Tin prices soar on mine closure (and one ASX miner that's leveraged to higher prices)

Tin prices spiked to a fresh eight-month high after one of the world's largest miners – Alphamin Resources – announced a temporary shutdown of its Bisie mine in the Democratic Republic of the Congo due to advancing rebel forces nearing the site.

Prices on the London Metal Exchange (LME) soared as much as 9% to US$36,465 a tonne on Friday.

Alphamin produced more than 17,000 tonnes of tin last year, accounting for approximately 6% of global supply, according to the International Tin Organisation.

The company is evacuating all operational mining personnel from the site, with only essential personnel remaining for the care, maintenance, and security of the property.

Alphamin’s Toronto-listed shares plummeted 38% on Thursday to their lowest since February 2021, while the resulting supply crunch propelled Australian tin miner Metals X (ASX: MLX) up 21% on Friday, hitting a near three-year high.

Metals X five-year price chart (Source: Market Index)

Metals X in a nutshell

Metals X stands out as one of the few pure-play tin producers on the ASX, operating its 50%-owned Renison Tin Operation on Tasmania’s West Coast. Here are some standout highlights from the 2024 calendar year.

• Produced a record 11,006 tonnes (100% basis)

• This follows a strong 2023, where production increases were driven by higher ore grades and improved mill recovery rates

• Net profit after tax up 121% to $101.8 million, reflecting higher tin prices and a lower Australian dollar

• Cash balance of $220.6 million as at 31 December 2024 (vs. current market cap of approximately $460 million)

• Approved extended on-market buy-back of up to 10% of issued capital

In a nutshell, Metals X is a highly cash generative miner that's benefiting from a solid operational performance and strong underlying tin prices.

What's next?

The scenario echoes a past commodity crunch involving manganese. Here’s a quick recap:

• What happened: South32 suspended operations at its Groote Eylandt Mining Company (GEMCO) after key infrastructure was destroyed by Tropical Cyclone Megan

• What was the significance: The GEMCO operation supplies approximately 10% of the global manganese market, with a prior guidance for FY24 of 1.7 million tonnes

• Stock in focus: Jupiter Mines (ASX: JMS) is one of the largest manganese miners on the ASX, with a 49.9% ownership of the Tshipi Project in South Africa. Tshipi is currently a top-five global producer of manganese, with stable production, comparatively low costs, and a mine life of more than 100 years

• Share price reaction: JMS shares rallied 10.2% on the day of the news (21 March 2024) and another 9.3% in the next session. After moving sideways for around two weeks, the stock continued to aggressively trend higher. From 21 March to its 13 May peak, the stock soared 89%

When a supply shock jolts a commodity market, the affected resource typically undergoes a sharp and rapid price surge. This escalation is fueled by a scramble among customers to lock in inventory and heightened pressure from capital markets pushing prices upward.

In the short-to-medium term, two key outcomes tend to unfold:

1. The lost supply eventually comes back online (as is the case with South32)

2. The skyrocketing commodity price sparks a robust supply response as producers rush to capitalise on the opportunity

When South32's GEMCO operation resumed production, JMS shares gradually retreated from highs of 37 cents to pre-disruption levels of around 16 cents.

Jupiter Mines 12-month price chart (Source: Market Index)

In a way, the lithium sector feels like a prolonged echo of this pattern, with miners riding a two-year bull market wave from 2021 to 2023, only to now navigate an ongoing bear market that continues to unfold.

The bottom line

Alphamin's recent mine closure has intensified the existing tin supply deficit, with Macquarie analysts predicting a global shortfall of approximately 13,000 tonnes this year.

The International Tin Association has also highlighted potential long-term supply challenges. Without additional investments in mining operations, the association forecasts a supply deficit of 13,000 tonnes by 2030, driven by increasing demand from sectors like green energy and artificial intelligence.

Metals X is already highly cash-generative, and the recent surge in tin prices has added further momentum to the stock. The key question is whether it can sustain these gains if Alphamin resumes production. Could this be a repeat of what happened with South32 and Jupiter Mines?