Commerce Resources Corp (CCE)

[sumisu]

Tantalum industry in dire need of new resources

Wed Oct 21, 2009 3:30pm EDT

By Chris Kelly

http://www.reuters.com/article/marketsNews/idAFN2154079620091021?rpc=44

WASHINGTON, Oct 21 (Reuters) - A severe supply crunch has hit the tantalum industry, and stockpiles of the metal used primarily in consumer electronic products could run dry in as little as three years, an industry analyst said on Tuesday.

"The industry at the moment is living on stocks. Late last year it was estimated that there was enough tantalum in the supply chain to last for two years. That was last year ... that will run out by 2012," said Patrick Stratton BA, senior analyst with Roskill Information Services Ltd. during a panel discussion titled, The 'Alternative Energy' Metals at the Managing Supply Chain Risks for Critical & Strategic Metals conference in Washington, D.C.

Stratton said the industry's problems were largely brought on by an unprecedented spike in the spot market price in 2000 after similar supply fears caused many nervous dealers to lock themselves into long-term contracts at very high market prices.

"They (tantalum capacitor manufacturers) paid for it dearly with inventory write-downs and future inventory write-downs," Stratton said. After a period of relative stability in the market, he said, everything "fell off of a cliff" in 2008, as the economic downturn put the brakes on consumer demand.

Many companies suspended production, including Australia's Talison Minerals, which provided about a third of the world's tantalum supply. Others included Noventa's Mozambique mine and Canada's Tanco mine.

Talison plans to reactivate its Wodgina mine in mid-2010. [ID:nSYD479828]

"We have a situation now where primary production of tantalum is limited to material coming out of Brazil, some production coming out of Africa, some Chinese material, and that is about it," Stratton said.

He saw only two real possibilities for new acceptable and ethical sources of tantalum, and they were both in Canada.

One was the Blue River Project in British Columbia, owned by Commerce Resources Corp (CCE.V), which was expected to be up and running in 2011.

Since 1990, tantalum's demand growth rate is about 5 percent per year. The price of tantalite, used to make tantalum metal, has been trading south of $40 a lb in the third quarter of 2009.

"A good question to ask is, 'what is the downstream industry more afraid of ... the price of tantalum or not being able to get hold of any tantalum?" Stratton asked.

"The second part of that is a very real possibility if something does not happen very soon." (Editing by David Gregorio)