Nabeel A Mancheri nabeelmnc@gmail.com

Tantalum Production, Demand Actual Consumption and Recyclability

NABEEL MANCHERI

nabeelmnc@gmail.com

Industry overview

Stable supply with moderate demand growth- (Apart from cases of stolen or missing containers in Africa) Primary mine production down by half and increasing restrictions on conflict-produced tantalum is complicating the supply chain Effect of SEC act, which requires US-listed companies to report sources of materials, causing conflict-free tantalum (contract) prices to increase Demand, driven by high technology and super alloy industries, expected to increase moderately Increased dependence on artisanal and small scale mining in Africa Increased supply from scrap and recycle 2

Source: John P. Sykes, 2015

Estimated global reserves and resources of tantalum are large and more than sufficient to meet global demand for the foreseeable future, possibly the next 500 years. Therefore, geologic availability does not appear to be a major concern for the supply of tantalum.

Tantalum Mine Production (in Metric Tons)

Source: USGS, 2016

In Central Africa, a zone of Neoproterozoic-age tantalum-mineralised pegmatites cuts the Mezoproterozoic Kibaraan belt which extends through Burundi, Rwanda, Uganda and DRC. Coltan is mined both from deeply weathered pegmatites and from secondary placer deposits derived from the pegmatites.

Source: United States Geological Survey (USGS)

Rwanda, Democratic Republic of the Congo, and Brazil were the leading global producers of tantalum mineral concentrates in 2014. The Democratic Republic of the Congo increased tantalum production in 2013 and 2014 and replaced Brazil as the second leading producer

Future Possibilities The market can completely change in next 10 years with marginal increase in prices, production can get back on track in Australia and Brazil as the reserves dry-up in African countries. Unless new reserves are discovered again in Africa which is suitable for artisanal and small scale mining

Primary Supply Primary mine production has declined almost half •Primary mine production has decreased from 2000 tonnes in 2002 to 1200 tonnes in 2014 •Resulting in declining inventories and stockpiles Stockpiles depleted •US Defense Logistics Agency historically 2nd largest seller of tantalum (350,000 – 500,000 lbs per year) now depleted (2009) Tantalum mine shut downs •Wodgina Mine, Global Advanced Metals – second shut down in January 2012; once produced 1.4M lbs per annum or 25-35% of world supply at its peak •Kenticha – shut down May 2012 due to issues of radioactivity; current small operation remaining, former capacity ~450,000 lbs per annum •Tanco Mine, Cabot Corp – second shut down May 2013; former capacity ~250,000 lbs per annum; reached the end of its mine life after 40 years •Marropino Mine, Noventa – shut down August 2013; former capacity ~450,000 lbs per annum at peak Larger portion of African production cannot be certified as conflict-free •US Dodd-Frank legislation requires key buyers to purchase only certified conflict-free material •Additional industry voluntary measures to ensure conflict-free material Increasing amount ending up with Chinese smelters

Tantalum Supply Chain

(7%)

(22%)

(12%)

(41%)

(18%)

Based on USGS, 2014; BGS, 2011; CML-Desire.

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16 15

7

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Net Weight (in tons) Trade Value

103

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35

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Net Weight (in tons) Trade Value

Exports of Niobium, tantalum and vanadium ores and concentrates in 2014 and 2010

AMG-Mibra and Pitinga mine

Tantalum flow from Africa in 2014

Source: Based on USGS and UNCOMTRADE, 2016

6500

Export of Tantalum and articles thereof including waste & scrap (8103)

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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

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Trade Quantity Trade Value

22,32

238,19

58

203,18

147,18

265,19

435,48

180,34

212,8 215,03

175,53

240,38

36,52

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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

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/KG

Average export price (per kg in USD)

Export of Tantalum and articles (in million USD)

2000 2005 2010 2014

China 96304622 78254433 223070997 256334050

EU-28 49745836 118596302 59362114 84729859

Japan 170124230 200582864 221694493 190546784

USA 147605236 187558455 200482824 266580744

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Potential of Recycling Tantalum

