Elementos in its Element at Cleveland
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Like many commodities, tin had a strong 2016, rising 60% in the second half of the year, mainly on the back of increased demand from Chinese economic stimulus encountering declining supply.
And while the current tightness in the market appears to be almost "fully priced in," according to research company BMI Research, the fundamentals for tin going forward are unambiguously positive.
Tin is heading for a situation of critically short supply, mainly due to demand from the electronics industry and the emerging Asian economies. BMI Research predicts that prices will increase gradually to average US$22,000 a tonne by 2020 – from about $20,000 at present – as the global market posts sustained market deficits and inventories dwindle.
Apart from increasing demand in its traditional uses in soldering, tinplating, alloys, electronics and chemicals, tin is on the march in the “green” economy, too, with applications in battery technology, solar power generation, hydrogen fuel and clean fuel.
The International Tin Research Institute (ITRI) projects a 21% shortfall by 2020, as consumption rises and production from existing mines tails off.
And new tin orebodies are not being found.
All of this is music to the ears of Elementos Limited (ELT), which owns the Cleveland tin-copper-tungsten deposit in northern Tasmania, located about 60 kilometres south of the port of Burnie. The Cleveland mine was an underground tin and copper producer that was operated from 1968 to 1986 by Aberfoyle Limited, and processed 5.7 million tonnes of ore to produce 24,000 tonnes of tin and 10,000 tonnes of copper in concentrate form.
Elementos is planning a staged development to return Cleveland to production, starting with processing the tailings concurrently with open-pit mining, followed by underground development – and ultimately accessing the tungsten deposit that sits beneath the tin-copper orebody at Cleveland.
The tailings project contains 3.8 million tonnes at 0.3% tin and 0.13% copper, for 11,000 tonnes of tin metal and 4,800 tonnes of copper, and a project life of six years.
The indicated open-cut resource contains 800,000 tonnes at 0.81% tin and 0.27% copper.
Further out, the underground JORC (Joint Ore Reserves Committee)-compliant indicated and inferred resources are stated as 6.64 million tonnes at 0.63% tin and 0.25% copper, and 4 million tonnes at 0.3% tungsten oxide.
Resource estimates remain open. The conceptual tin resource potential falls into a range of 3 million tonnes–16 million tonnes at 0.6%–0.7% tin, and about 0.2% copper, for an additional 20,000–110,000 tonnes of tin and 10,000–30,000 tonnes of copper. That could extend the project life at Cleveland to at least 15 years.
And even further down the track, the tungsten porphyry system could be up to 60 million tonnes at about 0.3% tungsten – enough to rank Cleveland as potentially one of the world’s largest tungsten deposits, with up to 120,000 tonnes of contained metal.
But “first things first,” says Elementos chief executive Chris Creagh: for the time being, he is concentrating on getting the combined tailings treatment and open pit part of the plan off the ground, while also expanding the open-cut resources through an exploration program.
“The priority this year is to complete the bankable feasibility study on the tailings and the open-cut. A great deal of the preliminary work has been done, we have mining lease applications in, we’re going through the approvals process with various state departments in Tasmania, and we’ve completed a lot of the work for the environmental approvals, but the feasibility study is the major part of our work this year.
“To treat the tailings alone, and produce a concentrate to sell to smelters, has been priced at about $21 million–$23 million in capital. But we’re looking at a couple of other approaches, hopefully with the aim of starting production in early 2019,” says Creagh.
Elementos has just completed a ground magnetic survey, the data from which will help it to start an exploration program with the aim of expanding the open-cut resources – this work will form part of the feasibility study.
“The aim of that is to reduce the risk of the project, by defining an increase in the open-cut potential of the project, so we can lift the grade at the processing plant,” says Creagh. “The tailings grade is 0.3 per cent tin, and the current open-cut is 0.8 per cent. If we can combine those two we can get a feed-grade through the processing plant that reduces the project risk considerably.
“We’ve got 800,000 tonnes at 0.8 per cent already in our open-cut resource, and we’d like to triple the size of that. If we can do that to a bit over 2 million tonnes – which isn’t a very big ask – we would have a much more risk-free mining and processing operation,” says Creagh.
Stage three would be underground mining.
“Cleveland was principally an underground operation – it had a very small open-cut right at the top of the resource on one of the lodes. A lot of the work that was done on Cleveland was done from underground, because it was. The actual exploration drilling, near-surface, was done from underground, so there’s a gap between the actual surface and the known top of the orebody, so we’re looking at those gaps between the old workings and the workings at surface,” says Creagh.
“The geological modelling has all been done, we know where all the underground workings were, and we’ve got historical drilling that was done in the past, and there are some really good intercepts in there. We’re combining that with the ground magnetic survey we’ve done to find drilling targets moving forward,” he says.
“There is a very significant underground tin resource already defined. The plan is to do the open-cut and the tailings first, and use part of the profit from that to develop the underground, to lessen the burden on the shareholders.”
Then there is the tungsten, about which Creagh is circumspect. “At the bottom of the mine there is at least a 3 million tonne tungsten resource. The plan is to develop the tailings and the underground tin, to get deeper and deeper, but then further explore the tungsten potential.
“The tungsten orebody only has 26 drill holes in it, which is not many, so it’s got a lot of potential. To develop the tungsten deposit now wouldn’t be economically wise. But to stage the development down towards it, would be ideal,” says Creagh.
In addition to the mine development work, Elementos is also investigating offtake agreements for its tin. “We could sell as a concentrate or sell it as a metal. The traditional route for Australian operations is to sell a concentrate to the big smelters in Thailand and Malaysia, but there are some new opportunities potentially opening up,” says Creagh.
Potential share price catalysts for Elementos would be drilling results, and progress on both metallurgical processing and offtake agreements. “If we have exploration success and we can clearly show that we can combine the open-cut with the tailings and further de-risk the investment, that’s a very good signal for the shareholders,” says Creagh.
Generally, the development of the project itself is what the shareholders should be watching, he says, but the shares also have leverage to an improving tin price. “That’s a fairly positive picture based on a looming demand and supply shortfall. That could be a big trigger,” he says.
To find out more about Elementos Limited and the Cleveland Mine click here.
James was founding editor of Shares magazine, and oversaw one of the most successful magazine launches in Australia. He has also written for BRW, Personal Investor, The Age and Management Today, and was subsequently personal investment editor at The Australian and editor of financial website, investorweb.com.au