First Tin (LON: 1SN) shares have just floated in London, so it’s worth having a look to see if it’s worth it.
The first and most obvious thing to note is that this is a development stage company, not an exploration stage one. First Tin definitely has tin available to it. Looking at the projects in Germany, there are already recorded reserves there. So, that there is tin there, that it’s worth extracting, is already known.
The region is the Erzgebirge (Krusny Hory in Czech, Ore Mountains in English), and one way of thinking of this is the opposite end of the same mineralisation as Zinnwald Lithium and European Metals are looking at. At the north-east end, where they are, the tin is mingled with tungsten and lithium. At the SW end, where First Tin is, it’s more likely to be straight cassiterite. It’s long been known that the mineralisations exist. The reason they weren’t mined was because they didn’t used to be worth mining – or at Cinovec, they were no longer worth mining.
This really brings us to what the risk is in First Tin. That global tin price, that’s really it. The reserves are there, exploration risk is already dealt with. Technology has moved on from the 1980s when Cinovec spluttered out. So, yes, the deposit is known to exist, the numbers add up now. But the biggest reason they do add up is because the tin price is much higher now than it was then. The big question is whether that is going to continue to be true.
The reason the tin price fell was partly because the old UN-driven commodity board, the ITC, went bust and fell apart. But underlying that was the widespread mining of alluvial tin deposits elsewhere in the world. Most especially at Bangka and Belitung in Indonesia. This crashed the tin price, and the European hard rock mines – including the last in Cornwall – all closed around this time.
First Tin makes it a merit that they’re a hard rock mine as opposed to those alluvial ones elsewhere. For the alluvial ones are often “artisan” mines, that is, mined by grossly poor people – and often enough their children – with nothing but a shovel. This doesn’t match up with our ESG goals in investing.
Well, yes, that’s true, but alluvial mining is also hugely cheaper. That’s why it can be done by a child with a spade. In fact, at Bangka there are people who have been able to mine from the sand with a Mr. Henry vacuum cleaner – no, really.
This is what then provides the competition. If the tin price falls – which it could do – then it will be those alluvial mines which are profitable still, the hard rocks ones that aren’t. Just as happened back in the 1980s. And that’s then the risk for First Tin. Not that there’s anything wrong with their reserves, or mine plans, but because the price of the output, tin, is variable.
That then becomes, really, the determinant of that future First Tin share price. What’s the price of tin going to be? Any trading position has to be informed by that.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage . 68 % of retail investor accounts lose money when trading CFDs with this provider . You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money .
Tim Worstall is a freelance writer specialising in economics and the financial markets.