CEO.CA Chairman's Briefing

Veteran mining investors are no strangers to the rapid fluctuations of sentiment through the sector. It seems that the better the outlook and the more confident investors are that the future is rosy, the more paranoid one should be that a downturn is right around the corner. And so it was in March of this year when base metals surged following the Russia invasion of Ukraine, resulting in sanctions that helped to trigger short squeezes in base metals such as copper, nickel, and tin. Since the March ‘LME short squeeze peak’ base metals have fallen between 40% and 60%.

One of the lesser understood and discussed base metals is tin. From the beginning of 2020 to its all-time of ~$49,000/tonne in March 2022, tin prices rose roughly 200%. Tin is used in solder for electrical equipment, coating, alloys, automotive applications (sealants, wiring, roofing, etc.) and sheet glass.

In March, the outlook for tin looked better than ever with demand continuing to grow in an increasingly supply-constrained market. Today, the fundamentals of the physical base metals market remain strong, however, the outlook is somewhat in question due to a significant deterioration in China’s housing market and the economic growth outlook globally.

China has been the fastest growing market for tin in recent years. And the concerns regarding China’s housing market have grown more palpable in the last few months, having weighed on the tin market resulting in a ~50% correction from Tin’s March peak at nearly $50,000/tonne:

Tin (One Year)

As is all too often the case in commodities markets, the price of tin took the stairs up throughout 2021 and early 2022, only to take the elevator down during the last few months.

The good news for shrewd metals and mining investors is that the long term outlook for tin is as bullish as ever. Meanwhile, share prices of tin related mining companies have been slashed 50%-70% across the sector. The sell-off has been so extreme that it appears to have already fully discounted a recession in the US and Europe.

However, investors who are able to look beyond the recession headlines hitting financial media may be able to appreciate that base metal inventory levels continue to be very low with little supply response to the much higher prices of 2021 and early 2022. Simply stated, if the anticipated demand destruction isn’t as strong as markets currently fear, we could see a bounceback in tin prices in the 2nd half of 2022. After all, demand for tin is relatively inelastic and the ~50% decline since March has wrung out any speculative enthusiasm that once existed.

The reality is that the global green energy transition, which is basically a switch from energy delivered via a pipe to energy delivered via a cable, will require a huge amount of tin to join it all up. Additionally, tin plays an important role in electric vehicles due to its ability to slow battery degradation when added to silicon in the graphite used in the anodes of lithium-ion batteries.

With the global tin project pipeline essentially barren, it might be a good time to look for companies working to make new tin discoveries and advance development stage projects. This search brings me to Tin One Resources (TSX-V:TORC), a tin explorer that listed on the TSX-V in early January after raising C$5.6 million in the IPO round in November 2021 at $.25 per share. Tin One shares closed at $.40 on its first day of trading in January, reaching as high as $.50 as tin prices peaked, and have since fallen as low as $.08 as investors have hit the exits betting on a 2008-style demand destruction market meltdown.

At its current valuation (C$5 million market cap), Tin One is being valued by the market as little more than a shell with either no assets or worthless assets. However, the reality is that TORC controls two highly prospective tin projects in a tier-1 mining jurisdiction, northeast Tasmania.

Tasmania is an island state of Australia with a long history of mining. In addition, Tasmania is home to the largest operating tin mine in Australia, the Renison Tin Mine operated by Metals X. Tasmania has excellent infrastructure with nearby port access on the northern coast of the island.

TORC is in the midst of a 5,500 meter RC + diamond drill program at its 100% owned Great Pyramid Project. The four key objectives of the drill program are to:

1. Confirm the historic resource grading .2% tin for a total of 10,400 tonnes contained tin.

2. Obtain grade and continuity data utilizing modern drill and analytical techniques within the area of the historic resource.

3. Expand the resource by drilling to depth below historical drill intercepts, while also expanding the deposit laterally.

4. Test a large-scale IP chargeability anomaly adjacent to the historic resource.

The deposit style and regional comparisons suggest that a tin-fertile granite source exists at depth below the deposit, however this has not been encountered and the deposit remains open at depth. Furthermore, the Great Pyramid Deposit begins at surface and 90% of the existing resource is within 40 meters of surface. It is not unreasonable to expect the current drill program to more than double the Great Pyramid resource to between 25,000-30,000 tonnes of contained tin.

TORC will complete this phase of drilling at Great Pyramid then proceed to deliver an updated resource estimate, metallurgical testing, and commence the preparation of a prefeasibility study (first half of 2023). From my vantage point, if TORC is able to reach the 25,000 tonnes of contained tin mark while maintaining (or improving) the average .2% tin grade, then Great Pyramid will offer a strong foundation of value for the company (one that is multiples of the current C$5 million market capitalization).

A soil sampling and mapping program is also underway at the company’s other Tasmania tin project, Aberfoyle. Aberfoyle is a past producing tin mine that produced more than 2 million tonnes at an average grade of .9% tin. Initial soil sampling results at Aberfoyle are very encouraging with grades as high as 4.9% tin. TORC is planning follow up mapping, continuation of the 3D data compilation, finalization of the structural interpretation and extensive soil sampling programs. It is anticipated that these programs will lead to the definition of integrated drill targets that could set the foundation of a drill program at Aberfoyle later in 2022 or in early 2023.

The company is in the process of completing a C$2 million financing at C$.10 per share with a full warrant at C$.20 for a period of 36 months. Challenging market conditions for base metal focused companies have delivered a tremendous opportunity to those who can look to the future and take advantage of the current market dislocations. Investors today can buy TORC shares at a more than 60% discount from its IPO financing price. In addition, management and insiders will be contributing a majority of the funds in the C$.10 financing.  Inventa Capital co-founder Craig Parry is TORC's largest shareholder and he will be investing C$200,000 in this round, insiders already own 36% of the company and that percentage is set to increase:

This means that if one is able to buy at $.08 or $.09 on the open market they are getting a 10% or 20% discount to the price management is paying (without the four month lock-up).

This is one of those rare cases in junior mining where retail investors can buy shares right alongside a highly competent management team, and in fact receive a discount in the process. I am buying TORC.V shares on the open market and I look forward to drill results from Great Pyramid rolling in over the next few months followed by a resource update. 

Disclosure: Author owns TORC.V shares at the time of publishing and may choose to buy or sell at any time without notice. Author has been compensated for marketing services by Tin One Resources Inc.