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Tantalum: A Hard Rock Road Ahead?
Dennis Zogbi June 30, 2008
http://www.ttiinc.com/object/me_zogbi_20080630.html
The top global supplier of tantalum ore is Talison Minerals (Perth, Australia), which controls an estimated 52% of the world’s hard rock supply of tantalum. Talison Minerals suggests that an 80% increase in contract price may be necessary to continue to extract tantalum from the Wodgina mine in Wodgina, Australia at profitable levels. This is according to capacitor manufacturers in Japan, the United States and Europe who have been contacted by Talison. The new price for tantalum ore will take effect in January 2009 after the majority of their current ore supply contracts expire. The price change will create a ripple effect in the supply chain that will lead to higher prices for capacitor anode powder and tantalum lead wire. Capacitor manufacturers, who already have limited margins, will probably raise prices to maintain a healthy supply of this important capacitor product line.
Capacitor Manufacturers and Customers React
Tantalum capacitor manufacturers reacted to the news of an impending hike in tantalum ore prices with shock and disbelief. According to one primary tantalum capacitor manufacturer, such a price increase for the primary feedstock material used to manufacturer tantalum capacitor anodes and lead-attach wire will lead to higher tantalum capacitor prices across the board at a time when many can least afford it. Unfortunately the timing is bad, not only from the perspective of anemic economies, but also because manufacturers of alternative technologies, primarily the high capacitance ceramic multilayered chip capacitors, now have excess capacity to produce parts due to massive investments in increased economies of scale in CY 2007. But regardless, many customers in the wireless handset, computer, portable MP3 player, automotive and other end use market segments will have no choice but to pay more for their tantalum capacitors. This is because of the unique combination of high capacitance and small case size availability of the tantalum, especially in the specific area of 100 to 1,000 microfarads, where competitive alternatives are limited.
Rising Mining Costs Create New Economies
Tantalum ore prices “under contract” have not increased in price at the same rate as other non-noble metals over the past 24 months. And while an increase in tantalum ore prices from Australia can be ascertained by global trade statistics between 2006 and 2007, costs to extract the ore have risen substantially, especially for fuel and energy, (to mine and transport the ore and to process the ore through separation technology). Fuel costs alone account for up to 40% of tantalum mining, according to one primary source. And this, coupled with the devaluation of the Australian dollar, has made current contractual prices for tantalum ore uneconomical. Therefore, Talison is faced with having to almost double prices to extract the ore at a profit or face continued losses. The alternative is to stop mining tantalum and use the existing resources at Wodgina to mine Spodumene, (which is used in the production of Lithium). Ultimately, what this means is that tantalum metal powder suppliers to the capacitor industry are faced with rising costs at a time when their “profit before taxes” has dropped to zero (Cabot Corporation, the world’s largest tantalum powder producer in the world reported first quarter CY 2008 profits for their Supermetals business segment at $0.00). Therefore, any upward movement in ore price from Australia would have to be passed on to the capacitor manufacturers, who in turn will have to pass that cost onto the consumer. Thus, tantalum capacitor prices are sure to go up.
China Looks to Africa to Solve the Problem
In 2007, according to United Nations data, Chinese tantalum metal powder and wire producers increased their imports from Africa at the expense of their Australian resources. China noted a substantial increase in shipments of tantalum ore from Rwanda and the Democratic Republic of the Congo on a year-over-year basis. American and German manufacturers of capacitor grade metal powder and wire do not have the luxury of sourcing ore from such countries since 2001/2002 when the United Nations determined that proceeds from tantalum ore were going to fund civil war. The ethical policies of the major American and German tantalum powder and wire producers, “do not allow for such ventures” anymore, according to one of the major vendors.
The Limited Tantalum Supply Chain
Tantalum capacitor manufacturers have a limited supply chain. The number of reliable mines producing tantalum on a consistent basis has been seriously limited since 2001, due to a moratorium on mining in the Congo (due to the scathing United Nations report that showed tantalum receipts were being used to fund civil war between the Mai Mai rebels and the armed forces of the Democratic Republic of the Congo and Uganda). Remaining mines in Canada, Brazil, and China are small, and cannot be scaled up in time to meet increased demand that would be created by the shuddering of Talison’s Wodgina mine. Additionally, the United States Defense Logistics Agency, which had historically supplied hundreds of thousands of pounds of surplus tantalum ores and concentrates to the commercial market, exhausted its captive supply in 2007. This has created a vacuum in the market at a time when costs to extract are rising at a rate that exceeds profitability.