Product description

Concentration

(kg Ta/kg product)

Source of concentration data Assumptions

concentrates 0.00211456

The content of tantalum concentrates is a balancing factor on

the raw material supply side, so we increase the concentration

in order to fulfill the demand of tantalum ingots, powder,

metal and oxides.

articles 1 Assuming tantalum articles are 100% tantalum

carbides 6.794E-05

Derived Based on the (BGS, 2011) we assumed that tantalum articles

represent 76% of tantalum consumption, in addition, the

carbide consumption represents 7%, so the carbide

concentration is adjusted to match 100% of the consumption

of carbide tools, which was the only application of carbides

found in the tantalum supply chain matrix in the (EU, 2013)

study.

capacitors 0.367 (Ecoinvent, 2007)

HDD 0.019

(Nunney et al., 2011),

(Hitachi, 2007)

Assuming a 10,5% weight of the data platter (Yan et al, 2013).

And an average tantalum content of the (perpendicular

recording) platter according to the two sources.

Artificial joints 0.175 (Zardiackas et al. 2006) Based on new medical alloys discussed in source

camera lenses 0.046 (Kodak, 1941)

vision correction

lenses 0.00184

assuming 2% market share for glass lenses

(myeyeware2go.com), assuming Kodak glass (same as ‘camera

lenses’ , see below).

other lenses 0.00184 Same as vision correction lenses

Tantalum concentration in the selected products

Mobile phones 0.00041

(Christian et al., 2012) &

(Oguchi, 2011)

Average of 39 phones in two studies (additionally assuming

130 grams/phone based on (GSM Association, 2006).

Laptop PCs 0.00103 (Oguchi, 2011) The values here, given by the study by Oguchi only describes

the tantalum content in the printed wiring boards of notebooks

& PCs (thus capturing the tantalum content in the micro-

electronics, but not in the harddisk). The tantalum content in

their harddisks is accounted separately. Desktop PCs 0.00088

(Oguchi, 2011)

Source: CML-Desire Project, http://fp7desire.eu/

Cameras 0.00142

(Oguchi, 2011) Similar to PCs, the tantalum composition of cameras given

here applies only for the printed wiring board. The tantalum

contained in the camera lenses is simply added to the overall

camera composition in the results.

hearing aid 0.04667

Based on (enginieeringprojects.com, 2014), we assumed 3

tantalum capacitors of a weight of 0.14 g (average of two

types, according to Ecoinvent, 2007) in a total product weight

of 9 grams (Alibaba.com, 2014)

pacemakers 0.0186

Based on (Haddad and Serdijn, 2009), we assumed the use of

10 tantalum capacitors of a weight of 0.14 g (average of two

types, according to Ecoinvent, 2007) in a total product weight

of 28 grams (Medtronic, 2014).

GPS 0.0043

According to (Philips, 2009) a GPS device contains 6 tantalum

capacitors of a weight of 0.14 g (average of two types,

according to Ecoinvent, 2007) in a total average product

weight of 195 grams (Recreation GPS Review, 2014)

DVD players 0.00001078 (Oguchi, 2011)

furnaces 6.2E-05 (JRC, 2013)

carbide tools 0.0007966

Derived Assuming that all tantalum carbides are used in carbide tools,

the tantalum content was derived as the tantalum input

divided over the mass of the tools.

