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Rabu, 18 Mei 2011

ON THE PLATTER: Timah (TINS IJ; NOT RATED): Site Visit - Dig in a Bit Deeper - OSK Nusadana

On 11-12 May we visited PT.Timah’s (TINS) offshore & inland mining sites and its tin refining process in Bangka Belitung as for the purpose of learning the business process of the company’s tin business starting from mining to its refining stage. With 2010 reserves of 395k tonnes, the company believes more suprises yet to come as TINS would be expecting to obtain additional reserves from its offshore location when its bucket wheel dredge (BWD) modification to start commencing in 2012. TINS is currently in possession of 12 bucket line dredges and 15 cutter line dredges on its offshore mines. The company plans to produce 40k tonnes by FY11 allowing a larger proportion from its offshore mining (60%), while the rest of the production coming from inland (40%) as to ease the cost burden from small-scale miners.

· Day 1: Offshore and Onshore mining. We took a 20 minutes ride using a boat to one of its shore mining in Pangkal Pinang where the bucket line dredge is allocated. The dredge is able to scoop up tin reserves 40-50m below water surface and process it to 25%-30% concentrated tin. The company believes that they could obtain additional potential reserves by using its bucket wheel dredge which is able to dig up to 90m below water surface which will start to operate in 2012. However, the amount of potential reserves is not declared/disclosed. The next stop we visited one of its inland mine in Pemali. The processing there is divided into 3 jigs, where at the end of the washing process would produce 70% sn tin- concentrated which would be ready to be refined.

· Day 2: Smelter plant. The next day we went to TINS’ Metallurgical Centre in Muntok where we saw the smelting and refining process. The refining process is done by transforming the tin ore from the mining area into different types of tin grade which is to be sold mostly to the export market (97%). Timah’s tin grade are separated based on its concentration such as the 99.85% sn concentrate (used in the LME market), 99.99% sn concentrate (usually USD1,000 premium to the LME market) and the upcoming product (99.99% sn concentrate). The company believes its high-end 99.99% sn concentrate project would bring less cost for its customers in the electronic industry as the high grade tin from TINS would be ready for use, hence an added value for the company.

· Valuation. 1Q11 bottom line reached IDR355bn (+150% y-o-y; 25% of FY11 consensus) mainly driven by higher tin price averaging at USD29,965/tonne (+75% y-o-y). The company remains positive with tin demand going forward on the back of strong economic recovery; however, according to the company, TINS only targets around 40k tones of production volume, a flat figure compared to its previous year, as to sustain its mine life reserves for longer years. TINS is also currently developing its down-stream products, which would enable TINS to obtain higher margins. The company is currently trading at 9.4x and 8.4x based on 2011-12 PE consensus. We have not initiated this company yet.
Posted by Saham Pilihan at 23.18

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