Tin prices boom — but investors beware
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  • Tin prices have continued to skyrocket, which in turn has caused several ASX-listed shares to shoot up
  • Among the companies enjoying success are Stellar Resources (SRZ), Aus Tin Mining (ANW) and Jadar Resources (JDR)
  • The higher prices are being driven by a lack of available global supply with shortages expected to continue in the near-term
  • Tin is currently worth US$29,540 per tonne (roughly A$37,316 per tonne), almost double what it was worth 10 months ago
  • Some businesses have already used the bump in prices to re-evaluate their tin assets and capitalise on the demand
  • Time will tell whether the price remains high and if these businesses have acted too hastily or just in time

Tin prices are continuing to skyrocket amid a shortfall in supply, leading some ASX-listed business in the market to experience pleasing share price jumps.

The commodity has spent much of February hovering around the US$30,000-a-tonne mark (around A$37,897 per tonne)

Comparatively, the spot price for tin was sitting at around US$16,000 per tonne (about A$20,212 per tonne) at the end of February 2020.

It then dropped to US$13,790 per tonne (roughly A$17,420 per tonne) at the peak of COVID-19 in March, before rallying in the months since November.

The price increase is being attributed to softer-than-expected production combined with logistic issues and reports of hoarding from within China.

Enjoying the spoils

Regardless of what's behind the demand, the rising tin price has already clearly benefited a number of ASX-listers.

Two of the top gainers on Tuesday's trading session tin-focussed companies Stellar Resources (SRZ) and Jadar Resources (JDR).

Stellar's share price ended Tuesday's session up 46.4 per cent, trading at 4 cents per share, and is continuing its strong upwards trajectory.

The materials stock owns the Heemskirk Tin Project and its associated deposits, all of which in Western Tasmania.

Source: Market Index.

Jadar Resources also enjoyed a jump in its share price, rising 39.4 per cent at the end of Tuesday to trade at 4.6 cents each.

The company recently acquired the Khartoum Tin, Silver and Tungsten Project in Northern Queensland.

Source: Market Index.

What's next?

The recent rise in tin prices has not only seen shares prices jump but also caused one company to re-evaluate its entire tin portfolio.

Aus Tin Mining (ANW) has announced a review of both of its tin projects, located in NSW and Tasmania, and is looking at ways to get them up and running in the near-term to take advantage of the sky-high prices. But before any decisions are made, the key question for this business, as well as other companies and investors, is whether this price hike is sustainable in the long-term.

The recent rise in tin prices has undoubtedly been influenced by the shortage of available product, with total tin production dropping 8 per cent last year according to the International Tin Association (ITA).

The shortage was directly linked to COVID-19, as tin producers faced unprecedented lockdowns throughout last year as well as continued shipping disruptions.

Given that many of those same producers have now implemented coronavirus safety measures, the ITA argues it's unlikely production will drop again in 2021.

In its 2014 pre-feasibility study for the Taronga Tin Project, Aus Tin Mining adopted a tin price of A$27,778 per tonne, giving it a CAPEX of $88 million. The company's is now reviewing ways to bring down that cost, but remains in the investigative stage.

Given the ITA's forecast and ANW's cautious but optimistic approach, investors should beware any companies promising returns on what could be a short-term gain.

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