Tantalum Wire and Mid-Level CV/g Power Supply Threatened
The two areas of the supply chain that will be most impacted by high ore prices will be tantalum wire and mid-level Capacitance Value Per Gram (CV/g) tantalum metal powders. Tantalum wire, which is used in tantalum capacitor production as the lead attach to the powder anode, will be impacted first. Primary capacitor manufacturer’s note that the world’s largest supplier of tantalum wire has noted to its customers that it is seriously planning on stopping wire production altogether by 2009. The mid-level tantalum powders from 30,000 to 52,000 CV/g will also be impacted, because these powders are already losing money, and any increase in ore prices will make these powders even more uneconomical to produce. Higher CV/g tantalum powders above 70,000 CV/g are less likely to be impacted because they already sell for a premium (above $500 per pound in Japan). These higher CV/g powders are used in ultra-small case size tantalum capacitors (P and J case) and in many of the conductive polymer capacitor anodes.
Reduced Supply, High Prices Probable
The majority of capacitor manufacturers interviewed for this article noted that the likelihood of them paying 80% more for tantalum powder and wire due to increased ore costs is not realistic. Since the economics for Talison most probably will not change between June and December of 2008, it becomes more likely that the amount of ore coming from Australia will be limited as Talison adjusts to a lower volume, higher value mining model. A greater reliance on stockpiles of ore that are already above ground will be the probable scenario. According to one primary source, these inventories will last for two years until identified resources can be turned into producing mines, (but this estimate may be over confident, as it is apparent from trade statistics that ore contained in stockpiles in the United States, Germany, and Belgium have already been drawn down substantially in 2007).
Many of these tantalum ore supplies from inventories will trade at the “spot price” for tantalum, which will undoubtedly move higher as “spot prices” tend to re-adjust in accordance with the suggested contractual price (Historically this has been the case).
The ultimate result of this materials trend will probably be higher prices for tantalum capacitors and (perhaps) some tantalum capacitor shortages in CY 2009, as was the case when similar events impacted the market in 2000 and 2001.
Alternative Technologies Cannot Cover the Spread
Capacitor manufacturers interviewed for this article also noted that alternative technologies to tantalum, such as high capacitance MLCC, niobium oxide and SMD aluminum electrolytic capacitors, only meet customer needs for a portion of the tantalum capacitor product portfolio.
For example, ceramic chip capacitor manufacturers have mass production capabilities up to 100 microfarads, while tantalum chips are sold up to 1,000 microfarads. SMD aluminum capacitors meet the capacitance/voltage requirements of tantalum, but are not as volumetrically efficient. Niobium oxide capacitors are a logical alternative, but the number of vendors is limited, and the product offering in terms of voltage and capacitance is also limited. Also, in certain circuits, only tantalum can be used (such as in certain wireless handset audio and video circuits where the piezo-electric effect of the ceramic makes tantalum the better choice).
Certainly high capacitance ceramics, SMD aluminum and niobium-oxide capacitor technologies will benefit from a higher cost structure in tantalum, but in many instances, the customer will have no choice, but to pay the expected higher prices for tantalum capacitors.
A Time for Management, not Panic
As one of the top manufacturer’s of tantalum capacitors noted for this story, now is not the time to panic, but to manage the transition effectively. The tantalum capacitor industry will undergo changes as a result of higher raw material costs being passed on to the consumer; however, this may be a change for the better. The segment may emerge as a smaller volume business, but one that is consistently profitable for the players.
As for higher tantalum ore costs, the results of this will invariably be more identified resources for tantalum ore, and the rapid conversion of those resources into producing mines. New tantalum resources in Egypt, Canada, Mozambique, Chile, China and Greenland hold great promise to fill in any gaps in the supply chain created by the current turn of events. But it takes substantial capital investment and a significant amount of time to convert resources into commercial mines that could fill in the vacuum created by a slowdown or shuddering of the Australian mines.
In conclusion, the short term future of tantalum appears to be headed for a higher price model. There are technical alternatives for manufacturers of electronic goods, but these alternatives do not fully cover all uses of tantalum, and in fact, any company that could have converted their slots to ceramic, aluminum or niobium alternatives would have done so already after the 2001 tantalum shortage. So, many of the current tantalum consumers will have no choice to pay higher prices for the tantalum capacitors they require for their decoupling and filtering solutions. Tantalum unit shipments may decline by a small percentage as alternative technology manufacturers identify this as an incentive to expand their existing portfolios to exploit the new vulnerability of tantalum. There is also the possibility that there will be spot shortages for certain types of tantalum capacitors due to the lack of available tantalum wire or powder, or a more rapid take down rate for ore inventories in the supply chain. How this unfolds over the coming months will depend upon the ability for key players to manage an uncertain supply chain, and through the application of experienced leadership for those who experienced similar changes in the tantalum market back in 2001.
