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Tin prices on upward trend despite short-term setback [29-04-2011]  
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Malaysia Smelting Corp Bhd (MSC) group CEO Datuk Seri Dr Mohd Ajib Anuar is standing by his earlier view that tin prices could hit US$40,000 (RM119,200) per tonne, supported by strong fundamentals, despite the short-term impact of  recent events.

Ajib said the impact of the Japan earthquake and tsunami last month was likely short-term, while the recent supply spike due to increased production by small-scale tin producers was not sustainable over the longer term.

Speaking to reporters after MSC’s annual general meeting yesterday, Ajib said tin prices could see some fluctuation due to buying from investment funds.

“But I believe investors are long-term position takers. If you believe the price will go up in the long term, your view won’t be affected by short-term fluctuations,” he said.

In its 2010 annual report, MSC noted that one of the key drivers in the new boom in tin prices was buying by investment funds buoyed by accommodative monetary policies of governments around the world, such as the US’ quantitative easing programme.

“Tin has outperformed other commodities because major investment funds believe that market fundamentals — rising global demand versus lack of investment in new sustainable supply sources — should support high prices for at least several years to come,” MSC said.

According to MSC, the annual average cash settlement price for tin on the London Metal Exchange (LME) was US$20,447 per tonne last year, the highest recorded since US dollar-denominated trading on the exchange began in 1989.

On Tuesday, tin was traded on the LME at US$32,725 per tonne, having breached the US$32,000 mark in February this year.

On the impact of the strengthening ringgit against the US dollar, MSC chairman Norman Ip Ka Cheung said the higher tin prices could have already factored in currency movements.

Tin, a US dollar-denominated commodity, has “natural hedge” qualities whereby commodity prices tended to be higher when the US dollar was weak, Ip said.

On MSC’s plans this year, Ajib said the company is planning to expand its resources and reserves by drilling within the group’s existing leases and by scouting for potential areas around existing leases for mining.

Ajib added that MSC is talking to governments and other parties on the possibility of mining or collaborating with third parties in areas around MSC’s existing leases.

MSC’s main assets in Malaysia are its tin smelter in Butterworth, Penang, and mining operations via Rahman Hydraulic Tin Sdn Bhd.

As at March 2010, Rahman Hydraulic’s total tin resources were estimated at 19,479 tonnes with an expected mine life of 10 years, excluding further drilling to establish additional resources.

MSC said in its annual report it was eyeing potential tin mining sites in Perak, Pahang and Terengganu for the continuity of its tin mining business.

In Indonesia, MSC’s mining and smelting assets were under its subsidiaries PT Koba Tin and PT MSC. Its total reserves and resources in Indonesia were estimated at 39,433 tonnes, the company said in its annual report.

After producing 45,381 tonnes of tin metal in 2010, MSC was aiming to sustain total output this year and maintain its position as the second largest tin player in the world, Ajib said.

Ajib told newsmen MSC had several acquisition targets in the pipeline which it would announce in due course. A  portion of the proceeds from MSC’s second listing on the Singapore Stock Exchange was earmarked for acquisitions.

For FY10 ended Dec 31, MSC’s revenue grew 47.9% to RM2.74 billion from RM1.85 billion a year ago. But the group reported a net loss of RM80.25 million compared to a net profit of RM72.36 million in FY09 due to the recognition of impairments in FY10.

Excluding the exceptional losses, MSC’s gross profit rose 69.54% to RM76.02 million from RM44.84 million a year ago.

The integrated tin group is expected to release its 1Q11ended March 31 results in the first week of May.

MSC shares closed unchanged at RM4.22 with no shares traded on Bursa Malaysia. On the SGX, MSC shares shed one sen to end at S$1.69 (RM4.09).

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