Resources Rising Stars: Cerutty’s Chris Judd explains top-down investment strategy, makes strong case for tin

Estimated read time 5 min read

There’s an age-old theme that by the time you’ve heard about it, you’ve probably missed the boat.

One of the tricks to investing is picking those so-called ‘unfashionable’ commodities, the unassuming sectors of the market that might be waiting to pop off.

That was the philosophy Chris Judd, G.O.A.T and founder of Melbourne-based investment company Cerutty Macro Fund, highlighted to investors and resources executives last week at the inaugural Resources Rising Stars Gather Round conference in Adelaide.

“We’re top-down investors at Cerutty, we like investing in commodities that are attractive from supply-demand fundamentals when liquidity conditions are right,” Judd said.

“We also like to invest in commodities or businesses that are on page 17 of The Australian Financial Review today, on their way to Page 1.

“We don’t really like it when we come out with an investment idea at a dinner party, and everyone nods and agrees that it is a smart thing to do,” he said.

“The commodity that we like the most at the minute is one that doesn’t get spoken about a lot, but it is used in a lot of new-age products which are really popular in the news – and that’s tin.”

 

What’s the deal with tin?

Although it is used in virtually every item of consumer electronics from robotics to microchips, GPUs and even EVs, tin often slips under the radar.

Around half of its global supply goes into solder for electronic circuit boards, a market where it has outpaced lead to become the dominant raw material.

Tin acts as both a glue and conductor between individual electronic components but it is only a tiny fraction of the raw material cost of most consumer items, making demand relatively inelastic.

There’s about five to eight grams in a washing machine, about 25-50c of tin in a $500 item.

Other items like tin cans have a thin layer of tin bearing anti-microbial properties worth just 1.8c which has not been bettered since the Napoleonic Wars, and new-build electric cars have about one and a half kilos of tin in them compared to older models with about 300 grams.

Unlike nickel prices which are down or lithium prices which are trending sideways, Judd says the tin sector is going through a silent bull run.

“Tin is on a tear and not a lot of people are speaking about it but it’s similar to what we saw with gold until recently so we’re bullish on it,” he said.

“We like it for several reasons, tin is only a small price of the overall product that it’s in, so manufacturers aren’t incentivised to manufacture it out of the supply chain, a similar dynamic you see with uranium.

“Once you’ve done the huge CAPEX of the power plant bill, the cost of uranium is somewhat immaterial,” Judd said.

“We see a similar dynamic with tin and in terms of where supply comes from, refined production is dominated out of China but the actual tin mines – whilst in China – are also in Myanmar and Indonesia.

“A couple of these countries – Indonesia and Myanmar specifically – have had significant supply issues around environmental concerns recently and I think there’s a potential risk that supply won’t meet a growing demand.”

 

Judd’s top tin picks?

Metals X (ASX:MLX)

After striking a $60m deal with Cyprium Metals (ASX:CYM) in 2021 to sell its Nifty project in WA, MLX agreed to sell its nickel assets to NICO Resources three months later to focus its attention developing its tin portfolio.

MLX has a 50% equity interest in the Renison Bell mine, Australia’s only producer of tin as a major product.

According to Geoscience Australia, ~67% of the Australia’s tin ore reserves come from the Renison Bell mine on Tasmania’s west coast.

Minor amounts of by-product tin are also produced from pegmatite deposits such as Greenbushes in Western Australia while the remaining reserves belong to the Cleveland, Kara and Mount Lindsay deposits in Tasmania and the Taronga deposit in New South Wales.

Renison produced 2,714 tonnes of tin-in-concentrate during the December 2023 quarter
with MLX entering into a new offtake agreement with Yunnan Tin Group (YTG) for 2024.

The company updated its life of mine highlighting a 10+ year mine life from 2024 with an annual production average of 10,191t of recovered tin metal in concentrate with the bulk of ore mined coming from the high-grade Area 5 and Leatherwood ore bodies.

MLX finished the quarter with $143m cash in the bank.

 

Alphamin Resources (TSXV:AFM)

Canadian tin producer Alphamin produces ~4% of the world’s tin from its Mpama North mine in the Democratic Republic of Congo, where it produced a record 12,568 tonnes of the metal in 2023.

Mpama North has a tin grade of 4.5%, four times higher than most other operating tin mines.

The company is also developing its Mpama South project, which will increase annual tin production by 60% once it’s up and running in April.

It hopes to increase tin output further by adding more mines in close proximity  to the current production and from within its licenced footprint.

 



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