Borneo Post reported that Malaysia Smelting Corporation Bhd will see its earnings being boosted by high tin prices which are at USD 32,500 per tonne now having risen by 59.8% from 2010’s average of USD 20,340 per tonne.
Mr Toh Woo Kim analyst of RHB Research Institute Sdn Bhd said that this compared with its estimated cost of production of USD 15,000 to USD 20,000 per tonne. Currently, MSC operates a tin mine in Hulu Perak through its subsidiary, Rahman Hydraulic Tin Sdn Bhd and another tin mine in Bangka Island, Indonesia through 75% owned PT Koba Tin. Its tin reserves and resources currently stood at 20,058 tonnes and 38,854 tonnes respectively.
Apart from tin mining, MSC also operates a custom tin smelting facility in Butterworth, Penang which processes tin concentrates and crude tin metal obtained from third-party suppliers as well as from its open pit tin mine in Hulu Perak.
Mr Toh said that cost of production of its tin mine in Perak is at the lower range while the cost of production of its tin mine in Indonesia is at the higher range due to higher administrative cost. In 2010, its Perak tin mine managed to produce 1,769 tonnes of tin metal up from 1,693 tonnes in 1998. Due to bad weather conditions, its Indonesian tin mine only managed to produce 6,644 tonnes of tin metal in2 010 down from 7,335 tonnes in 2009.
He said that MSC had made several non-tin investments in the past. On the back of the global financial crisis in 2008, it undertook a strategic review of its growth strategy and decided to reposition itself to focus on its core tin business. This is positive for the company given the favorable outlook for tin prices going forward. Based upon the shift in its strategic business direction, MSC initiated a divestment program for several of its non tin investments and assets which are ongoing at this moment.
Mr Toh noted that funds received from these asset divestments, together with the MYR 100 million proceeds from its dual listing on the Singapore Stock Exchange, will mainly be used for explorations and acquisition of new tin mining projects in Malaysia and Indonesia as well as Brownfield developments at its existing mines. Due to a long term lack of investment in new mine capacity worldwide the recovery in tin demand was expected by International Tin Research Institute to result in tin supply shortfalls for four straight years from 2010 to 2013, resulting in high tin prices.
According to ITRI, the industry’s stocks supply pipeline would reduce to historically very low levels. It expected that tin prices could rise to a cyclical peak of approximately USD 35,000 per tonne to USD 40,000 per tonne by 2013 and 2014.
Mr Toh highlighted that by then, market mechanism would ensure that supply and demand would be re balanced by stimulating investment in more new mines and substitution by alternative materials in marginal applications. This is expected to result in tin prices settling at somewhat lower levels in 2016 through 2020.
He said that nearly all recent growth in tin usage has been related to the expansion of the electronics industry in Asia especially during 2004 to 2006 and in particular by the rapid uptake of high tin content lead free solders in most parts of the world in response to new legislative requirements. The lead free share of electronics solder market had increased from just two per cent in 2002 to over 65% in 2009 and remaining transition would mean additional consumption of tin in the future.
He added that this will be in addition to the increase in tin consumption due to the growth of the electronics industry. With current electronic assembly technologies, there is little immediate threat of substitution for solder as the only viable alternative to tin is lead which is increasingly environmentally unacceptable.
(Sourced from www.theborneopost.com)
