CAPE TOWN, South Africa — Markets for tantalum metals used primarily in electronics could face short supplies by as early as 2014 in part because of reduced Australian primary production and impending restrictions from the U.S. Dodd-Frank Wall Street reform law aimed at curbing trade of illegal and artisanal produced minerals from the Democratic Republic of Congo (DRC) that is the source of the metal.
“Consequently the establishment of new tantalum sources outside the DRC we believe is imperative,” Lara Smith, managing director of Johannesburg-based Core Consultants told the Investing in Africa Mining Indaba conference here this week.
Smith says the 2008-2009 recession had caused a reduction in demand for electronics, which had a knock-on effect on tantalum supplies, but that studies done by her firm had concluded that if the market moves beyond a a conservative steady growth of 4% in the coming years, a supply shortage could develop within three years. Consequently she believes that prices should ultimately move to reflect this circumstance.
Smith noted that tantalum reserves are dispersed around the globe with only 10% of proven reserved actually found in Africa, and only 2% located in Central Africa. “That being said, it has been estimated that since 2009 over 50% of the world tantalum supply originated from Africa and a significant portion of that is said to come from artisanal mining in the DRC,” she says.
Smith added that it is probably more sensible to talk about the most likely resource base, recognizing that artisanal mine and illegal miners typically do not prove up their reserve base. “If you consider the most likely resource base, then Africa would account for about 16% of global resources, and Central Africa [about] 9%,” she says.
New technologies leading to miniaturization of electric devices – which have become smaller, lighter and with more processing power – have resulted in increased usage of tantalum, Smith says, noting that in particular, tantalum-based capacitors are on the rise in automotive electronics, mobile phones, personal computers and wireless devices. Capacitors now account for 60% of tantalum consumption, compared to only 51% in 2004.
While tantalum consumption has increased by around 3.5 million tonnes since 2004, growth in tantalum demand has been relatively lackluster over the past 15 years or so when compared to other metals used in electronic sectors. But Smith says analysis found that demand from the automotive sector could lead to three-fold growth in tantalum consumption from 2007.
On the supply side, production has traditionally been supplemented by secondary sources, including the US Defense Logistics Agency’s (DLA) stockpile sales, recycling, long-term contracts and sourcing from slags resulting from production of other metals. These secondary sources accounted for about 45% of supply in 2007, Smith noted.
But she says that since 2007, there have been no DLA sales of tantalum. Additionally, recycling is becoming more difficult because of high costs and the miniaturization of electronic parts, which use less tantalum metal. Retrieval of tantalum from tin slag is also declining, she says, noting that another speaker at the conference had shown fore forecasts of tin supply projecting 0.8% of increased supply in 2012 and 0.2% for the next five years.
“Moreover tantalum is traditionally sold under long-term contracts as opposed to the spot market,” Smith says, noting that end-user companies have always engaged in preemptive buying. During the tech boom tantalum inventories were stored up by companies based on their projection of their demand for their products and when the tech bubble burst those stockpiles were prolonged further.
Similarly, in 2008 the economic recession and ensuing slowdown in consumer demand insured that tantalum consumers were long on supply. “We conjecture that the reason the prices are not yet perspective of a deficit market is due to these stockpiles, which we estimate will be depleted over the next 12 months or so as consumer demand improves,” Smith says.
In terms of primary sources, in December 2008 Australia’s Talison Minerals Pty. Ltd., which since has been renamed Global Advanced Metals, placed its two Australian mines on care and maintenance. The mines, Greenbushes and Wodgina, together annually accounted for 2.4 million pounds tantalum pentoxide or 38% of global tantalum supply.
Operations of the Wodgina mine restarted in January 2011 but the company indicated that they would only produce around 700,000 pounds per year. “In reality we understand that they are producing closer to half a million pounds,” she added.
In addition to the global financial crisis, the other reason cited for halting production in Australia was the influx of low-priced coltan minerals, from which tantalum metal is extract, coming from the DRC’s illegal and artisanal miners, Smith says.
The Dodd-Frank law enacted in July 2010 requires that companies who consume minerals from conflict zones, in particular tantalum, tin, tungsten and gold from the DRC, have to now show provenance of these minerals and demonstrate that they are not conflict or “blood” minerals.
“This could facilitate the issue of lower priced imports of coltan,” Smith says but noted that the implementation of the act has since been delayed a number of times, most recently in December.
Under the act companies are expected to be granted a grace period of 12 months to either demonstrate provenance or find alternative supply sources. “This means that full implementation of this legislation will most likely not come into effect before the end of 2013,” she says. “Subsequently cheaper coltan from the DRC and Rwanda may continue to fill the supply gap and stabilize prices.”
Consideration of current and future tantalum project plans were used by Core Consultants in forecasting the outlook for supply demand and future price direction of this strategic metal.