TVs 0.0008

Automotive

(vehicles) 5.8E-06

(Cullbrand & Magnusson,

2011)

Wavefilters 0.3305

Average material content of two types of surface acoustic

wavefilters described by (Abbott, 2005) and (Strijbos et al.,

2007)

Semiconductors 0.286

(Ecoinvent, 2007) average of "diode, glass-, SMD type, for surface mounting, at

plant" (32 mg) & "transistor, SMD type, for surface mounting,

at plant" (0.593 g)

Tantalum concentration in the selected products

Product description

Concentration

(kg Ta/kg product)

Source of concentration data Assumptions

Source: CML-Desire Project, http://fp7desire.eu/

Product stage Export Import Production Apparent Consumption

Concentrates Raw material 7 597 10 600

Carbides Raw material 3 10 31 38

Articles Raw material 345 493 254 401

wave filters Sub-component 2 3 2 3

Semiconductors Sub-component 46 39 32 25

other lenses Sub-component 3 6 5 8

camera lenses Sub-component 21 151 16 147

HDD Sub-component 103 635 5 537

Capacitors Sub-component 183 100 398 315

Cameras Final product 16 196 5 185 (331 including

lenses)

TVs Final product 25 57 195 226

DVD players Final product 0.1 2.2 0.3 2

Artificial joints Final product 53 61 184 192

hearing aid Final product 15 28 30 42

pacemakers Final product 4 6 9.5 12

GPS Final product 0.5 0.6 2.6 3

vision correction lenses Final product 3 18 12 27

Mobile phones Final product 122 213 216 307

passenger cars Final product 7 16 90 98

public transport vehicles Final product 0.5 0.1 0.3 0

freight vehicles Final product 4 3 26 24

carbide tools Final product 3 2 38 37

furnaces Final product 6 1 15 9

Laptop PCs Final product 21 149 61 189

Desktop PCs Final product 138 123 209 195

Tantalum containing products & their trade and production flows (expressed in tons tantalum) for Europe in 2007

Source Deetman et al 2016, CML-Desire Project

Annual Tantalum flows through the EU27 in 2007

Source Deetman et al 2016, CML-Desire Project

>2550

Final product Shape

(β)

Scale

(𝜂)

Average

lifetime

(yr)

Reference category & source probability density function

vision correction lenses 1.4 7.6 6.9 Small medical, (Wang et al, 2013) Cutting Tools 2.6 15.7 13.9 Small tools, (Wang et al, 2013) Furnaces 2.218 26.7 23.6 (OEERE, 2008) Mobile phones 3.66 7.59 6.8 (Polak et al., 2012) Cameras (video/still) 1.4 8.2 7.5 (Wang et al, 2013) Desktop PCs 2.1 9.6 8.5 (Wang et al, 2013) Laptop PCs 1.5 5.2 4.7 (Wang et al, 2013)

External HDD & servers 2.30 13.74 12.2 (Pasha et al., 2006)

DVD players 1.7 10.5 9.4 Video & projection, (Wang et al, 2013) GPS 1.7 9.6 8.6 Small monitoring, (Wang et al, 2013) TVs 2.1 12 10.6 FPD TVs, (Wang et al, 2013) Hearing aid 1.4 7.6 6.9 Small medical, (Wang et al, 2013) Pacemakers 1.4 7.6 6.9 Small medical, (Wang et al, 2013) Artificial joints 2.6 19.2 17.1 Prof. medical, (Wang et al, 2013) Aerospace 0.65 10.2 13.9 Airplanes, (Nomura, 2013) Automotive 1.89 10.3 9.1 Passenger cars, (Nomura, 2013)

Source Deetman et al 2016, CML-Desire Project

Expected waste generation profile of tantalum contained in products consumed in 2007 in EU

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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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NetWeight Trade Value (millions) Average price USD/Kg

Trade in Tantalum Waste & Scrap

Tantalum can be recovered from waste metals and scrap and account for about 20 percent of total supply. Tantalum is recovered from a number of different items including cemented carbides and alloys, sputtering targets, edge trimmings and limited amount from capacitors (BGS, 2011)

Trade in Tantalum Waste & Scrap

112

153

177 178

111 118

69

244 263

302

135

162

119

232 240

144

233

152 160 178

2007 2008 2009 2010 2011 2012 2013 2014 2020-F 2025-F

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Export Import

Export and Import of EU-28 in tantalum waste & scrap

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2010 2011 2012 2013 2014 2020-F 2025-F

