Structural Changes in Mine Supply: Tin and Tantalum - Sept 2013 - Greenfields Research / ITRI / Curtin University / University of Western Australia

Structural changes in mine supply:

Case studies in tin and tantalum

John P. Sykes Director, Greenfields Research & PhD Candidate, Centre for Exploration Targeting

(on behalf of ITRI)

Supply shortages in tin mine supply

Contents

Case studies of two mineral commodities undergoing

structural change in the supply chain and what this

means for the electronics industry:

Tantalum

• Demand

• Prices

• Current supply

• Potential new supply

• Conclusions

A comparison of structural supply issues in tin and

tantalum

Tin

• Demand

• Prices

• Current supply

• Potential new supply

• Conclusions

Structural changes in mine supply: Tantalum

Demand: Tantalum capacitors,

electronics & mobile phones Section

1

Demand: consumer electronics

Source: Tantalum-Niobium International Study Centre (TIC)


Price: Spike due conflict minerals

legislation Section

2

Conflict legislation price spike

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20

07

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9

201

0

201

1

201

2

201

2

20

13

Metal Pages Tantalite basis 30% Ta2O5 (EU) $/lb Ta2O5

Closure of

Wodgina

mine

Passage of

Dodd-Frank

Act

Global Financial

Crisis

Source: Pete Souza (Whitehouse Photostream)

Tantalum has a history of price spikes

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USGS Tantalum Pentoxide (nominal)

USGS Tantalum Pentoxide (real) 1950-60s – invention of tantalum

capacitor, adoption partly driven

by US space program

1980 price spike to panic buying

by consumers, due to worries

about mine supply.

2000 price spike a combination

of surging demand from mobile

phones and an opaque market,

partly fuelled by war in the

Congo.

Current spike partly relates to

this “conflict minerals issue.

Sources: USGS, UN, TIC


Past structural changes in supply:

tin slags, Australia & the Congo Section

3

Tin slag decline, rise of Aussie mines

0

200

400

600

800

1000

1200

1400

1600

Annual mined tantalum production (tonnes)

OtherAfrica

CentralAfrica

Canada

Brazil

Australia

Source: Tantalum-Niobium International Study Centre (TIC) Source: United States Geological Survey (USGS)

Rise of Congo & “Conflict Minerals”

0

200

400

600

800

1000

1200

1400

1600

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Annual mined tantalum production (tonnes)

Other Africa

Central Africa

Canada

Brazil

Australia

Source: United States Geological Survey (USGS) Image: Shutterstock


Where will future tantalum mine

supply come from? Section

4

The future of tantalum mining?

35%

58%

3% 3% 1%

USGS Reserves Estimate (t)

Australia Brazil Canada

Ethiopia Other

41%

21%

10%

10% 9%

7% 2%

TIC Estimated "Likely Resources" (%)

South America Australia

Russia & Middle East China & SE Asia

Central Africa Other Africa

North America


Conclusions: A structural change

in tantalum supply is coming? Section

5

Conclusions on tantalum supply

Tantalum demand driven by growing electronics industry

Opaque market, subject to spikes

Past demand destruction and structural supply changes

Recent structural change: Congolese conflict tin at the expense of

Australian & Canadian hard rock supply

Dodd-Frank Conflict Minerals legislation has led to a de-facto embargo on

Congolese tantalum

Is another structural supply change imminent?

• Conflict free Congolese tantalum, integrated with consumers?

• Resurgence of Australian & Canadian hard rock supply through globally

integrated companies?

• Price insensitive, low cost by-product niobium production?

• Other mine projects in North Africa, Russia China?

• Opening up of new exploration “search space”?

The actions of the small number of actors in the industry will have a big

affect on which of these outcomes occurs.

Game theory and tantalum

The few miners and few buyers in the tantalum

industry creates a “prisoners dilemma”.

