INDUSTRIAL METALS / MINERALS
Tantalum prices boosted by DRC conflict zone mining ban
Mine restarts and new projects in other countries may take years to get underway or require a sustained period of high prices to become economically viable.
Posted: Saturday , 13 Nov 2010
LONDON (Reuters) -
Tantalite prices are likely to test new highs above $120 a lb next year as industrial consumers scramble for ethically mined material outside of the Democratic Republic of Congo (DRC), the top global producer.
But mine restarts and new projects in other, conflict-free countries may take years to get underway or require a sustained period of high prices to become economically viable.
Prices for tantalite, which is used to make tantalum metal for iPods and BlackBerry smart phones, have soared by about 150 percent this year. The minor metal traded at about $87.50 a lb on the European spot market, well below $36 a lb hit in January.
Eastern Congo is in the grip of conflict years after the formal end of a 1998-2003 war, which sucked in six neighbouring armies and led to an estimated 5 million deaths. International pressure on DRC is growing to stop armed groups profiting from mining, but analysts say a clampdown on so-called "conflict minerals" will be difficult because government troops are themselves heavily involved in the trade.
Production data is complicated by a considerable black market, but output in the DRC last year accounted for about 90 percent of global production at around 2 million lbs, according to exploration company Commerce Resources Corp (CCE.V).
Commerce Resources said the electronics industry accounts for 75 percent of tantalum consumption, aerospace companies 15 percent and medical industries 10 percent. The Canadian firm added that China was the world's top importer.
An international crackdown on sourcing from conflict areas and a scarcity of tantalite from other countries have led to sharp price rises since early summer.
"Prices for raw materials on the world markets have gone up drastically, especially due to UN initiatives and a new law in the United States regarding materials from central Africa," said David O'Brock, chief executive at producer AS Silmet of Estonia "I've heard that it (tantalite) could go up to $120 a lb." Silmet buys Brazilian ferro niobium tantalum.
The pressure comes in part from a U.S. "conflict minerals" bill, due to come into force in April next year. The new law will require companies to prove that materials extracted from the DRC and its nine neighbours are not linked to conflict.
"Prices are just going to continue going up. The increases have been quite dramatic recently ... $120 a lb is viable," said Candida Owens, a trader at German-based Cronimet. "I was dismayed to hear the other day that apparently alloy makers are not now accepting Chinese tantalum bars because of the whole Congo connection," she added. "That has knock-on effects down the chain -- impacting miners' livelihoods."
Industry groups are moving to try and put in place by April recognised schemes to trace materials from African sources including some DRC mines that can be certified as not involved in conflicts. One of the frontrunners is a system run by the Tantalum-Niobium International Study Center and tin consultants the ITRI.
Hindering their efforts in the DRC, however, is a ban on all mining operations in the eastern part of the country as the government seeks to undermine illegal networks.
"All material movement has stopped. If it's not moving, it can't be tagged," said William Millman, executive committee member at the Belgium-based Study Center. "We are losing tremendous ground here. The timescale to get it (the scheme spread evenly and properly across the region is in an abeyance."
Industry sources in the DRC say it is unlikely the ban will be lifted before the end of the year.
NON-CONFLICT TANTALUM SOUGHT
Miners in countries such as Canada and Australia say they hope to provide a solution to the supply shortage caused by the conflict issue.
But traders, analysts and consumers say they are withholding judgment on whether a number of planned projects will be able to achieve their targeted output levels.
Commerce Resource Corp's Blue River Project in British Colombia, for example, is looking to produce up to 1 million pounds of tantalum per year by late 2012.
Traders are also closely watching Global Advanced Metals' Wodgina mine in northwest Australia, formerly the world's top tantalum producer, where production was suspended in late 2008.
"We are still working on the re-opening program and have made no final decision as yet," Bryan Ellis, chief executive at the Australian miner, formerly known as Talison Tantalum, said in an email.
"It is not only the price of the product but the exchange rate that will influence our decision ... currently (the) Australian dollar is too strong," Ellis added
Existing stockpiles of tantalum could run dry within two years, industry analysts say. This would be compounded if, as Ellis expects, global demand recovers next year to 2007 levels of 6 million lbs, from about 4 million lbs in 2008 and 2009.
"Talison are probably looking closer to $120 a lb to restart," said Bill Hattan, a U.S.-based independent minor metals broker. "The market is going up more on production shortfalls, versus overall demand. If demand were good right now, you'd see these prices really rocketing."
(Additional reporting by Katrina Manson in the DRC; editing by Jane Baird)