Tantalum Revealed: What We Should Know
By Sam Kiri, CFA ACMA
Mar 20 2008 4:46PM
http://www.kitco.com/ind/Kiri/mar202008.html
{MY COMMENT - This was presented before, but modified by Kiri for his Kitco article.]
While precious metal and base metal stocks continue to be the focus of investors, speciality metals such as tantalum offer equally attractive investment opportunities. Though they may be less glamorous, savvy mining investors have always remained loyal to companies with exposure to them. Despite the important role they play in the high-tech world and in our everyday life, tantalum seems to have remained under the radar of many investors.
Tantalum is a rare metal used in the production of electronics capacitors which find their way into cell phones, DVD players, personal computers, digital cameras, gaming platforms, LCD monitors and wireless devices. In other words, tantalum keeps us entertained, productive and connected. Tantalum is also used to make super alloys for jet engines, turbines, space vehicles, nuclear reactors, power plants and cutting tools. Its high strength, high ductility, high reliability, high corrosion resistance and high thermal conductivity support the diversity of applications.
Consequently, the demand for tantalum raw material has been on the rise but the inventories in the supply chain currently are low. The US Geological Survey (USGS) and the Tantalum-Niobium International Study Centre (TIC) predict the annual demand growth for tantalum to be 7% over the next 20 years. In other words from an estimated 6 million lb. world consumption in 2007, tantalum is expected to record a four-fold consumption increase in 20 years! To meet the future demand, the market will require additional production from new projects as well as expansions from existing operations.
The Tantalum Market
Tantalum supply comes from primary sources such as mining operations, as well as secondary sources such as recycled material, processor inventories, tin slags from old dumps containing low percentage material and the United States’ Defence Logistics Agency (USDLA) stockpile.
Much of the tantalum from primary sources reportedly comes from Australia with Africa, Brazil, Asia and Canada accounting for the remainder. Primary and secondary sources account for 70% and 30% of the tantalum supply respectively. A large majority of the primary raw materials derives from one source; Talison Minerals’ Wodgina mine in Western Australia. Several other smaller mines are found in Central Africa, Brazil, China and Canada.
Source: Talison Minerals, 2007
There are two notable developments in the supply chain for tantalum raw materials. The USDLA stockpile, whose contribution to the supply side of the market over the past five years should not be understated, has heavily depleted its stockpiled inventory. The removal of this stockpile from the supply equation leaves a large gap in the tantalum raw materials market. Consequently, this gap has been filled by raw materials processors and manufacturers drawing down their inventories. These two developments should lead to strengthened tantalum prices as new material is required for future demands.
Tantalum Price
Unlike other metals, tantalum does not trade as a commodity in recognised metal markets. Consequently, tantalum trades in negotiated markets. This leaves considerable power with suppliers particularly during an up market.
While volatile politics have constrained the development of tantalum mines in Central Africa, obscure regulatory environments have restricted new mines in other African and Middle Eastern countries. The development of new tantalum projects are also facing difficulties due to strict regulations implemented by the International Atomic Energy Agency (IAEA) over the transport of the raw materials. Some potential new projects may be stalled before even graduating to a mine!
Opportunity Developing
Against this backdrop, the investment case of companies with exposure to tantalum continues to increase. None of the mining giants such as BHP Billiton and Rio Tinto have a foot in the tantalum market. With Talison Minerals and their Australian mines being the dominant supplier to the world, there is certainly room for new players. The tantalum industry is experiencing a transitional period on a number of fronts and there exists only a handful of emerging companies poised to take advantage.
Rising demand for tantalum will provide existing companies with defined resources a distinct advantage. Interestingly, there are very few pure tantalum players. Troubles with the once-dominant Australian listed Sons of Gwalia have created an opportunity for emerging tantalum companies like these. The next two years will be exciting times as the emerging fresh faces vie for a place amongst the established suppliers.
Sources & Acknowledgements:
US Geological Survey (USGS), Tantalum-Niobium International Study Centre (TIC), US Defence National Stockpile Centre (DNSC), Comprehensive Strategic Analysis of the Tantalum Industry by Joel Jeangrand
Sam Kiri
Element Tantalum – Ta on the Periodic Table of Elements
http://environmentalchemistry.com/yogi/periodic/Ta.html
Good description of tantalum. The link above will be included in the iBox under the section titled: INFORMATION LINKS FOR TANTALUM AND NIOBIUM.
sumisu
JPMorgan fund sees winners in minor metals
Thu Dec 13, 2007 7:36am
By Tamora Vidaillet
http://tinyurl.com/3bw8ym
PARIS (Reuters) - Investors would do well to bet on firms with exposure to minor metals such as chrome and molybdenum as they are relatively cheap and demand is robust, a senior fund manager said on Wednesday.
