World’s Largest Tin Mine Isn’t Giving Up : Minerals: Malaysian operation trims staff and waits for higher prices.
“I’m a die-hard miner,” said Malaysian businessman Sia Hok Kiang, shining a flashlight around a 100-year-old underground tin mine that workers were preparing to blast with explosives.
“My only concern is the market,” the 36-year-old geologist-turned-miner said later outside the tunnel as it rumbled with explosions.
Once the world’s biggest source of tin, the Sungai Lembing (Spear River) mine in the central Malaysian state of Pahang is back in business after two closures--the last in 1987 after the collapse of the global tin market.
While prolonged low prices have kept other mines closed permanently, Sia, managing director of Sungai Lembing Tin, says he expects to make a lot of money from the mine--eventually.
Though it is not the oldest or even the deepest tin mine in the world, the Sungai Lembing is certainly the largest: Its 500 miles of tunnels lie about 1,500 feet underground, as deep as a 140-story building is high.
“With proven and probable reserves totaling 750,000 tons of tin-in-concentrates, I’m very confident of the potential of Sungai Lembing,” Sia said.
But with tin prices hovering near $4.69 per kilogram and the average cost of production about $6.26 a kilogram in Malaysia’s mines, Sia must be losing money, analysts say.
They say the venture is grossly undercapitalized and is doomed.
“Sungai Lembing may have large proven and probable deposits, but the question is whether it will be viable at current prices,” one industry analyst said. “Underground mining is capital-intensive. Many lower-cost mines have closed down.”
Even Malaysian Primary Industries Minister Lim Keng Yaik is telling tin miners to try another line of work.
“I’ve given up on tin,” Lim said in a recent interview. “Forget about tin. Go into something else.”
Ignoring the advice, Sia said he plans to invest $16 million in the 4,000-acre complex, near the Pahang state capital of Kuantan.
The mine dates from 1888, when the Sultan of Pahang gave Pahang Corp. an 80-year mining concession. The British company was liquidated in 1906 and its rights were assumed by another British firm, Pahang Consolidated Co.
During World War II, British mine managers hid the mine’s stocks, switched off its water pumps and flooded the tunnels to deny Japanese occupation troops access to the tin.
It resumed operations after the war, producing more than 2,000 tons of tin-in-concentrates annually until 1977, when output began to decline steadily.
Less than 900 tons were produced in 1986, the last full year of operations.
In 1987, the town of Sungai Lembing and its 9,000 people found that their main source of income had disappeared.
Sia said he became interested in Sungai Lembing in 1988, when he went there to buy old equipment.
He decided to reopen the mine when he found it still held high-grade tin, persuading London-based Commonwealth Development Corp. to take a one-third stake in the venture for $600,000 and securing local financing to raise his initial working capital to $1.6 million.
In 1990, Sia predicted tin prices would rise to at least $8.66 per kilogram by 1993 and that world stocks would drop.
Instead, prices dropped below $4.28 in September, and world stocks remain stubbornly high at about 40,000 tons.
“If I am forced to throw in the towel,” he said, “I will lose everything--goodwill and infrastructure.”
To stay lean, Sia has cut his work force to 55 from 117 and is concentrating on mining higher grades.
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