Source: Scott Adams

Structural changes in mine supply: Tin

Demand: Tin solder not tin cans

Section

6

Demand: Tin solders not tin cans

2010: solder is +50% of demand 1970s: tinplate is ~40% of demand

Copyright: Greenfields Research & ITRI; Data: ITRI

China dominates solder demand

Tinplate: 54,200t (17%)

Chemicals: 42,600t (13%)

Brass/Bronze: 18,300t (6%)

Glass: 7,300t (2%)

Others: 26,600t (8%)

China: 94,400t (30% of tin &

55% of solder)

ROW: 76,700t (24% of tin &

45% of solder)

Solder: 171,100t (54%)

Tin Consumption (2009)



Prices: 30-year highs on electronic

demand & stalling supply Section

7

Tin prices are at 30-year highs

Long-term tin price history

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1900 1920 1940 1960 1980 2000

US$/tonne, inflation adjusted 2010 prices

0

10

20

30

40

50

60

0 to 5 5 to10

10 to15

15 to20

20 to25

25 to30

30 to35

35 to40

Price range, $000/tonne, 2010 real terms

Number of years in each price band

Tin price histogram 1900-2011


Prices at 30 year highs

Recent prices

mainly is this

range

Lead to tin solder substitution

Copyright: Greenfields Research & ITRI; Data: IPC 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Lead-free solder Lead solder

Lead-free solder as a % of global shipments

Conversion to tin

solder drove tin

prices

Weak supply driver of prices

Tin supply demand balance (Kt)

250.0

275.0

300.0

325.0

350.0

375.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Refined Supply Mine Supply Refined Demand

Tin supply demand growth (%)

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

Refined Demand Refined Supply Mine Supply


Demand strength

driving prices Supply weakness

driving prices

Demand strength

driving prices

Supply weakness

driving prices


Mine supply problems: artisanal

Asia, conflict Congo, closing Peru Section

8

Alluvial and artisanal important

Copyright & Images:

Greenfields

Research

Artisanal mining occurs in short cycles

Global tin production (Kt)

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Other

Africa

CIS/USSR

Australia

Bolivia

Brazil

Peru

Thailand

Malaysia

Indonesia

China

Index of alluvial mining booms

0.0

100.0

200.0

300.0

400.0

500.0

600.0

Malaysia 1958-1987 Thailand 1962-1991

Brazil 1977-2006 Indonesia 1992-20112

Indonesia 2012-2017???

?

?

?


Major Peruvian mine due to close

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35.0

40.0

45.0

2006

2007

20

08

2009

2010

2011

2012

2013

2014

2015

20

16

2017

Annual Production from San Rafael (Kt tin)

Due for

closure

Conflict tin from the Congo

https://www.itri

.co.uk/index.ph

p?option=com

_zoo&view=fro

ntpage&Itemid

=60

Data: ITRI/Greenfields Research

0.0

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8.0

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14.0

16.0

18.0

Annual Production from Africa (Kt tin)

End of

Congolese

Civil War

Dodd-Frank

legislation

iTSCI

Scheme

https://www.itri.co.uk/index.php?option=com_zoo&view=frontpage&Itemid=60








Where will future tin mine supply

come from? Section

9

Hard or soft rock: Grade is king!

Theoretical change in cost due to changes in ore grade for a

primary tin, alluvial mine in Indonesia, producing 7,500 tonnes of tin

per year, from a team of gravel pumps, with a 100% recovery. Copyright: Greenfields Research & ITRI; Data: ITRI

0

5,000

10,000

15,000

20,000

25,000

1.0kg/m3 0.8kg/m3 0.6kg/m3 0.4kg/m3 0.2kg/m3

US

$/t

on

ne

Mining Other

2015, Theoretical Net of By-Product Cash Costs Approximate grade of

S.E. Asian alluvial ores

Hard rock mining costs competitive


0

5,000

10,000

15,000

20,000

25,000

OP 2.0% UG 4.0% OP 1.5% UG 3.0% OP 1.0% UG 2.0% OP 0.5% UG 1.0%

US

$/t

on

ne

Mining Processing Other

2015, Theoretical Net of By-Product Cash Costs Approximate grade of

new hard rock projects

Underground mine is a theoretical primary tin, underground mine in Australia,

producing 7,500 tonnes of tin per year, with a processing recovery of 75%.

