CMRZF - Tantalum Mining and How to Invest

Discovered in 1802 by Anders Ekeberg, tantalum was first produced in metallic form in 1864. As one of the five major refractory metals, it is highly resistant to heat and wear, and has an extremely high melting point. It is also very ductile.

About two-thirds of tantalum is used to construct electronic capacitors, a fundamental component of cellphones and other modern technologies. Tantalum is also used in superalloys, and, because it causes no immune response in humans, it is also used in surgical appliances, as a replacement for bone, as a connector of torn nerves and as a binding agent for muscles.

The tantalum market can be difficult to understand, but because it is essential for electronics companies and other end users, some consider the metal a compelling investment. Read on for a brief overview of tantalum supply and demand dynamics, and a look at how to invest in the critical metal.

Tantalum mining: Supply and demand

Tantalum is extremely rare, averaging only 2 parts per million in the Earth’s crust. There are few mines solely dedicated to production of the metal. The Democratic Republic of Congo (DRC) was the biggest tantalum producer in 2018, putting out 710 metric tonnes; Rwanda came in second with tantalum mining production reaching 500 metric tonnes. Brazil, Nigeria and China are other key tantalum mining producers.

The Congo is a major producer of many metals aside from tantalum, including tin and cobalt, but for over a decade the extraction of these resources has been linked to conflict, human rights abuses and corruption. For that reason, tantalum is known as a conflict mineral; other common conflict minerals are tin, tungsten and gold.

To stem the production of conflict minerals, some government bodies have put rules in place to ensure that companies disclose which mines the metals they use come from. The EU recently strengthened its conflict minerals rules, while in the US it’s possible that legislation put in place by Barack Obama could be eliminated under President Donald Trump.

Moving forward, Roskill is calling for tantalum supply to rise 22 percent between 2016 and 2020. Much of that increase will come from conventional mining and open pit mining, whose share of supply will jump from 32 percent in 2015 to 44 percent in 2020. Meanwhile, artisanal mining or small-scale mining will account for 48 percent of supply in 2020 compared to 57 percent in 2015, remaining a key part in the supply chain.

Tantalum production is growing with the increase of low-cost byproduct tantalum now being introduced via lithium mining. Instability in the Congo paired with a 10 percent export royalty implemented by the Congolese government may force end users out of the Democratic Republic of Congo and into other jurisdictions. Analysts expect tantalum prices to remain relatively flat.

There is also a developing tantalum recycling market that does not rely on new tantalum ore production, but instead uses waste and scrap metal to fill its reserves.

Looking over to demand, Roskill sees demand for tantalum rising 4 to 5 percent per year from 2018 to 2027, though growth rates for individual end-use markets will vary. For instance, the capacitor space, which is facing challenges such as miniaturization and material substitution, will have below-average demand growth. Conversely, the superalloys market will have the highest rate of demand growth because of the positive outlook for the commercial aerospace industry.

Tantalum mining: How to invest

While tantalum is essential for modern electronics and many other products, the tantalum market is extremely small. Like most critical metals, it is not traded on a commodities exchange, and as a result, investors can have a hard time getting exposure to it.

One way investors can do so is by looking at the mining industry and researching tantalum companies.

These companies are few and far between, because so little tantalum is produced and so much of the tantalum that is mined is produced by artisanal miners and small-scale mining. What’s more, many tantalum producing companies are privately owned — Global Advanced Metals, which holds the Wodgina and Greenbushes operations, is one such company.

Galaxy Resources (ASX:GXY), which produces tantalum and lithium at its Western Australia-based Mount Cattlin operation, is an example of a public company that produces tantalum.

Investors willing to dig a little deeper may be interested in tantalum exploration companies. Again, these companies are few and far between, and they often focus on more metals than tantalum. That said, there are certainly some options to choose from, and many of them are appealing because they operate outside contentious areas like the DRC.

Here’s a list of juniors with exposure to tantalum that are currently listed on the TSXV, TSX and ASX; all had market caps over $15 million as of August 20, 2018:

• Commerce Resources (TSXV:CCE,OTC Pink:CMRZF)
• Critical Elements (TSXV:CRE,OTCQX:CRECF)
• Frontier Lithium (TSXV:FL)
• Pilbara Minerals (ASX:PLS,OTC Pink:PILBF)
• Alliance Mineral Assets (ASX:A40)

This is an updated version of an article originally published by the Investing News Network in 2013.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Critical Elements is a client of the Investing News Network. This article is not paid-for content.