The demand of tin is strong, the supply is decreasing

Tag : niobium metal
 Gippsland Ltd. and Shamika Resources are among a small group of juniors that stand togain from changing supply-demand conditions in the global markets. Tin, tantalum and niobium exploration and resource development isheating up as increasing consumption and tightening supply drivesup raw-material and refined-product prices.

Tin his been on a massive bull run since end 2005, when priceswere hovering around $6,000 per tonne. Its since shot up to $25,000 per tonne, increasing 53% this year,notes Sandeep Joon, a research analyst with SMC Comtrade Ltd. Demand rose nearly 19% in 2006 and is forecast to increase another3% or more over 2007 levels this year. Meanwhile supply has been decreasing with the closing of tin minesin Indonesia, which along with China, Peru, Bolivia and Brazilaccount for over 90% of worldwide production. The key reason behind the bull run is the uneven production from Indonesia and erratic exports from China , Joon wrote.

The situation is much the same for tantalum. The worlds leading tantalum miner, Perth s Talison Minerals, has reportedly notified its biggest customers-capacitor manufacturers in Japan , the U.S., and Europe- that contract prices may need to rise as much as 80% in order forit to continue extracting tantalum oxide from its Wodgina mineprofitably.

Several exploration companies on the tin-tantalum trail stand tobenefit from the changing market landscape. Among them are Gippsland Ltd. (GIP), which recently completed adrilling and resource expansion and upgrade program at its AbuDabbab project in Egypt . As is true for a range of metals, the Democratic Republic of Congois a country frequently mentioned as a potentially large producer. Having secured exploration permits for 720 mining blocks from thenew government of President Joseph Kabile and with another 300applications in progress, Shamika Resources is planning an IPO onthe Toronto TSX Venture Exchange this fall.

Gippsland Upgrades Tantalum Resource

Gippsland on July 14 announced that tantalum and tin assays ofsamples from its recently completed in-fill diamond-drill sectionsat its site in Abu Dabbab site in Egypt have led to an 11% overallresource increase, from 40-44.5 million tonnes, and a resourceupgrade: 32.5 million tonnes are now in the Measured and Indicatedcategories according to JORC standards. Overall tantalum pentoxide grade has rose from 243-250 grams/tonne(g/t).

The resource expansion and upgrade help pave Gippslands wayforward. Company mining engineers are using the resulting new resourcemodel to complete pit optimization studies while the ore reserveincrease will strengthen the project and companys financial model,offering project finance banks a heightened level of confidence andhence potentially easier and lower cost access to capital forGippsland.

"The drilling programme has been an outstanding success despitedelays caused by the industry-wide problem of assay laboratorybacklogs, commented Gippsland executive chairman Jack Telford in amedia release. It has produced an 11% resource increase with 73% of the resourcenow categorized as Measured and Indicated while the global tantalumpentoxide grade has increased from 243g/t to 250g/t. These results further underpin the robustness of the Abu Dabbab project whilst reinforcingGippsland's position in becoming a major supplier to the globaltantalum industry."

Revised Valuation & Target Price

Tin is looking attractive for long term for investors due to itsstrong fundamentals .The demand is strong, while the supply isdecreasing, writes SMC Comtrades Joon. Supplies from Indonesia have been declining since the governmentcracked down on illegal miners in Bangka Belitung, while China hascurbed exports by imposing export taxes on the metal, and Congo,Africa's largest Tin producer, has banned the export of the metalfrom a big producing area of the country that is controlled byrebels.

Taking stock of recent developments, Fox Davies Capital miningresearch analysts Andy Rose and Andy Davidson have reiterated theirBuy recommendation and revised their valuation and share pricetargets for Gippsland.

Rose and Davidson have set a 27-pence (~$0.54) per share target forGippslands shares. The stocks been trading between 4.5 and 5.0 p (~$0.09 and $0.10)recently. We have assumed that the additional tonnage will result in a smallextension to mine life. Additionally, we have increased the grades of ore treated toreflect the higher grades in the revised ore resources and havemarginally improved recoveries, they wrote in a July flashresearch note.

A New Producer Taking Shape in the DRC?

From its two main offices in Montreal and Goma in northern DRC, Shamika Resources has amassed a largeand promising portfolio of permits for 720 mining blocks in theDRCs resource-rich Kibara mineral belt with another 300applications pending.

Potentially rich in cassiterite, tantalite and columbite,management is focusing on exploration and development of tin,tantalum, niobium and tungsten.

Shamikas geologist-in-charge of its nascent Kalimbi Hill prospectwithin the Nyabibwe property in South Kivu estimates that one, 700x 3,000 x 200-meter vein there contains 1 million tonnes of tinore.

Certified sample assays conducted by SGS Lakefield Research Ltd.Showed tin oxide percentages in three ore samples showed 66.6%,77.6% and 72.6%, respectively, which translates to tin percentages,respectively, of 52.5%, 61.1%, and 57.2%.

Management plans to develop the Kalimbi project and has conductedits own due diligence in order to confirm that the deposits arethere, that they are big, that they can be expanded and that thecompany has the capability of developing them.

Located in western North Kivu Province , Walikale is in another current focus for Shamika management. Located in an area of important crossroads in the eastern DRC andthe core of the Kibara mineral belt, cassiterite deposits there arewell-known, have high iron content and hence have been dubbed MainRouge. Tin oxide content is approximately 60% -- with 45-55% pure tin -and the area is also known to host high-quality deposits ofcolumbo-tantalite, typically in more remote, rainforest areas,according to Shamikas website.

Shamika is now looking to raise capital. Besides working towards an IPO on the TSX Venture Exchange,management is negotiating a $C3-million private placement.