Open pit mine is a theoretical primary tin, open pit mine in Australia, producing

7,500 tonnes of tin per year, with a processing recovery of 75%.

Hard or soft rock: Grade is king!


0%

20%

40%

60%

80%

100%

Alluvial Open Pit Underground

% b

rea

kd

ow

n o

f c

os

t in

pu

ts

Fuel Electricity Labour Other

2015, Theoretical Net of By-Product Cash Costs

Theoretical cost breakdown for a primary tin, open pit mine in Australia grading 0.5%,

producing 7,500 tonnes of tin per year, with a 75% recovery.

Theoretical cost breakdown for a primary tin, alluvial mine in Indonesia grading 0.2kg/m3, producing

7,500 tonnes of tin per year, from a team of gravel pumps, with a 100% recovery.

Theoretical cost breakdown for a primary tin, underground mine in Australia grading 1.0%,

producing 7,500 tonnes of tin per year, with a 75% recovery.

Vulnerable to fuel costs

Vulnerable to labour

costs

Asian countries dominate production

World Tin Mine Production (2012 est.)

Indonesia

(34.5%)

China

(34.5%)

Peru

(9.4%)

Bolivia (6.9%)

Brazil (3.8%) Australia

(2.3%)

DR Congo

(2.6%)

Malaysia

(1.2%) Vietnam (1.2%)

Nigeria (0.6%)

Portugal (<0.1%) Egypt (0.1%)

Rwanda

(1.4%)

Burundi (<0.1%)

Myanmar (0.7%)

Thailand (0.1%)

Laos (0.4%)

Mongolia

(<0.1%)

Russia

(0.2%)


Labour rates versus fuel prices?

0

10,000

20,000

30,000

40,000

50,000

60,000

2011, GNI Per Capita (US$)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2007-11 GNI Per Capita CAGR (%)

Copyright: Greenfields Research & ITRI; Data: World Bank

Developed world

labour costs are

higher…

…but developing

world labour costs

are rising quickly

Developed nations a safer investment

Country Ranking (of 181)

Canada 4th

Australia 5th

- -

USA 10th

- -

Germany 20th

- -

UK 25th

- -

Spain 27th

Country Ranking (of 181)

Peru 56th

- -

China 71st

Brazil 72nd

- -

Indonesia 111th

- -

Bolivia 125th

- -

DR Congo 159th

Rankings based on Greenfields Research’s proprietary mining political risk ranking system. The ranking system correlates economic data sets

that cover most of the world’s countries (such as the Transparency International Corruption Index, the World Bank Doing Business dataset and

GDP/land area) with well known mining industry political risk surveys, including the Fraser Institute, Behre Dolbear and ResourceStocks, to get

a system which ranks all countries by their suitability for mining, not just those in the mining industry surveys.

Copyright: Greenfields Research & ITRI; Data: Greenfields Research

Exchange rates important


0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

2006 2007 2008 2009 2010 2011

Exchange rates (to US dollar) indexed to 2006

Indonesian Rupiah (IDR) Chinese Renminbi (CYN)

Bolivian Bolivano (BOB) Brazilian Real (BRL)

Australian Dollar (AUD)

Weaker

Stronger

Indonesian Rupiah affects

marginal costs in tin. A

stronger Rupiah means

higher long term tin prices

Asian mining in decline

World Tin Mine Production (2016 est.)

