First Tin (LON: 1SN) is, as the name suggests, a tin miner. In fact it's a would be developer of tin mines. Which is great, there's tin out in them thar hills, the world needs tin, what could go wrong? Well, actually, the problem is that it's not obvious - as Tungsten West has mumbled about) that the tin price is going to remain high enough to make new tin mines profitable.
There's a bit of ancient background to this too. After WWII the bureaucrats got together and decided that international commodity prices should be “fair”. One outcome of this was the International Tin Council which regulated the world price of tin. As always happens the producers ended up in charge here, not the consumers. So, the price was set nice and high. The ITC would buy in tin and store it if production got above consumption and threatened to push the price down again.
Well, OK, but eventually you do run out of other peoples' money when attempting to buck markets. Which the ITC did, it went bust, their stocks of tin flooded the market and near every rich world hard rock tin mine closed. For there are - to be rough about it - two possible sources of tin, hard rock and alluvial. This geology is wrong, but it's reasonable a story - we can dig the cassiterite (tin ore) out of the granite in the mountains or we can go look in the beds of rivers which have eroded down the granite mountains. That second is obviously vastly cheaper. The ITC high prices encouraged both types of mining. Roughly, and not entirely accurately, only the alluvial type survived the price collapse.
What we actually end up with is a price cap. If the tin price rises above a certain level then hard rock mines make sense again. But if they fall below that price then only alluvial do. Which is a problem if you are a developer of hard rock tin mines - is the price going to be above that cap? Not obviously and it's not right now either.
Tin price from Market Insider
First Tin price from London Stock Exchange
We don't say that the tracking is exact but we can see the influence of the falling tin price on the First Tin share price there. At some point - and best guseese do run in hte $25k to $30k per tonne range - there's no point in opening a hard rock tin mine as it would lose money. The alluvial deposits are the only ones able to stay open at those prices.
First Tin requires a rise in global tin prices to be usefully economic. And it needs that price rise to be sustained. We're not sure that that's going to happen.