ALPHAMIN has a tiny fraction of JSE owners, but the DRC-based tin miner is about to post a record quarter’s earnings — about $158m — thanks to this year’s jump in tin prices and is set to propose a fat dividend come the release of its year-end numbers. The Financial Mail Group spoke to CEO Eoin O’Driscoll.
Tin prices spiked from about $30,000/t in January to almost $60,000 and are now at around $48,000. Is there a big speculative element to the increase, or is there a genuine supply deficit that’s helping?
We think it’s a confluence of factors; there’s a certain element of dollar weakness. There’s definitely a constraint in supply. Myanmar has fallen off quite substantially over the past five years; they came from nowhere to about 15% of the world’s supply, and it was all alluvial artisanal mining. The thinking is that it has been depleted and there’s been no industrial-scale exploration development [since]. The other big one is Indonesia: it was producing 80,000t three years ago and closer to 50,000t last year, and they’re also struggling to keep up with their production levels.
So on the supply side we feel comfortable that we’re heading for a structural deficit, and on the demand side it’s starting to pick up as well with AI infrastructure demand and so on. There’s a very real correlation between semiconductor demand and tin prices; it tracks almost perfectly. But there have also been some positions put in the market, and we’ve seen in the past that when short-term spikes unwind, the price comes crashing down again. It’s likely to be less severe this time. We think north of $40,000/t is pretty sustainable at this stage.
As for your own supply, it seems pretty constant at about 5,000t a quarter?
For the next six or seven years, that’s where we see ourselves. Beyond that we need to have exploration success and extend the life of the mine. Normally, if they’re worried about DRC supply, they’re worried about us. And every time the tin price spikes we get calls asking if we’re evacuating, but we’re not.
Yes, I hear there have been skirmishes around Bisie, where your mine is. Is it still quite a fraught region?
The region has had 70 years of semi-permanent conflict. Around the mine it’s very settled and we haven’t had any security incidents in a long time. [But] in the past 18 months, M23 has been the big story, and they are a different level of armed group from what we’ve seen in the past. There are skirmishes between the DRC and the army about 150km east of us.
It seems in your production update that the extra drilling you’ve done at your Mpama North mine hasn’t yielded much to get excited about? If we’re talking about how to extend your life of mine …
The drilling so far has been underwhelming. We originally did our drilling at Mpama North from 2015 to 2017 and then concentrated on development of the mine. In 2020 we were in survival mode. We then restarted exploration and in 2021/2022 had a lot of success in extending Mpama North and finding the Mpama South deposit. The original intention was to bed down Mpama South and then hit exploration hard again; last year was somewhat interrupted by the evacuation in March. It’s very early days; we’re going to keep looking around the extensions in Mpama North and South, but the initial holes weren’t the quick, easy wins we’d hoped for.
Does it really matter for the time being? If you’re producing 20,000t a year and tin prices remain here, that makes you a simple, consistent little investment for the next seven years?
It’s very much our intention to mine there for 40 or 50 years. It’s an extremely highly prospective area; it’s completely unexplored beyond the boundaries of the exploration we’ve done there. So your worst-case scenario is a pretty nice little case, but absolutely not what we see happening.
Does that mean you have to have a nuanced approach to your dividend? Will you need to keep cash back?
That’s unlikely. Exploration isn’t really a massive needle-mover in terms of cost. We’ll probably spend $10m-$20m a year in the next couple of years on exploration. If we could spend $100m and guarantee more reserves, we’d do it. But we’re constrained by how many drill rigs we can sensibly have drilling. The topography’s difficult; you’ve got to clear roads. It’s quite a narrow, steeply dipping ore body, so you have to be precise in how you drill to make sure you hit it.
So that would suggest your dividend is pretty secure?
It’s up to the board, but I’d be surprised if it’s not a substantial dividend.
How big is your South African investor base, given that you’re also listed on the Toronto Stock Exchange?
We have about 15-million shares out of 1.3-billion on our listing, so around 1%.
That’s tiny! Why do you keep a JSE listing at all?
We originally did the listing in 2017 when we were developing Mpama North and there appeared to be a lot of interest in South Africa at that time. It just didn’t really take off, and we raised a lot less money than we’d hoped. But delisting is a headache, frankly, and I think where we’re at now is that we accept that we have the listing and we’d rather like to give it a bit more life.
