Timah -TP Rp1,950

Bangka Tin Mines Site Visit
In a recent visit to the TINS Bangka mining site we obtained a better picture of the company’s
current business conditions. All in all, we remain upbeat. Future growth looks assured from
additional dredgers that should boost its offshore capacity whilst the commencement of physical
tin trading by FY12 will help stabilize prices. The main risk, we believe, comes from the deteriorating outlook for the global economy. Taking this into consideration, we adjust our FY12-13 price and cost assumptions. BUY maintained with a TP of Rp 1,950, implying PE 14.73-13.05x in FY 12-13.


The offshore mining site
We visited the Unit Laut Bangka part of TINS site on Bangka Island where 4 dredgers, 3 BLDs (Bucket Line Dredge) and 1 cutter suction are regularly operated nearby. We used a speedster to reach the BLD about 15 minutes from the dock. The aged dredger is still working properly, producing 2 tons of tin ore per day (or 600 tons/year assuming 300 working days - representing only 3% of FY10’s offshore tin ore). The dredger is equipped with several tools including a strainer and three jigs to filter the tin ore from other elements. A barge then takes the ore from the dredger to the dock where it is loaded onto trucks and taken to the washing plant. The offshore site produces only 20%-30% sn tin ore although this will be increased up to 70% sn at the washing plant before it finally goes to the smelter. Going forward, the company is planning to increase the offshore production by introducing modified BWD (Bucket Wheel Dredge). They are expected to start operating by mid-2012. As for the BWD, the company will start to build a dredger in 2012. It should be ready for operation the following year. By 2014, the company expects to have 5 additional dredgers. The additional capacity from one dredger would be about 3,000 tons/year of tin ore, that is an additional 15% for each dredger (using FY10 offshore production numbers), in our view.


The Pemali inland mining site
Unlike the offshore mining site the inland site is much simpler. To operate the tin mine, heavy
equipment is used to remove the soil which contains tin concentrate. It is then taken to the
processing plant where rock materials are dislodged and sediment is removed from the tin ore
using high-pressure water jets in a technique called hydraulic mining. Daily production is similar
to that at a BLD at around 2 tons/ day of tin ore with 60%-70% sn. With high concentrate ore, no washing plant process is typically needed. The company operates only 7 open mine pits with the rest managed by third parties.

Smelting the ore
The tin ore (both inland and offshore mined) are smelted to produce tin metal. This is done at
temperatures up to 1,300 C. The smelting is done at the Mentok smelting plant located about 140 km from Pangkal Pinang. The variety of tin products produced by the company includes Banka Low Lead (99.92%-99.95% sn), Banka Tin (99.9% sn), Mentok Tin (99.85% sn), and Banka Four Nine (99.99%). Given the gloomy outlook for the European economy, tin prices may be negatively affected. Consequently, we trim our FY11 production forecast from 37,000 tons to 35,913 tons but maintain our FY12-13 production estimates of 38,293 and 40,696 tons, respectively.

source: Danareksa dated 20 December 2011