Tantalum

[sumisu]

“Blood Tantalum” Profiteers in Congo Set to Capitalize on Dramatic 2009 Price Spike for Australian Tantalum

By Marc Davis, President, Davis & Associates Capital Corp.

05 Dec 2008 at 11:38 AM GMT-05:00

http://www.resourceinvestor.com/pebble.asp?relid=48509

The bloody civil war that is creating another humanitarian crisis in the central African nation of the Democratic Republic of the Congo (DRC) is set to get far worse because of events a world away in Australia.

VANCOUVER (ResourceInvestor.com) -- That promises to be the case if the world’s leading tantalum supplier in Australia acts on a threat to almost double the metal’s price, beginning in January, 2009. Apparently, Perth-based Talison Minerals means business.

To underscore its resolve, Talison will cease mining tantalum altogether in early December – at least for the foreseeable future. This leaves only its existing stockpiles, which surely won’t compensate for the fact that the company’s two major mines accounted for no less than 50% of the world’s annual supply.

What’s the connection between the endless bloodshed in the DRC and the closing of a mine thousands of miles away due to the global recession? The tantalum in the DRC is far more inexpensively produced compared to mining operations in the Western world. And some of it can be extracted dirt cheap because of the brutal enslavement of civilian workforces -- including young children -- by armed factions.

Located in war-torn eastern Congo, these primitive open pit quarries are controlled by various militias, rebel groups and renegade elements of the Congolese army. These lawless thugs have profited for the past few years from the tantalum, which is known as “coltan” in Africa, by terrorizing rural communities and forcing locals to dig for this rare mineral by hand.

By the way, if you own a mobile phone or a laptop or any other portable electronic device, then there is a good likelihood that one or more of your devices contains “blood tantalum.” And the odds are about to increase that more of this illicit tantalum will find its way into your hands. That is if the price of tantalum jumps as much as the 80-85% increase recently demanded by Talison. This, in turn, will make cheaply produced black market Congolese tantalum all the more attractive to some unscrupulous processors of the metal -- even ones that are so desperate for ore that they are willing to turn a blind eye.

With the stakes so high, much of this blood-tainted mineral is already smuggled overseas by warlords or corrupt senior army officers for lucrative cash rewards. Or it is mixed with ore from legitimate Congolese mines, which are run by foreign and domestic companies in trouble-free parts of the country.

Human rights organizations claim that some processors are willing to buy tainted tantalum on the black market at bargain prices in China and Russia. Significantly, an estimated $750 million worth of profits from this illicit activity financed the war chests of the DRC’s feuding forces between 2000 and 2004, according to the United Nations.

About 4-5 million, mostly civilian Congolese, have died--primarily from disease and starvation--as a result of the civil war and the related collapse of the nation’s economy. Currently, an estimated 1,000 people are dying every day. Millions more have been displaced from their homes.

Talison Minerals claims they are being forced to dramatically raise prices for the type of high purity tantalum that is used in electronics because it represents only a small and largely unprofitable segment of their business. And one that is slackening due to the slowdown in the miniature electronics consumer market.

Furthermore, mining companies are now demanding long-term contracts with buyers to ensure steady supplies, according to Dan Lane, marketing director of AVX Corp., a major capacitor manufacturer.

Western politicians and tantalum industry experts, alike, argue that the ultimate solution to the DRC’s escalating humanitarian crisis is two-fold: outlaw blood tantalum and stabilize the world’s legitimate tantalum supplies.

There is considerable encouragement on one front: the future introduction of an internationally-sanctioned certification of origin protocol for tantalum may eventually choke off much of the black market for blood tantalum. Yet, the need to find new tantalum supplies in conflict-free, politically stable nations is proving to be a more problematic challenge. Especially since most of the world’s remaining tantalum supplies are located in other sometimes turbulent African nations.

Very few new sources of tantalum have emerged in recent years, even though the mining industry has spent billions of dollars on mineral exploration. There have been some reports of potential new deposits in South America, Egypt and the Middle East, however, there is far more interest in the discovery of new tantalum supplies in Western nations with low political and currency risk.

The suspension of tantalum operations at both of Talison’s Australian Wodgina and Greenbushes mines due to escalating production costs and the global recession will make it all the more difficult for end-users to source out conflict-free tantalum.

The economic and political repercussions of this scenario are not lost on Talison’s CEO, Peter Robinson, whose words have chilling implications for the DRC’s already traumatized population.

“Our goal is to bring Wodgina back into production as soon as the global situation improves and demand and prices are stronger…Without Talison’s supply, the majority of the world’s tantalum will come from irregular and unreliable suppliers from politically unstable regions, with much of it coming from the Democratic Republic of the Congo,” he says.

The advent of a sudden tantalum supply/demand imbalance could precipitate yet another dramatic price spike, like so many others that have plagued the tantalum market over the past several decades. All of which have been caused by a combination of strong demand and fears about supply shortages.

Any new supply problems could be exacerbated by the fact that there are new, 21st century markets for this high-tech metal -- not the least of which is the exponential growth in the use of tantalum capacitors in automobiles.

This looming supply quandary is being viewed as a call to action for a small Canadian tantalum exploration and development company called Commerce Resources. It is proving up a tantalum deposit in southeastern British Columbia, one that could more than easily replace Congo’s supplies of blood tantalum, the company says.

Additionally, Commerce believes it has enough tantalum supplies to enter into long-term contracts with reputable, ore-hungry processors.

Without a doubt, Commerce’s plans to commercialize its Upper Fir tantalum deposit by 2010 or early 2011 won’t come a moment too soon in terms of helping to satisfy burgeoning worldwide demand.

So the race is on to develop strong reserves of reliable and legitimate tantalum ore. Otherwise the temptation to profit from “blood tantalum” may too great and will continue to heap misery on the people of the DRC.