Ian Henderson, manager of the UK-registered JPMorgan Global Natural Resources Fund, which invests in companies, also singled out ferro manganese as potentially offering value alongside higher profile commodities such as iron ore, coal and uranium.
"For us, small commodities such as chrome, molybdenum and ferro manganese are interesting," he told a briefing. "Many such commodities have not witnessed such a large run-up in prices."
There may also be a "pretty strong market" for cobalt, tantalum and vanadium, whose prices were generally being underpinned by the industrialisation of emerging market economies such as China, he said.
While the prices of certain base metals traded on the London Metal Exchange could remain relatively weak next year, commodities in general were likely to benefit from a shift by investors away from property plays.
Against such a backdrop, fuelled in part by uncertainties stemming from the U.S. economy, the price of gold could poke above $1,000 a troy ounce while that of oil potentially breached the $100 mark, he said.
Partly in reaction to global credit fears, the 2.2 billion euro fund had trimmed its exposure to its "base metals and diversified" sector towards 30 percent from 35 percent in recent weeks and raised its cash holdings, he said.
The fund has handed investors 57.1 percent in returns, in euro terms, in the year ending October 31.
One other area which suggested great promise was the agricultural sector and soft commodities.
The fund currently held little over one percent of its portfolio in this sector, mostly parked in palm oil or other plantations related to biofuels, a proportion Henderson would like to increase to three percent.
But he stressed the need to be opportunistic given the difficult nature of identifying investment targets.
"If I could find suitable investments I would. You can't really find many companies, if any, that are investing in corn or the soft commodities because they are basically owned by farmers," he said.
Boeing Scrubs New Jet's Takeoff
By Doug Bartholomew
November 7, 2007
http://www.baselinemag.com/article2/0,1540,2213433,00.asp
Software integration and supply chain issues forces the aviation giant to delay delivery of the 787 Dreamliner until late 2008.
Boeing, which only a year ago was cruising smoothly through design, development and early manufacturing of its new 787 Dreamliner commercial aircraft, has hit some heavy turbulence. Just months before the first 787 was to roll out off the assembly line at Boeing's Everett, Wash., plant, the company said it would be delayed six months due to problems with software integration and supply chain issues.
The Chicago-based aerospace giant-struggling to gear up to fulfill more than 700 orders for the new passenger jet- disappointed investors and customers with the news that the first Dreamliner would be assembled near the end of 2008 instead of midyear. An estimated 30 to 35 Dreamliners originally promised for delivery next year were pushed back to 2009.
The company, which only last September had downplayed its manufacturing challenges, suddenly revealed that even the careful tracking of every aspect of the new aircraft from virtual design to delivery using Dassault Systemes' product lifecycle management (PLM) software wasn't enough to insulate it from real-world parts shortages, supplier missteps and software integration snafus.
In its latest statement to analysts and media, the company blamed the delay on "flight control software and systems integration activities" as well as "out-of-sequence manufacturing and parts shortages." As a result of materials shortages-specifically a lack of corrosion-resistant tantalum fasteners-Boeing and its suppliers were unable to complete some assemblies in the proper sequence, causing a production holdup.
In another sign of the Dreamliner program's slippage, Boeing saw fit to replace former 787 general manager and vice president Mike Bair with a vice president from the company's Missile Defense unit, Pat Shanahan.
Boeing competitor Airbus suffered a similar, if not more serious, trip-up with its manufacturing of a new airliner a year and a half ago. Repeated delays in the building of its double-decker A380 superjumbo ultimately cost the four-nation aerospace consortium two years and an estimated $6 billion. Cargo giant Federal Express cancelled an order for 10 Airbus A380s and replaced it with one valued at $3.5 billion for 15 Boeing 777 air freighters.
Although Boeing's manufacturing woes haven't escalated to that level, both analysts and customers have grown more suspect of the aerospace firm's commitment to an aggressive production schedule of 109 Dreamliners by year-end 2009.
"We're in a very intense period while we work on how to get through this situation," says company spokeswoman Laurie Gunter.
Kevin Fowler, 787 systems integration vice president, whom Baseline interviewed for a cover story earlier this year (see "Boeing's Dream; Airbus' Nightmare," February 2007), declined to be interviewed for this story.
"One problem Boeing has had is material shortages, particularly tantalum fasteners," says Mike Burkett, vice president for value chain strategies at AMR Research. "This is not really a PLM problem but more a supply chain risk management issue, because its supplier ran out of tantalum, so Boeing ran out of fasteners. With any new design, you should always look at sourcing, which should be well integrated into the design process."
