Supply Shortages In Tin Mine Supply - Sept 2012 - John P. Sykes - Greenfields Research / ITRI
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Transcript of Supply Shortages In Tin Mine Supply - Sept 2012 - John P. Sykes - Greenfields Research / ITRI
Supply shortages in tin mine supply…
John P. Sykes, Director, Greenfields Research Ltd (on behalf of ITRI Ltd)
…and its effect on the global electronics industry
Supply shortages in tin mine supply
Contents
1 Demand: Tin solder not tin cans
2 Prices: Highest since 1980s ITC Tin Crisis
3 Supply problem: costly alluvial production
4 Supply problem: decline in Asia
5 Supply problem: dependent on other riches
6 Supply problem: dealing with capital costs
7 Conclusions: new mine supply required!
Supply shortages in tin mine supply
Demand: Tin solder not tin cans
Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7
Demand: Tin solders not tin cans
2010: solder is +50% of demand 1970s: tinplate is ~40% of demand
Copyright: Greenfields Research & ITRI; Data: ITRI
China dominates solder demand
Tinplate: 54,200t (17%)
Chemicals: 42,600t (13%)
Brass/Bronze: 18,300t (6%)
Glass: 7,300t (2%)
Others: 26,600t (8%)
China: 94,400t (30% of tin &
55% of solder)
ROW: 76,700t (24% of tin &
45% of solder)
Solder: 171,100t (54%)
Tin Consumption (2009)
Copyright: Greenfields Research & ITRI; Data: ITRI
Supply shortages in tin mine supply
Prices: Highest since 1980s ITC Tin
Crisis Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7
Tin prices are at 30-year highs
Long-term tin price history
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1900 1920 1940 1960 1980 2000
US$/tonne, inflation adjusted 2010 prices
0
10
20
30
40
50
60
0 to 5 5 to10
10 to15
15 to20
20 to25
25 to30
30 to35
35 to40
Price range, $000/tonne, 2010 real terms
Number of years in each price band
Tin price histogram 1900-2011
Copyright: Greenfields Research & ITRI; Data: ITRI
Prices at 30 year highs Recent prices
mainly is this
range
Lead to tin solder substitution has
driven demand & prices
Copyright: Greenfields Research & ITRI; Data: IPC 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Lead-free solder Lead solder
Lead-free solder as a % of global shipments
Conversion to tin
solder drove tin
prices
Weak supply now looks to be the
driver of prices
Tin supply demand balance (Kt)
250.0
275.0
300.0
325.0
350.0
375.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Refined Supply Mine Supply Refined Demand
Tin supply demand growth (%)
-7.5%
-5.0%
-2.5%
0.0%
2.5%
5.0%
7.5%
10.0%
12.5%
Refined Demand Refined Supply Mine Supply
Copyright: Greenfields Research & ITRI; Data: ITRI
Demand strength
driving prices Supply weakness
driving prices
Demand strength
driving prices
Supply weakness
driving prices
Supply shortages in tin mine supply
Supply problem: Costly alluvial
production Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7
Alluvial and artisanal important for tin
mining in contrast to other base metals
Copyright & Images:
Greenfields
Research
Unregulated alluvial and artisanal
mining occurs in short cycles
Global tin production (Kt)
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
197
0
197
3
197
6
197
9
198
2
198
5
198
8
199
1
199
4
199
7
200
0
200
3
200
6
200
9
201
2
Other
Africa
CIS/USSR
Australia
Bolivia
Brazil
Peru
Thailand
Malaysia
Indonesia
China
Index of alluvial mining booms
0.0
100.0
200.0
300.0
400.0
500.0
600.0
Malaysia 1958-1987 Thailand 1962-1991
Brazil 1977-2006 Indonesia 1992-20112
Indonesia 2012-2017???
?
?
?
Copyright: Greenfields Research & ITRI; Data: ITRI
Hard or soft rock: Grade is king!
