OPERATIONS
OPERATIONS
In mining there are three factors that nobody can change: the
commodity; grade and location. If a mine ticks all these boxes,
it is in the pound seats. If it ticks only one, that tick needs
to be so substantial that the other boxes do not matter. The
exceptional grade at Bisie places it very low on the cost curve,
and potentially makes it a prolific operation with a large
margin for error.
Servicing debt
Despite the high grade tin at Bisie, there have been concerns
about Alphamin’s rising debt levels as it has experienced a
number of teething problems, including incremental logistical
costs, amongst others repair work on a damaged bridge and
additional arsenic demand in the processing plant.
Management said in a recent statement that it is aware
of concerns about the growing debt ratios, however, at
current levels and within the operational metrics, debt is still
completely manageable and should be settled in full within
the next two years. “Alphamin continues to focus on achieving
full production at the lowest possible AISC, which should
provide the company with a robust operating margin based
on current tin prices in Q1 of 2020,” the statement further said.
Fears about the coronavirus
The impact of the coronavirus on international tin prices was,
at the time of writing, still reasonably insignificant. At the
beginning of March London Metals Exchange (LME) tin prices
were trading between USD16 000/t and USD18 000/t. There
has been a significant reduction in tin demand though, mostly
as a result of the fears about the coronavirus and challenges
faced in the global electronics industry on the back of the US/
China and Japan/South Korea trade wars.
According to the International Tin Association (ITA) the
immediate impact of coronavirus on the supply and demand
of refined tin appears to be relatively small. Nonetheless, the
continued logistical backlog and sluggish return to work by
Chinese workers could slow global consumption and Asian
production in 2020, but in order to make their GDP growth
target for this year, the Chinese government is expected to
stimulate the economy, lessening the impact of the virus.
An unknown factor is the effect of the virus on logistics
in China, the main destination for Bisie’s tin concentrate.
According to reports, cross-provincial transportation in China
has come to a standstill. Even if tin mines were operating
at full tilt, smelters in China and especially in Gejiu – the
main destination for the concentrates – would not benefit.
According to reports, the inflow of concentrates is completely
blocked. Smelters without integrated mines are working
through already low concentrate stocks.
Boosting the balance sheet
On the other hand, if the virus spreads unabated throughout
Southeast Asia and mines remain shut it could result in
a significant shortage of tin concentrate and tin-related
products, especially in parts of Europe where tin-using
companies are already working through their stockpiles. This
could alter trade patterns and work in favour of Bisie. Most tin
buyers in Europe, especially in the chemicals sector, are reliant
on supplies from China. They could reportedly face serious
issues if they don’t receive critical components on time. This is
all speculation; but supply deficits will boost the tin price and,
of course, Bisie’s balance sheet.
As part of Bisie’s focus on sustained productivity and keeping
costs and debt in check, Alphamin has introduced a new
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African Mining April 2020
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African Mining April 2020
www. africanmining.co.za