YTCL: Bright Prospect

The European Union will prohibit the use of lead-containing
soldering materials from July 1st, 2007. The United States will
start an all-round use of lead-free products from 2008. The
lead-free trend will stimulate producers of electronic products
to use more tin materials. China is a country with the richest
tin resources in the world. Yunnan Tin Company Ltd. (YTCL, SZ:
000960) will be greatly benefited from the sustained consumption
growth of tin in the world.

Environmental protection standards stimulate tin demand

Tin is a "green" environmental-friendly metal. It is mainly used
in electronic tin soldering material, tinplate and tin chemical
sectors. The tin consumption in the world is making a brisk
growth. The average annual growth of the global tin consumption
approaches or surpasses 10% in recent years. China has always
been a major tin supplier in the world in recent years, but the
export amount started to considerably reduce in 2006. In
mid-2007 China may implement the industrial entry policy of
lead-free soldering materials. The supply and the demand of tin
in the domestic market will tend to be balanced. In a not distant
future China may also have tin supply deficit and the
supply/demand balance of tin in the world will be accordingly
affected. Following a tin deficit of 8 300 tons in 2006, it is
expected that 2007 and 2008 will be the years with the most
serious tin deficit in history in the world.
   With the increasing environmental protection awareness, the
use of heavy metals has met stricter restrictions. China will
likely formulate policies prohibiting enterprises from using
lead-containing soldering materials. The electronic sector is
an important user of tin metal. The content of tin in
lead-containing soldering materials is 60% - 63%. In lead-free
soldering materials, the content of tin will increase to 95% -
98%. As tin soldering materials have a very small proportion in
the cost of electronic products, the price rise of tin produces
no great impact on the use of tin in the electronic sector.
   The output of tin concentrates in the world has roughly stably
increased in recent years and the growth is usually 1% - 5% per
year. The macro control exercised in China on economic
overheating has slight effect on the electronic sector. It is
expected that the trend of its rapid development will not be
weakened in the next 2-3 years. Besides, the floating-process
glass production is also a major sector for the tin consumption
in China.

Leading tin producer

Yunnan Tin Company Ltd. is a listed company controlled by Yunnan
Tin Group Co., Ltd. It is the biggest tin production and export
base in China. There are more than 300 product varieties in over
20 categories. Major products include tin ingots, tin products,
tin chemical products and lead ingots. Through a development of
more than 7 years, the company has acquired a capacity of 40 000
t/a tin, 20 000 t/a lead, 11 150 t/a tin chemical products and
19 270 t/a tin products. An industrial system with the
integration of mine prospecting, mining, dressing, tin chemical
production and tin/nonferrous metal deep processing has been
formed. The two new sectors of tin chemical products and tin
products have accelerated the pace of large-scale production and
their capacity already holds a leading position in China. Gejiu
where YTCL is located is one of the areas with the most
concentrated tin resources in China. Tin mines in the city have
a long history. Gejiu is one of the super large tin mining areas
in the world and the output of tin holds the first place in China.
Reserves of various nonferrous metals amount to 1.8 million tons
and tin resources account for more than one third of the national
total today.
   In 1999, YTCL introduced the Ausmelt furnace technology from
Ausmelt of Australia. Operation conducted in recent years proves
that compared with the reflective furnace technology used in
several big tin producing countries the Ausmelt furnace
technology has increased total smelting yield and reduced energy
consumption.
   The industrial chain of the company includes tin dressing,
smelting and deep processing. Major competitors however only
undertake tin dressing and smelting. After many years'
development, the company has introduced production processes
and equipment for tin deep processing from abroad and can already
produce spherical soldering powder, organic tin and zinc
stannate.

Future prospect

The total metal output in YTCL is planned to be 89 220 tons in
2007. Of the total, the output of tin chemical products will be
12 650 tons and the output of tin products will be 14 740 tons.
The total output is expected to increase by 2% in 2008 and the
output in 2009 will be maintained at the level of 2008. The
average price of tin is expected to be US$15 000 per ton in 2007
and US$20 000 per ton in 2008, an increase of respectively 66.67%
and 122.22% over the tin price of around US$9 000 per ton in 2006.