Theoretical change in cost due to changes in ore grade for a
primary tin, alluvial mine in Indonesia, producing 7,500 tonnes of tin
per year, from a team of gravel pumps, with a 100% recovery. Copyright: Greenfields Research & ITRI; Data: ITRI
0
5,000
10,000
15,000
20,000
25,000
1.0kg/m3 0.8kg/m3 0.6kg/m3 0.4kg/m3 0.2kg/m3
US
$/t
on
ne
Mining Other
2015, Theoretical Net of By-Product Cash Costs Approximate grade of
S.E. Asian alluvial ores
Hard rock mining costs becoming
competitive with alluvial mining
Copyright: Greenfields Research & ITRI; Data: ITRI
0
5,000
10,000
15,000
20,000
25,000
OP 2.0% UG 4.0% OP 1.5% UG 3.0% OP 1.0% UG 2.0% OP 0.5% UG 1.0%
US
$/t
on
ne
Mining Processing Other
2015, Theoretical Net of By-Product Cash Costs Approximate grade of
new hard rock projects
Underground mine is a theoretical primary tin, underground mine in Australia,
producing 7,500 tonnes of tin per year, with a processing recovery of 75%.
Open pit mine is a theoretical primary tin, open pit mine in Australia, producing
7,500 tonnes of tin per year, with a processing recovery of 75%.
Hard or soft rock: Grade is king!
Copyright: Greenfields Research & ITRI; Data: ITRI
0%
20%
40%
60%
80%
100%
Alluvial Open Pit Underground
% b
rea
kd
ow
n o
f c
os
t in
pu
ts
Fuel Electricity Labour Other
2015, Theoretical Net of By-Product Cash Costs
Theoretical cost breakdown for a primary tin, open pit mine in Australia grading 0.5%,
producing 7,500 tonnes of tin per year, with a 75% recovery.
Theoretical cost breakdown for a primary tin, alluvial mine in Indonesia grading 0.2kg/m3, producing
7,500 tonnes of tin per year, from a team of gravel pumps, with a 100% recovery.
Theoretical cost breakdown for a primary tin, underground mine in Australia grading 1.0%,
producing 7,500 tonnes of tin per year, with a 75% recovery.
Vulnerable to fuel costs
Vulnerable to labour
costs
Supply shortages in tin mine supply
Supply problem: Decline in Asia
Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7
Asian countries dominate production,
very few developed world tin miners
World Tin Mine Production (2012 est.)
Indonesia
(34.5%)
China
(34.5%)
Peru
(9.4%)
Bolivia (6.9%)
Brazil (3.8%) Australia
(2.3%)
DR Congo
(2.6%)
Malaysia
(1.2%) Vietnam (1.2%)
Nigeria (0.6%)
Portugal (<0.1%) Egypt (0.1%)
Rwanda
(1.4%)
Burundi (<0.1%)
Myanmar (0.7%)
Thailand (0.1%)
Laos (0.4%)
Mongolia
(<0.1%)
Russia
(0.2%)
Copyright: Greenfields Research & ITRI; Data: ITRI
Developed versus developing world
labour rates versus fuel prices?
0
10,000
20,000
30,000
40,000
50,000
60,000
2011, GNI Per Capita (US$)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2007-11 GNI Per Capita CAGR (%)
Copyright: Greenfields Research & ITRI; Data: World Bank
Developed world
labour costs are
higher…
…but developing
world labour costs
are rising quickly
Developed nations a safer investment,
important for large capital projects
Country Ranking (of 181)
Canada 4th
Australia 5th
- -
USA 10th
- -
Germany 20th
- -
UK 25th
- -
Spain 27th
Country Ranking (of 181)
Peru 56th
- -
China 71st
Brazil 72nd
- -
Indonesia 111th
- -
Bolivia 125th
- -
DR Congo 159th
Rankings based on Greenfields Research’s proprietary mining political risk ranking system. The ranking system correlates economic data sets
that cover most of the world’s countries (such as the Transparency International Corruption Index, the World Bank Doing Business dataset and
GDP/land area) with well known mining industry political risk surveys, including the Fraser Institute, Behre Dolbear and ResourceStocks, to get
a system which ranks all countries by their suitability for mining, not just those in the mining industry surveys.
