However, on 1 June 2021, the Malaysian government initiated a third Movement Control Order (MCO). The MCO requires that companies operate with a maximum of 10% of their workforce. However, this is a challenge for smelters, where the majority of the workforce is required on-site. The MCO will continue until 28 June, having recently been extended by two weeks.
Despite appeals to the Malaysian government, MSC has not been granted an exception from the MCO. As a result, the major smelter has been forced to declare Force Majeure on all concentrate contracts. The Force Majeure includes contracts between MSC and Metals X, via the Bluestone Mines Tasmania Joint Venture. Furthermore, as a result of the MSC closure, the Kuala Lumpur Tin Market (KLTM) has closed. This presents further issues for Metals X, as the KLTM sets pricing for tin concentrates from Renison.
All shipments about to be dispatched to MSC, or currently in transit, will be continue to be received by the smelter. However, these shipments – as well as some already received by MSC – will be subjected to extended payment terms. While MSC will not be able to receive significant amounts of concentrate for the remainder of the MCO, Thaisarco in Thailand has agreed to take additional shipments on extended payment terms.
While the problems in Malaysia will impact Metals X’s cash flow in the short-term, the company does not expect the changes to impact the forecast revenue for this calendar year – likely due to higher-than-expected tin prices in 2021. Furthermore, the company believes that current cash reserves are sufficient to ensure that there will be no impact on development work at Renison.
Our view: It is unclear whether the additional tonnage taken on by Thaisarco will make up for the lost capacity at MSC. However, this will be good news for the tin market, with at least some of the lost refined tin capacity recovered by the new deal.