China

(26.2%)

Indonesia

(22.0%) Australia

(8.5%)

Peru

(10.6%)

Bolivia

(7.5%) Brazil (4.8%)

Malaysia (2.9%)

Vietnam (1.1%)

Laos (0.4%)

Thailand (>0.1%)

Myanmar

(3.1%)

Mongolia

(0.4%)

Russia (0.9%)

Kazakhstan

(1.8%) Canada (0.1%)

UK (0.1%)

Germany

(1.2%)

Spain

(0.3%)

Portugal (<0.1%) Egypt

(0.7%)

Morocco

(2.1%)

Nigeria (0.5%)

DR Congo (3.0%)

South Africa (0.5%)

Rwanda (1.2%)

Burundi (<0.1%)


Tin mining dependent on by-products

Copper

Australia & China

Silver

China

Lead

China

Zinc

Bolivia, China

Antimony

China Indium

China

Gallium

China

Tungsten

Egypt, Mongolia,

Myanmar

Tantalum

Burundi, Congo,

Rwanda

Niobium

Brazil, Burundi,

Nigeria

World Tin Mine By-Products (2012 est.)

Copyright: Greenfields Research & ITRI; Data: ITRI; Images: Shutterstock, www.csksg.com, www.tradekorea.com, www.cdves.com, American

Elements, Wikipedia

http://www.csksg.com/

http://www.tradekorea.com/

http://www.cdves.com/

Uneconomic without by-products


0%10%20%30%40%50%60%70%80%90%

100%

2016 estimates of revenue shares for tin producing mines and mine projects

Tin Aggregates Copper Iron Ore Mineral Sands Niobium Silver Tantalum Tungsten Lead/Zinc

More dependent on by-products

Copper

Australia, China,

Germany,

Kazakhstan,

Peru, UK

Silver

Australia,

Canada,

China,

Kazakhstan,

USA

Lead

China

Zinc

Australia,

Bolivia,

Canada, China,

Germany, UK,

USA

Antimony

China

Indium

Australia, Canada,

China, Germany

Gallium

China,

Germany

Tungsten

Australia, Canada,

Egypt, Kazakhstan,

Mongolia, Myanmar,

Portugal, Russia,

Spain, UK, USA

Tantalum

Australia, Burundi,

Congo, Egypt,

Kazakhstan,

Rwanda

Niobium

Brazil,

Burundi,

Nigeria

Iron Ore

Australia,

Kazakhstan

Molybdenum

Canada Titanium

Kazakhstan,

Malaysia

Zirconium

Brazil

World Tin Mine By-Products (2017 est.)

Copyright: Greenfields Research & ITRI; Data: ITRI; Images: Shutterstock, www.csksg.com, www.tradekorea.com, www.cdves.com, American

Elements, Wikipedia, www.made-in-china.com; www.images-of-elements.com

Lithium

Czech Rep. Aggregates

Malaysia

http://www.csksg.com/

http://www.tradekorea.com/

http://www.cdves.com/

http://www.made-in-china.com/





http://www.images-of-elements.com/





Small, private and state companies

~25,500t, 9.4%,

Private/Public, Peru

~30,000t, 11.1%,

State/Public, Indonesia ~27,000t, 10.0%,

State/Public, China

~9,200t, 3.4%,

State, Bolivia

~10,500t, 3.9%,

Private, China

~3,000t, 1.1%, Public,

Australia

~3,500t, 1.3%, Public,

Malaysia/Indonesia

~3,500t, 1.3%, State,

Vietnam

~2,500t, 0.9%, Private,

China

~2,000t, 0.7%, Co-op,

Brazil

Images: Company websites, ITRI, Wikipedia Data: ITRI (2012, mined production estimates – total 271,300 tonnes)

Substantial investment required

Company Project Capex

(US$M)

Capacity

(t/y Sn)

Capex

(US$/t/y)