Copyright: Greenfields Research & ITRI; Data: Greenfields Research
Exchange rates important, a stronger
Rupiah raises marginal costs
Copyright: Greenfields Research & ITRI; Data: ITRI
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
1.15
2006 2007 2008 2009 2010 2011
Exchange rates (to US dollar) indexed to 2006
Indonesian Rupiah (IDR) Chinese Renminbi (CYN)
Bolivian Bolivano (BOB) Brazilian Real (BRL)
Australian Dollar (AUD)
Weaker
Stronger
Indonesian Rupiah affects
marginal costs in tin. A
stronger Rupiah means
higher long term tin prices
Asian mining in decline, replaced by
developed world production
World Tin Mine Production (2016 est.)
China
(26.2%)
Indonesia
(22.0%) Australia
(8.5%)
Peru
(10.6%)
Bolivia
(7.5%) Brazil (4.8%)
Malaysia (2.9%)
Vietnam (1.1%)
Laos (0.4%)
Thailand (>0.1%)
Myanmar
(3.1%)
Mongolia
(0.4%)
Russia (0.9%)
Kazakhstan
(1.8%) Canada (0.1%)
UK (0.1%)
Germany
(1.2%)
Spain
(0.3%)
Portugal (<0.1%) Egypt
(0.7%)
Morocco
(2.1%)
Nigeria (0.5%)
DR Congo (3.0%)
South Africa (0.5%)
Rwanda (1.2%)
Burundi (<0.1%)
Copyright: Greenfields Research & ITRI; Data: ITRI
Supply shortages in tin mine supply
Supply problem: Dependent on
other riches Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7
Tin mining is dependent on a wide
variety of by-products
Copper
Australia & China
Silver
China
Lead
China
Zinc
Bolivia, China
Antimony
China Indium
China
Gallium
China
Tungsten
Egypt, Mongolia,
Myanmar
Tantalum
Burundi, Congo,
Rwanda
Niobium
Brazil, Burundi,
Nigeria
World Tin Mine By-Products (2012 est.)
Copyright: Greenfields Research & ITRI; Data: ITRI; Images: Shutterstock, www.csksg.com, www.tradekorea.com, www.cdves.com, American
Elements, Wikipedia
Tin industry uneconomic without by-
products
Copyright: Greenfields Research & ITRI; Data: ITRI
0%10%20%30%40%50%60%70%80%90%
100%
2016 estimates of revenue shares for tin producing mines and mine projects
Tin Aggregates Copper Iron Ore Mineral Sands Niobium Silver Tantalum Tungsten Lead/Zinc
Tin mining will become more
dependent on by-products
Copper
Australia, China,
Germany,
Kazakhstan,
Peru, UK
Silver
Australia,
Canada,
China,
Kazakhstan,
USA
Lead
China
Zinc
Australia,
Bolivia,
Canada, China,
Germany, UK,
USA
Antimony
China
Indium
Australia, Canada,
China, Germany
Gallium
China,
Germany
Tungsten
Australia, Canada,
Egypt, Kazakhstan,
Mongolia, Myanmar,
Portugal, Russia,
Spain, UK, USA
Tantalum
Australia, Burundi,
Congo, Egypt,
Kazakhstan,
Rwanda
Niobium
Brazil,
Burundi,
Nigeria
Iron Ore
Australia,
Kazakhstan
Molybdenum
Canada Titanium
Kazakhstan,
Malaysia
Zirconium
Brazil
World Tin Mine By-Products (2017 est.)
