be a sign of a faltering market, many metals analysts say the supply market remains increasingly tight and a deficit is expected this year. “There is a huge contradiction of what is happening to the price and the underlying state of the market,” said Peter Kettle, manager at tin consultancy ITRI.

Like most commodities in the industrial sector, the tin price has fallen victim to the global financial crisis. And as the crisis deepens we can expect continuing drops in price, with some analysts predicting lows of US$9,000/tonne.

However, most believe the fundamentals in the tin market remain strong. Tin is the only metal on the LME that is trading at a premium over the three-months price in cash material trading, a phenomenon known as backwardation. Currently in Europe, tin premiums are trading at between US$200 and US$450/tonne over LME prices.

Demand may be slowing in nations like the US, but some analysts and traders believe the low LME prices will rebound before next year because 20 per cent is earmarked for delivery. “I am sure you will see some slowdown in business, but I think you are going to see this market get very very tight,” said one trader to Thompson Financial News.

Supply is tightening and will continue to do so. Once demand levels come back up, we should see the tin price rebound significantly. Some believe the price will rebound back to the US$16,000 to 17,000/tonne range in the near future.

LME warehouse inventories for tin have fallen to the lowest level since July of 2005 by 500 tonnes to 4,080. Output from Indonesia, the world’s leading tin producer, is falling drastically; the world’s second-largest tin producer, China, is tightening its exports; and the tin rich eastern provinces of the Congo are embroiled in a brutal conflict with militia rebels.

Output in Indonesia is falling because many independent smelters are struggling and even the nation’s major producers like PT Timah and PT Kobah are announcing cutbacks due to low tin prices. For the year, Indonesian tin output of refined tin is down 20,000 tonnes from last year’s 100,000 tonnes.

Although tin consumption worldwide “was seen coming down this year and next,” reported Anna Stablum of Thomson Financial News, “production both of refined tin and at the mine level was seen falling even more.”

Despite a noticeable slowdown in demand for tin in the chemical industry, consumption in the solder industry, which represents 50 per cent of the market, is expected to remain strong. “The solder industry is a big unknown at the moment — most of the solder business is in Asia and people are still looking at decent growth r  ates within China and the emerging economies,” said Kettle. China, which has now become a net importer of tin, represents about 55 per cent of the global solder industry.