Source

Consolidated Tin Mines Mt Garnet 124.0 3,050 40,700 Scoping 2010

Kasbah Resources Achmmach 166.8 6,900 24,300 Pre-Feasibility 2012

Metals X Rentails 173.2 5,300 32,700 Feasibility 2009

Stellar Resources Heemskirk 114.0 4,330 26,300 PFS 2013

Venture Minerals Mount Lindsay 198.0 2,750 39,100 PFS 2011

Total & average 776.0 22,330 34,750

Total new mine supply required 2013-17: 70,000t/y

Average capital cost per tonne new capacity: $34,750

Total investment required in new supply: $2.4 billion

* Mount Lindsay is a tin-tungsten-magnetite project. The tungsten plant in particular greatly adds to capital costs. Copyright: Greenfields Research & ITRI; Data: ITRI

But most a long way off

0

2

4

6

8

10

12

Median intervalsfrom surveyed

projects

Years

Start-up

Construction

Financing

Feasibility

FinalResource

Pre-Feasibility

0 10 20 30

Early exploration

Advanced exploration

Scoping

Pre-feasibility

Feasibility

Permitting

Financing

Construction

Commissioning

No. Projects

Tin projects at different stages



in tin supply is also coming? Section

10

Conclusions on tin mine supply

Tin demand driven by growing electronics industry

Market is currently supply driven, with falling production from key regions

Tin industry has a history of alluvial mining “booms & busts”

Dodd-Frank Conflict Minerals legislation has also led to a de-facto

embargo on Congolese tin

The major San Rafael mine in Peru is due for closure

Is another structural supply change imminent?

• Resurgence of Australian & European hard rock supply?

• Conflict free Congolese tin, integrated with consumers?

• More complex by-product related industry?

• New production from opaque, but known tin regions (Myanmar, Brazil, China)?


The large number of unknowns in this industry mean it is difficult to

predict exactly which future will prevail.

Spotting black swans

Tailings

mining?

Conflict tin?

Myanmar

democracy?

San Rafael

closure?

New Brazilian

supply?

Tin in

Colombia?

Bolivian

expansion

slows

New

Russian

supply?

China? SE Asia

revival?

New African

supply?

New

European

supply?

Australian

slowdown?

Images: Shutterstock/Minsur

Structural changes in mine supply: Tin & Tantalum


in tin supply is also coming? Section

11

Comparing tin and tantalum

Tin and tantalum demand driven by growing electronics industry

Tin and tantalum industries have histories of “booms & busts” relating to

major supply and demand changes

Both industries seem to be on the verge of a structural supply change

Dodd-Frank Conflict Minerals legislation has also led to a de-facto

embargo on Congolese tantalum – also an issue in tin

Costs and formalisation of alluvial and artisanal an issue in both industries

Structural supply changes could come from:

• Resurgence of Australian & European hard rock supply?

• Conflict free Congolese minerals, integrated with consumers?

• More complex by-product related industries?

• New production from opaque, but known regions (Myanmar, Brazil, China, CIS)?


Or will the supply side continue on as it is currently?

Both industries seem very difficult to predict

Preparation via scenario analysis

Known

Known

Unknown

Unknown

Unknown

Known

Known

Unknown

Opening

new search

space

Rising costs

& falling

production

Non-conflict

minerals

By-product

mining

Current project

pipeline

Resurgence of

current supply

Higher Costs

Tim

efr

am

e

Current supply

Opening new

search space

Non-conflict

minerals

Current project

pipeline

By-product

mining

No change

Contact Details: John P. Sykes

Director, Greenfields Research

[email protected]

www.greenfieldsresearch.com

PhD Candidate / Adjunct Research Fellow

Centre for Exploration Targeting

www.cet.edu.au

Today’s reference: ITRI New Tin Mine Supply – Out Soon!

Peter Kettle

Manager, Statistics & Market Studies

[email protected]

www.itri.co.uk

mailto:[email protected]

http://www.greenfieldsresearch.com/

http://www.cet.edu.au/

mailto:[email protected]

http://www.itri.co.uk/