82

7,1

46

98

3,8

66

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30

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6

11

07

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12

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Tantalite basis 30% Ta2O5 (EU) $/lb Ta2O5 prices

Source: Metal Pages, 2016

Tantalum is sold in several forms, each commanding a different price. •Concentrate, priced as $/lb of Ta2O5 contained •Oxide, priced as $/kg or $/lb of Ta2O5 •Finished products, such as capacitor-grade powder, sold as $/lb of Ta metal Tantalum is not openly traded on any metal exchange, such as copper or gold. •Long term contract prices are negotiated between buyer and seller and generally remain confidential •Spot prices are typically lower than long term contract prices – the current average for Tantalite basis 30% Ta2O5 (EU) $/lb is 58.5 and for Ta2O5 is 285 $/kg, which was 525 in 2011 •Prices for certified conflict-free material are at an additional premium

Tantalum min 99.8% (EU) $/kg prices

250

300

350

400

450

500

550

jun-11dec-11

jun-12dec-12

jun-13dec-13

jun-14dec-14

jun-15dec-15

jan-16

Low 500 490 480 505 485 400 390 365 360 265 270

Hight 550 550 530 535 510 440 440 400 390 290 300

What influences price • Moderate demand from high technology end users •Closing of the Wodgina, Kenticha, Tanco and Marropino Mines had no impact •Lack of viable new development projects •SEC ruling and other voluntary and legislated requirements to use conflict-free tantalum had only short term impact Conflict-free prices are highly confidential •Not openly traded on exchanges •Confidential contracts between buyers and sellers •Conflict-free tantalum sells at a significant premium •Conflict-free material is in higher demand and sold via long-term contracts and not significantly affected by current market volatility

Source: Metal Pages, 2016

Lower prices are reported to be offered in China, where only three tantalum processors so far (F & X, Ninxia and RFH) have obtained EICC-GeSI “conflict-free smelter” certification

Current market prices are not a great incentive to either to new producers or to investors

Cash costs Cost per Tonne Milled ($/t) (½ lb Ta/ton)

Cost per Kg Ta2O5 ($/kg) payable

Mining 20 170

Process 14 110

Material Handling 0.70 26

G&A 2.00 6

Total 36.7 312

Production and average operating costs of the major developers

Average operating cost estimation of a Hard-rock mine

They are expensive operations and need a minimum price to produce economically

Tantalite market is now trading at $55-60/lb Ta2O5 and Tantalum min 99.8% is trading at 270 to 300/kg. This is the lowest price, in absolute terms, seen since June 2008 when tantalum was a much less regulated market without the associated social and compliance costs.

*Acquisition by GMC from Galaxy Resources and planned to start production

NPV Sensitivity to Price

Actual case of a on-hold project

26

• Huge data gap exists between production and final consumption

• Producing responsible products also requires sourcing of conflict-free socially responsible components and raw materials

• Except for the Dodd-Frank act there is no nationally binding operational schemes that helps industry to source their components and raw materials in responsible manner

• For metals e.g. used in electronics this is more difficult because of the lack of transparency in the supply chains and the many steps between mining and finished product

• Introduction of strong certificate schemes are far from perfect they provide the opportunity for industry to make responsible choices

• Strengthening certificate schemes for metals and electronic components will offer opportunities for Western raw materials producers to (re-) enter the mining and refining market

Concluding Remarks

The market for tantalum is maturing and is expected to show the moderate rate of growth in demand - Superalloys, along with sputtering targets and tantalum chemicals, have probably the highest demand growth potential in the coming years Continued growth is expected in sectors such as aerospace and land-based gas turbines, prompting the demand for superalloys Commitment by multinational OEMs on responsible sourcing will have ripple effect on Chinese component producers Increased compliance by Chinse smelters on conflict free tantalum may push price upward and reduce the gap between spot and contract prices