Indonesia’s state-controlled tin producer PT Timah reported year-on-year increases in both mine and refined tin production in the third quarter, but rapidly rising costs greatly eroded operating margins. In its third quarter financial results, released today, Timah reported Q3 tin-in-concentrate production of 14,938 tonnes, 58% higher than in the same period of 2007. Refined tin production rose by 5% to 15,114 tonnes, the second highest quarterly total the company has ever achieved. The increases were due to a larger intake of concentrates from small mines, increased offshore mining and smelting capacity and some run down in stocks of concentrate and tin slags.
Year-to-date production figures are however well down on 2007 levels: tin-in-concentrate production in January-September was down 24% to 38,585 tonnes, while refined tin production fell 19% to 38,106 tonnes. Refined tin sales in the nine months were down 28% to 34,045 tonnes. Following the recent large fall in tin prices, senior company officials have indicated that spot sales to traders will be reduced and that 2008 annual production and sales will be between 45,000 – 50,000 tonnes.
Timah reported that its average production cost rose by 77% year-on-year to US$16,065/tonne in Q3, cutting its operating margin to $4,517/tonne. However the cost figure reflects very high purchasing prices for concentrates in the period, as Timah competed vigorously with private smelters for raw material supplies. The slump in global tin prices in October and the recent closures of all the main private smelters has subsequently resulted in a more than 50% fall in ore buying prices.
Timah’s net income declined to 379.9 billion rupiah ($41 million) in the July-September, from 483.7 billion rupiah a year earlier. The company’s share price has fallen 60% this year, compared with a 54% drop in the broader Jakarta Composite Index on concern that the global financial crisis will slow demand for metals. The stock rose 7.4% to 1,160 rupiah today.
