My Top Pick In Mining

Metals X 

Ever since I finished researching the tin market in-depth in early 2019, I had my eyes on Metals X for the tin. However, I first came out as a bear due to issues the company was having in the past with the Nifty copper mine in the Eastern Pilbara region of Western Australia. After (1) new management took over, (2) management made it clear that they wanted to sell the copper asset(s) and focus on tin, and (3) further equity dilution was unlikely, I finally bought it and introduced it to Premium subscribers on January 9 of this year (2021) after which the stock roughly doubled in just a few months. After telling Premium subscribers to consider taking some profits in April I just recently wrote that it is a good time to add to positions. I did so myself. After what proved to only be a pause, the price of tin has resumed its climb higher. Notably, this also transpired at a time when the broader base metals complex continued consolidating. Tin moving higher to its own beat without the broader industrial momentum is a further bullish sign.


Metals X controls 50% of the Renison (SRCWF) tin mine in Tasmania through a 50/50 joint venture with Yunnan Tin (Bluestone Mines Tasmania Joint Venture - BMTJV). Renison is one of the world’s largest and highest grade tin mines. It currently has about 120,000 tonnes of Proved & Probable Reserves of tin at a 1.4% grade. It’s Measured & Indicated Resources are more than twice this much. The mine is currently producing about 8,500 tonnes per annum so the Reserve life is about 14 years and the Resource life is much longer. Furthermore, Renison has been producing for over a century and the greater Heemskirk district where it is located remains highly prospective for tin discoveries. Case in point is the fact that the company had an exploration drill result a few years ago of 20 meters grading 6.27% Sn. Tin trades for more than 3 times the price of copper so this is like drilling 19% Cu over 20 meters. This is the equivalent of 631 g/t (22 ounces) of gold per meter. There are also juniors in the Heemskirk district, such as Stellar Resources (SLROF), with quality projects that a company like Metals X could someday invest in or acquire to expand its tin footprint.


Metals X came out with a new company presentation a few months ago where they outlined their updated tin production plans. This enabled me to develop a detailed financial outlook for the rest of the decade which my current outlook is based on. However, this outlook does not include the potential development of their Rentails Project (re-processing of the Renison tailings) and Thermal Upgrade project that could increase tin recoveries by 10% to 15% and boost operating margins by almost 10%.

C1 costs for Renison are running a little above $14,000 per tonne. Management expects to get these down to the $12,000 per tonne level in a few years as production expands by about 10%. Given my long-term average tin price outlook of $23,000, this would put free cash flow margins around the 20% level and returns on invested capital in the 13% to 14% range (above average for a miner). Moreover, at the current share price, this would put the stock at about 6 times free cash flow. This is what I think we have if tin slowly descends to $23,000 over the next 2 years. This is sort of my base case and I think the stock is worth AUD $.30 (7.5 times $.04 per share earnings) based on this. My 12-month forward looking price target is higher at AUD $.34 which reflects the current higher tin price environment boosting the company’s results. This represents 36% upside from the current price.

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The information presented in the True Vine Letter is general in nature and designed for do-it-yourself and professional investors. It does not have regard to the investment objectives, financial ...

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