Strategic Metal Report

Material Risk & The Debate Over Government Support

In recent years, a number of reports on critical and strategic mineral resources have been commissioned by governments and produced by various research organizations and consulting firms. These reports have primarily come in response to China’s growing restrictions on the export of rare earth elements (REEs) and an increased global awareness of the importance of REEs and many other strategic metals integral to national security and economic growth. The European Community commissioned paper Critical Raw Materials for the EU, and consequent report, Material Risk: Access to Technology Minerals, produced by Ernst & Young in September 2010, exemplify the prevailing concern about dependence on foreign supplies of strategic raw materials.

The initial report by the EC, also published in 2010, identified 14 raw materials as critical to European industry, whereas, Material Risk explores “the supply risks facing producers and consumers of these technology minerals, and assess(es) the European mining and metals sectors ability to respond to the supply chain challenge.” While recognizing that the supply of ‘technology metals’ is under pressure, there is no stated recognition that much of this perceived pressure is due to the world’s increasing reliance on Chinese primary production of strategic minerals, including REEs, antimony, bismuth, indium, gallium, germanium and silicon. Nevertheless, the question that remains is: What role, if any, do governments have in supporting domestic industries reliant on critical raw materials or strategic metals?

Evaluating and Valuing Minor Metals: Tellurium

“Tellurium: Nerd’s Gold”, an article recently published on Resourceinvestor.com, examines the potential demand growth for tellurium in contrast with its relatively low natural occurrence. Like many minor metals, the potential demand for tellurium is significant, particularly due to its use in cadmium-telluride solar cells. However, to date, this demand has largely not materialized and global production has kept prices relatively stable.

The article provides an interesting analysis of the applications and potential demand for tellurium, but due to some fundamental mistakes in assessing the supply and demand characteristics of tellurium is misguided in its efforts to value the metal. Investors, analysts and traders must be cautious of such mistakes so as not to under- or over-value their investments.

Minor Metal Market Outlook 2011

It is probably appropriate that 2010 comes to an end with rare earth back in the headlines, as it was the year of REEs. Severe export quota decreases drew headlines around the world and institutional investors into the market, resulting in exponential price increases and encouraging what seemed like every junior mining exploration and development company to add REEs in their taglines. As companies outside of China raced to get their hands on as much rare earth as possible, investors’ eyes lit up at the projected growth figures for hybrid car sales and wind turbine energy production by 2020 and beyond.

But what about 2011? Will REEs continue to be the headline-makers, or will demand for flatscreen TVs and continued growth of CIGS solar technology push indium into the spotlight? Will antimony prices remain at record levels? And what impact will rising production costs in China have on minor metal prices?

After looking into our crystal ball, we have come up with five projections on what minor metal markets should expect in 2011. Enjoy, let us know what you think, and – most importantly – Happy New Year!