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28/02/2024
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How will the lithium industry impact global tantalum supply

With lithium now seeing some of the highest growth rates of all critical materials, the question is whether by-product tantalum will increase from hard-rock lithium projects vying to be commissioned.

Tantalum as a critical material.

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Tantalum is one of the ‘3TG’ metals (alongside tungsten, tin, and gold) or so-called ‘conflict minerals’ produced in Central Africa. Its main use is in high-end capacitors and sputtering targets for semiconductors, making the material’s demand closely linked to integrated circuit boards and electronic applications. Its thermal stability offers the ability to create capacitors that are small enough to fit within mobile phones and other portable electronics. Semiconductors require a substantial number of materials as dopants or thin film layers to protect the vulnerable conducting wires in the chips. Tantalum is used to coat these chips, and with its anti-corrosion properties, it protects the chips from chemical degradation.

Tantalum is recovered largely as a by-product of tin mining and is associated in particular with tin produced in the DRC. It is an opaque market, particularly with regard to the African upstream, with DRC material finding its way to the market via various routes, most notably via neighbouring Rwanda and, to a lesser extent, Burundi. Project Blue data shows that Central Africa is a key swing producer of tantalum: when the market falls into deficit, subsequent higher prices quickly lead to additional African supply which floods the market.

The most recent price spike was in response to a surge in demand for portable electronics during the COVID-19 pandemic. High prices prompted a supply response which pushed the market into oversupply in 2022. In 2023, the market has remained in surplus with high prices encouraging a second year of high output from Central Africa.

Most Central African output goes to China, where it is converted to metal, and further consumed in domestic semiconductor and capacitor industries. USA, the second-largest producer of tantalum metal, sources significant volumes of stock from recycled material. The USA alone recycles up to 50% of the world’s tantalum scrap and waste material. Additional sources of tantalum for the USA include imports from Australia, where USA-based company Global Advanced Metals (GAM) recovers tantalum concentrates from LCT pegmatites at the Greenbushes and Wodgina Operations.

Hard rock lithium has tantalum.

Tantalum is considered an incompatible element. It prefers to remain in its liquid form rather than crystallise. Because of its chemical characteristics, tantalum is often found within late-stage melts of igneous melts and in relatively minor ore volumes. A specific class of rock, known as LCT-type pegmatites, are enriched in lithium-caesium-tantalum (LCT), and their relative abundance in the ores tend to proportionally increase together. The Greenbushes operation in Australia yields the largest volume of tantalum mined from hard rock lithium mines, though before lithium’s demand boom, the deposit was primarily mined for its tin content. GAM has the mining rights to the tantalum resources at Wodgina and Greenbushes, despite not operating the main lithium mine. In this manner, the tantalum cost remains low as the company piggybacks off of the lithium operation to carry the extractive costs.

Currently, GAM is the only producer of tantalum in Australia, even purchasing additional tantalum concentrate at cost from other lithium operations. Being a vertically integrated operation, the company exports its products to its refining facilities in the USA. Additionally, tin is also a common co-mineralised phase in certain pegmatites, however, the Ta:Li ratio in pegmatites is generally higher than the Ta:Sn ratio. Tantalum as a tin by-product has historically been the dominant source given the larger volume extracted for the tin market. With lithium now seeing some of the highest growth rates of all critical materials, the question is whether by-product tantalum will increase from hard-rock lithium projects vying to be commissioned.

Increased demand from constrained supply chains.

Governments have identified the critical role that tantalum plays in the development of their technology supply chains. Developed countries such as the USA and China have begun placing restrictions on the material, with geopolitics playing a growing role in the tantalum landscape beyond its 3TG status. The USA placed bans on exporting high-end chip-making equipment to China, restrictions on importing tantalum metal, and has encouraged domestic production of chips. China responded by placing a ban and gallium and germanium products. Further strain on the supply chain is to be expected in the short term. A comprehensive 741-page annual report by the U.S.-China Economic and Security Review Commission has revealed how chip manufacturers managed to produce a 7-nanometer chip for Huawei’s new Mate 60 Pro, despite export restrictions imposed in October 2022 by the Biden administration to curb advancements in China’s semiconductor industry.

The Commerce Department initially implemented a 14-nanometer restriction limit on chipmaking equipment exports to China. However, the report highlights that importers are able to circumvent these restrictions by claiming that the equipment is intended for older production lines. Due to the limited capacity to verify the actual applications of the equipment, it has become challenging to enforce the export controls effectively.

This revelation comes shortly after the USA discovered Huawei’s ability to produce a 7-nanometer chip at its leading chipmaker, SMIC. Both Huawei and SMIC were placed on a trade restriction list in 2019 and 2020, respectively, prohibiting U.S. companies from supplying them with certain technologies.

Independent reports suggest that SMIC might have manufactured the chip using equipment procured before the October 2022 regulations took effect. However, the company is also believed to have explored alternative sources for obtaining the equipment from overseas.

The report further reveals that between January and August 2023, China imported semiconductor manufacturing machinery worth US$3.2 billion from the Netherlands, representing a 96.1% increase over the US$1.7Bn imported during the same period in 2022. In light of these findings, the report urges Congress to mandate an annual evaluation, to be completed within six months, to assess the effectiveness of export controls on chipmaking equipment exports to China.

Meanwhile, silicon wafer shipments for semiconductor applications have witnessed a significant decline since their peak during the COVID-19 pandemic. Despite this downturn, portable electronics demand is projected to grow in 2024, particularly with major producers like Apple increasing their buy orders in the third quarter of 2023. Notably, Apple is expected to incorporate 3-nanometer chips into its upcoming iPhone 16 models.

Swing production from Central Africa versus booming lithium supply.

Demand for tantalum is largely forecast to increase through its use in capacitors and semiconductors, underpinned by the outlook for portable electronics and high-end chips required for AI learning and other high-end electronic applications. According to Project Blue data, additional supply beyond current known hard rock lithium and other existing miners (including artisanal mining) is required by the late 2020s to meet demand.

In the near term, we expect Central African ASM swing production to repeat historical trends with a surge in supply expected around 2026/27 in response to a forecast deficit and high prices after stocks have run dry. Alternatively, exports from Central Africa could remain high for a third year running, as the closure of the Myanmar-China border could force additional tin production out of Africa to accommodate the tin market, bringing with it by-product tantalum.

Project Blue forecasts hard rock LCT lithium projects to account for 60% of new projects coming online by 2033 to supply the burgeoning lithium-ion battery market. Outside of Australia, LCT mines and projects typically have not defined tantalum resources and estimates. However, within Australia, several additional LCT deposits are already forming part of the base case supply outlook for tantalum. The Australian LCT assets only account for 34.5% of the forecast lithium supply.

This leaves a theoretical scenario for significant volumes of additional tantalum to come online from LCT mines and projects across the globe – assuming a similar geological association of tantalum and lithium in LCT deposits identified in Australia. Therefore, if all LCT lithium miners are able to recover tantalum, there is the potential to replace as much as two-thirds of Central African tantalum supply in the short term, which could play an important role in de-risking the 3TG conflict mineral association of tantalum.

A recent development, which will be interesting to follow in this space, is the announcement by Resource Capital Funds to put GAM on the market for sale. Will existing lithium market participants identify tantalum as a positive economic by-product to differentiate projects looking to join the supply chain for lithium-ion batteries? Or will tantalum remain a forgotten waste product and miss out on potential improved ESG credentials? Either way, production for tantalum will need to increase substantially, required to support high-tech applications, many of which enablers of energy transition.

 

Source: Project Blue

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