EDITOR: | February 5th, 2013

The Pulse: Tin supply tightens; Graphite exploration update; JPMorgan bullish on gold

| February 05, 2013 | No Comments
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the-pulse-300x254121Tin prices climbed 22% in 2012, more than another base metal.

Indonesia’s exports are set to drop 24% because most of the country’s smelters won’t meet a new government standard that demands lower grades of impurities; these won’t be allowed to export tin. Chinese production is also slumping.

Morgan Stanley is predicting demand for the metal that is used in solder and food packaging to reach 361,000 tonnes this year against mine supply of 357,000 tonnes. That is likely to prove a conservative estimate of the looming deficit.

Back in September, I said to regard tin as a critical metal. It is more so now.

As I wrote then, it’s hard to regard something that’s been mined since 3000BC as critical metal. But the world’s largest mine (in South America) is due to close within four years and now Indonesia is trying to drive out of business many of the smaller tin producers.

Tin closed at $24,930/tonne at the London Metal Exchange on Tuesday. An analyst survey by Bloomberg last week come up with an average 2013 forecast of tin at $28,750/tonne.

On the demand side, Japanese imports recovered slightly in 2012 from their sharp fall in 2011 caused by the earthquake and tsunami. And South Korea’s Public Procurement Service has opened tenders for supply of the metal to go into the country’s stockpile.

Stephen Briggs at BNP Paribas in London’s latest report is titled “Tin will stay on top”. He’s estimating the 2012 deficit at 10,000 tonnes and a 2013 shortfall of 5,000 tonnes (much higher than Morgan Stanley’s).

He wrote: “What makes tin’s performance both in 2012 and since 2001 all the more remarkable is that it has been achieved despite demand being relatively weak,” he writes.

As for the future, several new uses for tin have been identified, notably in batteries and steel.

GRAPHITE: Time for a quick update on what the Australian graphite explorers are up to.

Triton Gold (ASX:TON) has acquired two more tenements at its Mozambique project. One licence area includes “highly prospective and large anomalous zones” while the other is only a short distance from the ground held by Syrah Resources (ASX:SYR); last month Syrah reported a maiden resource of 151 million tonnes at 17.1 per cent graphitic carbon.

Talga Resources (ASX:TLG) is about to begin drilling at its Raitajarvi coarse flake graphite deposit in northern Sweden. It is targeting a resource that includes 49% large to jumbo flakes. In total, 31 holes will drilled, a total of 3,800 metres of diamond drilling.

Sovereign Metals (ASX:SVM) has completed the acquisition of its Malawi project and has raised A$3 million from European investors. Trenching exploration is expected to begin in the coming months.

Kibaran Resources (ASX:KNL) has completed drilling at its Mahenge project in Tanzania. Significant intersections included 53 metres at 10.4% graphitic carbon; work is now continuing to confirm the continuity of the graphite in other zones.

And Lamboo Resources (ASX:LMB) has completed 93 holes at the McIntosh property in Western Australia. Meanwhile, the company has been granted the Samcheock flake project in South Korea with an inferred 200,000 tonne resource.

Maiden resource drilling has begun at the projects on the Eyre Peninsula, South Australia, owned by Lincoln Minerals (ASX:LML). As the company points out, more than 30 known graphite prospects and historic graphite mines are located near Port Lincoln and Cleve on the Eyre Peninsula.

GOLD: Good news for gold miners who maybe have marginal operations – either in terms of grade or costs. The latest commodity outlook from JPMorgan says you will be needed. Because central banks will likely remain buyers of physical gold. This means that “marginal gold supplies will likely continue to be needed to meet demand, supporting gold prices,” says JPMorgan. A graph shows that Russian central bank holdings have risen from about 12 million ounces in 2007 to around 30 million ounces now.

Meanwhile, in another commodity review out this week, London’s Capital Economics says there are several catalysts that could send gold higher. Top of their list is a renewed escalation of the Eurozone crisis. Another candidate is the fiscal position of the U.S. and Japan.

But Capital Economics thinks silver will under-perform gold, its dependence on industrial demand holding it back as the global economy falters.


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