ASX:MLX
Metals X Ltd
Investment Summary
The fund managers believe that Metals X Ltd is well-positioned to capitalize on the current physical tin supply disruptions, notably from Indonesia and Myanmar, leading to a stronger pricing outlook for the commodity. In their opinion, the recent price action showcases a favorable bull market environment for tin, driven by increased demand from global electrification needs. They highlight that Metals X, a low-cost tin producer in a tier-1 jurisdiction with no debt and significant cash reserves, presents an attractive investment opportunity. With a market cap of approximately $520 million and net cash reaching upwards of $250 million, they assert that the company is undervalued, even assuming conservative tin prices. Furthermore, the manager’s support of the recent capital return initiative signals shareholder-focused strategy, which they believe will enhance the stock's performance despite market volatility. Given the estimated mine life until at least 2035 and the pressures on global tin supply, the fund managers hold a bullish outlook on Metals X moving forward.
Commentary From The Managers
Cerutty Macro Fund
31 Mar 2025
$0.69
- Cerutty Macro Fund discussed Metals X Ltd over a year ago as tin prices rose due to supply disruptions in Indonesia and Myanmar.
- Ongoing issues in Indonesia related to mining permits and a major mine closure in Myanmar have significantly impacted global tin supply.
- Recent events in the DRC have led to further supply constraints, particularly with the closure of the Bisie mine, representing ~7% of global tin supply.
- Tin prices surged to nearly USD $39k/t, remaining the only metal to outperform gold year-to-date.
- Despite a market sell-off, current tin prices remain high at approximately USD $35k/t, with supply disruptions persisting.
- Metals X is now the sole listed pure-play tin producer, poised to greatly benefit as a tier-1 producer.
- Previous performance indicates a significant cash flow capability; MLX generated $30m at a lower tin price and could see $45m in Q4CY24 at current prices.
- The company has a strong financial position, with a market cap of $520m, net cash of $220m, and no debt.
- Future supply challenges and an advantageous balance sheet position suggest a positive outlook for MLX despite market uncertainties.
- The Renison deposit has a substantial life expectancy until at least 2035, with an average production rate of ~10kt/year.
Cerutty Macro Fund
31 Mar 2024
$0.36
- Recent price action signals the potential onset of a bull market in base metals, influenced by China's economic recovery and increased demand.
- Cerutty Macro Fund began building a position in base metals in Q4 2023, focusing on Canadian copper producers and explorers.
- The Fund added tin exposure in early 2024 through Metals X, attracted by its simple structure and strong cash flow.
- Our bull thesis on Metals X centers on tin market dynamics and potential shareholder value on the balance sheet.
- Forecasts predict supply shortfalls in the tin market beyond 2025, contingent on production stability in producing countries.
- Indonesia faces significant challenges in tin production, including export bans and corruption allegations.
- Myanmar's tin production is also unstable, being affected by militia control and new taxation policies.
- Global tin inventory drawdowns have begun, with LME inventories falling 43% from December 2023 to March 2024.
- Metals X is a proven low-cost tin producer in a tier-1 jurisdiction with a robust balance sheet and no debt.
- With a market cap of $330m and a cash position of ~$155m, Metals X shows strong financial health.
- Recent updates indicate over 10 years of production potential, with exploration upside and new off-take agreements.
- Expectations for strong quarterly net cash flow due to reduced marketing costs and high tin prices.
- Market pricing appears excessively conservative, potentially due to concerns around Chinese ownership and board interests.
- Management announced a capital return initiative, which the Fund views positively for future stock performance.
- Metals X is undervalued and expected to be re-rated amidst its strong operational profile and market conditions.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.