Despite having supply chain software, manufacturers find it difficult to predict which parts or raw materials will be in limited supply when time comes for manufacturing. One way they can cushion the impact of a shortage is to line up a backup supplier in advance. In the case of tantalum, the material was involved in a shortage that affected the entire electronics industry in 2000-2001, with some device manufacturers placing orders for tantalum capacitors as much as 18 months in advance.
Boeing also is struggling with a software collaboration and integration challenge in the development and integration of the Dreamliner's avionics systems. Although manufacturers in automotive and aerospace "have made a lot of headway using PLM to do collaborative design on mechanical systems," Burkett says, "they've made less progress on collaborating and testing of electromechanical systems and software systems."
One project contributing to the six-month delay in the 787 production schedule is the flight control software development and integration, which is being done with Honeywell International.
Both Boeing and Airbus are using Dassault Systemes' PLM for the mechanical design of the aircraft, Burkett says, "but this system doesn't really address when you have suppliers collaborating on a software system. PLM is not as mature when it comes to software as it is with mechanical design."
Still looking for Tantalum mines?
I found these notes I kept from some research I did a few months ago and thought you tantalum bugs might be interested.... (
Don't know if the URLs are still good....
______________________________
Avalon is exploring two targets in Ontario and one on the border in Manitoba. It has a deal with a private company in the tantalum industry giving that firm the right to earn a 50-per-cent interest in any of Avalon's tantalum targets by spending $5-million ( Canadian ) on exploration.Tantalum Mining has a joint venture with Gossan Resources Ltd. of Winnipeg to explore a property near Kenora.Other Canadian juniors looking for tantalum in Ontario include Houston Lake Mining Inc. of Val Caron, Ont., and Champion Bear Resources Ltd. of Calgary.One of the largest U.S. producers of tantalum capacitors, Kemet Corp. of South Carolina, has reached a deal to help an Australian company develop tantalum properties in that country.Mine expansions and some exploration success could result in tantalum prices falling dramatically as they did in 1979-80 when another supply squeeze came to an end.
http://www.globeandmail.ca/gam/ROB/20010105/RTANT.html
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Leader Acquires Second Tantalum Project
CALGARY, Alberta-- ( BUSINESS WIRE ) --March 20, 2001--Leader Mining International Inc. ( OTCBB: LDRMF - news; CDNX: LMN. - news ) is pleased to announce that it has entered into an option agreement with Champlain Resources ( a private company ) to acquire up to 70% working interest in the New Ross Tantalum Project; which consists of approximately 21,000 acres of mineral claims within a historic tin-tungsten mineral district.
The properties are located approximately 70 km west of Halifax, Nova Scotia and possess excellent infrastructure with paved roads and power supply to provide for year round exploration and easy development.
Grab samples, by Champlain Resources, yielded Ta2O5 values up to 390ppm, 395ppm, and 972ppm Ta2O5 from a flat lying pegmatite outcrop and boulders over a strike length of 2,000 feet. In 1970, the Nova Scotia Department of Mines drilled 600 feet northwest of the primary pegmatite, and intersected another 2 foot wide pegmatite zone which produced a Ta2O5 value of 265ppm. For comparison, 25% of the world tantalum production comes from two Australian mines which grade 230ppm and 414ppm Ta2O5.
In addition to the tantalum bearing pegmatites, the underlying granites also show enrichment in tantalum. These highly fractionated, topaz bearing leucogranites could host large scale porphyry-type tantalum deposits, amenable to large-scale, low-cost open pit mining. Ta2O5 values of up to 50ppm have been obtained from these granites.
Leader is expecting to start detailed geological mapping and geochemical sampling in May. Diamond drilling program will follow. Leader has budgeted $150,000 for this initial work program, and a total expenditure of $600,000 is anticipated over the next 18 months.
This more advanced tantalum project compliments Leader's early-stage Bright Lake Tantalum Project and represents Leader's belief in the short-term, as well as the long-term, strength of the price and demand for tantalum; Leader's guiding philosophy is to capitalize on strategic opportunities in geologically under-explored terrains among politically stable jurisdictions.
Financing: Leader Mining has signed a letter of intent with Mr. Ernst Baer of Weinfelden, Switzerland to arrange a private placement in the amount of $500,000 @ $0.50/share with a half a share purchase warrant attached at $0.75 over 12 months. A 10% finders fee is payable on this transaction. The funds will be used for the tantalum projects and for general working capital.
http://biz.yahoo.com/bw/010320/0815.html
Have fun......
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