Is there a way to invest in the AI revolution without punting on chip stocks like Nvidia, TSMC, and ASML, which are trading at sky-high valuations? In short, yes - by applying the lessons from the last big boom: electric vehicles (EVs).
When Tesla shares were soaring, savvy investors turned to companies mining the critical metals - lithium, graphite, cobalt, and copper - used in the batteries powering Elon Musk’s EVs. These metals were essential to the EV supply chain, and their demand surged alongside Tesla’s stock. While the battery metals cycle has since shifted from overbought to oversold, a new trend is emerging that mirrors this pattern: the price of tin is beginning to stir, driven by the increasing demand for artificial intelligence.
AI and tin
AI relies heavily on graphics processing units (GPUs), originally developed for gaming consoles, to achieve its high processing power. What many don’t realise is that tin is essential in these GPUs, used both as solder and anti-corrosion protection within circuit boards. As demand for units from Nvidia and other suppliers skyrockets, so too does the requirement for tin. Investing in tin or tin-related stocks could provide an indirect but strategic way to tap into AI's growth, offering a long-term position in the tech revolution.
Adding to the tech-driven demand for tin is its use in renewable energy and the latest EV battery innovations. Tin is a critical component in solar panels and advanced battery technologies, further boosting its importance in the green energy transition. However, the supply of tin has been constrained by various factors, including political unrest in Peru, the world's second-largest producer. This disruption has significantly affected global tin supplies, creating a tightening market.
Demand curve shifting
After years of oversupply, the tin market is now expected to face a deficit of 8,000 tonnes this year, with the gap projected to widen to 12,000 tonnes by 2025, according to Macquarie. By 2030, analysts estimate a shortfall of 100,000 tonnes per year, worth around $3.5 billion at current prices. This potential for a supply crunch, combined with rising demand from both the tech and green energy sectors, positions tin as a highly attractive investment prospect.
This backdrop makes the potential of Rome Resources Plc (AIM:RMR, AIM:RMR), which is developing a promising tin project in the Democratic Republic of Congo (DRC), particularly intriguing. Rome’s project is situated in a region known for its rich mineral resources, adjacent to a globally significant deposit that boasts the world’s highest tin grade. The DRC, while challenging due to its political landscape, offers some of the most promising tin prospects in the world, making Rome’s venture one to watch closely.
Ready to hit the ground running
The company, which previously traded on the TSX Venture Exchange, listed in London in July following a reverse takeover that brought in £4 million of new investment. This move has positioned Rome Resources as a serious contender in the tin market. The senior management team includes Mark Gasson, chairman, and Klaus Eckhof, a strategic advisor—both seasoned mining experts with a proven track record of discovering and monetising key DRC projects. Notably, they were instrumental in uncovering the potential of the Bisie tin mine, operated by Alphamin, which is just eight kilometres from Rome’s project.
Rome’s targets are geologically similar to its high-grade neighbour, based on initial exploration drilling. Kalayi, for instance, has shown high-grade tin mineralisation deeper within the system, consistent with what was seen at Bisie. Significant results include 12.5 metres at 1.06% tin, with concentrations of 2.5 metres at 3.39% tin and 0.5 metres at 11.7% tin.
Early results are promising
The Mont Agoma target also returned promising results, with notable intercepts of 41 metres at 3.52% copper and 15.15 metres at 57.74 grams per tonne of silver. Additionally, 160.5 metres at 3.3% zinc was discovered, with 11.25 metres at 0.51% tin near the surface. These results indicate a significant polymetallic system, with the potential for both high-grade copper and base metals, similar to the San Rafael deposit in Peru.
These sites, while remote and primarily accessible by helicopter, are being thoroughly explored with at least three rigs expected on-site. Indeed work is well and truly underway as the latest update confirms. This ambitious drilling programme is part of Rome’s strategy to define a maiden resource estimate by early next, with a decision on the project’s next steps expected by February 2025. CEO Paul Barrett emphasises that Rome’s expertise lies in exploration, not mine development, suggesting the company will likely seek to monetise the project rather than develop it themselves.
Explorers, not developers
“Like every junior miner, we will need more money. Do we partner or go back to shareholders? There's warrants outstanding, which might come into play [as a source of funding],” Barrett explains. “We are completely flexible I think is the bottom line. The company’s management are not miners. They are exploration geologists. So we will not envisage Rome taking this project all the way through to development by any shape or form—it will get monetised.”
Barrett, along with Gasson and Eckhof, forms part of a “fit-for-purpose” board that includes two geologists and two francophone legal and financial experts.
The scale of the opportunity at Rome Resources can be gauged by looking at the Bisie mine, which is just up the road. A definitive feasibility study put its net present value at $402 million, with an internal rate of return (IRR) of 49.1%. The capital expenditure required was $126 million, with a payback period of less than a year and a half. While it is too early to tell whether Rome can replicate such success, the initial indications are promising.
Risk-reward, not risk-free
So, Rome Resources offers significant potential upside if the geology supports the ‘nearology’ hypothesis. However, this investment is not without its risks. This is an exploatation play, which by its very nature incorporates a chance of failure. I can't write this without noting, that the DRC's political landscape remains volatile. And while Rome's project may be geographically insulated from the worst of the unrest, it is not entirely immune from it if tensions escalate. Nonetheless, for those looking to gain exposure to AI's growth through tin, Rome provides an intriguing, albeit speculative, opportunity. Investors should, of course, always do their due diligence.