Copyright: Greenfields Research & ITRI; Data: ITRI; Images: Shutterstock, www.csksg.com, www.tradekorea.com, www.cdves.com, American
Elements, Wikipedia, www.made-in-china.com; www.images-of-elements.com
Lithium
Czech Rep. Aggregates
Malaysia
Supply shortages in tin mine supply
Supply problem: Dealing with
capital costs Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7
Dominated by small, private
companies and state miners
~32,000t, 11.0%,
Private/Public, Peru
~39,400t, 13.6%,
State/Public, Indonesia
~27,200t, 9.4%,
State/Public, China
~11,600t, 4.0%,
State, Bolivia
~10,500t, 3.6%,
Private, China
~3,200t, 1.1%, Public,
Australia
~7,125t, 2.5%, Public,
Malaysia/Indonesia
~3,500t, 1.2%, State,
Vietnam
~2,500t, 0.8%, Private,
China
~2,000t, 0.7%, Co-op,
Brazil
Copyright: Greenfields Research & ITRI; Data: ITRI; Images: Company websites, ITRI, Wikipedia
Substantial investment required in new
tin supply, bigger companies required
Company Project Capex
(US$M)
Capacity
(t/y Sn)
Capex
(US$/t/y)
Source
Consolidated Tin Mines Mt Garnet 124.0 3,050 40,700 Scoping 2010
Kasbah Resources Achmmach 167.0 6,880 24,300 Pre-Feasibility 2012
Metals X Rentails 173.2 5,300 32,700 Feasibility 2009
Stellar Resources Heemskirk 108.0 3,900 27,700 Scoping 2011
Venture Minerals Mount Lindsay 144.6* 3,700 39,100 PFS 2011
Total & average 716.8 22,830 31,397
Total new mine supply required 2011-15: 70,000t/y
Average capital cost per tonne new capacity: $31,400
Total investment required in new supply: $2.2 billion
* Mount Lindsay is a tin-tungsten-magnetite project. The tungsten plant in particular greatly adds to capital costs. Copyright: Greenfields Research & ITRI; Data: ITRI
Supply shortages in tin mine supply
Conclusions: New tin mine supply
needed Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7
High marginal tin costs, mean high
long term prices
Copyright: Greenfields Research & ITRI; Data: ITRI
Hard rock
Alluvial
Artisanal (non-alluvial)
High and rising
marginal costs dictate
long term prices –
currently ~$25,000/t,
rising to $40,000/t ???
Generally rising costs mean that even
floor prices are quite high
Recent price lows versus marginal cash costs Copper Zinc Nickel Tin
2011 Cash Costs (US$/tonne)
Median 2,250 922 6,505 8,686
10th Decile 4,000 1,530 16,048 13,327
Recent price history (monthly average LME 3-months prices)
GFC low 3,108 1,119 9,791 10,465
2011 peak 9,854 2,489 28,266 32,464
GFC low versus:
Median 138% 121% 151% 120%
10th Decile 78% 73% 61% 79%
Copyright: Greenfields Research & ITRI; Data: ITRI, Barclays Capital, Brook Hunt
Floor (100%)
seems to be about
¾ the marginal
cost for base
metals, currently
about $18,000/t,
rising to about
$25,000/t ???
Alternative price forecasts are all high
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
Price history and forecast scenarios (US$/tonne)
Historical price (real 2010) Central Forecast
Double Dip Scenario Robust Growth Scenario
High demand growth,
significant new supply
required, prices will trends
towards a high & rising
marginal cost
No demand growth, new
supply will struggle to
come on stream, prices will
trend towards a high &
rising floor price
Future price
range: $20,000-
40,000/t ???
Floor price: $20,000/t ???
Marginal cost: $40,000/t ???
Copyright: Greenfields Research & ITRI; Data: ITRI
Plenty of projects in the pipeline: time
and money needed to develop them
~130 known projects
~60 with historical
resources
10 with compliant
resources
4 at scoping
stage
1 at feasibility stage
~4.8Mt of estimated reserves
(USGS)
~3.2Mt as historical
resources
824Kt as compliant
resources
310Kt at
scoping
stage
90Kt at feasibility stage
Copyright: Greenfields Research & ITRI; Data: ITRI, Greenfields Research, USGS, Infomine, company websites
New supply will have to enter the cost
curve lower than marginal alluvials
Data: ITRI/Greenfields Research
Copyright: Greenfields Research & ITRI; Data: ITRI
Operating (2012)
Brownfields
Greyfields
Greenfields New projects
need to enter the
cost curve here!
These projects
currently not
economic
Supply shortages in tin mine supply
Conclusion
1 Tin is an electronic metal driven by solder demand.
2 30-year price highs are effecting the electronics industry.
3 Alluvial tin supply falling to be replaced by hard rock mining.
4 Declining Asian mining, new supply from elsewhere in the world.
5 Increasing reliance on by-products as grades decline.
6 Future supply will have much higher capital costs.
7 High medium term prices, will encourage new supply on-stream
Contact Details: John P. Sykes
Director, Greenfields Research
www.greenfieldsresearch.com
Today’s reference: ITRI Tin Industry Review 2011
Peter Kettle
Manager, Statistics & Market Studies
www.itri.co.uk