Tantalum boom lifts mining game
By JOHN McILWRAITH 23apr01 - The Australian newspaper
A GLOBAL electronic manufacturer's participation in a new tantalum venture will help tighten Australia's control of the world market.
Sons of Gwalia (ASX:SGW) which announced at the weekend strong growth in tantalum production in the March quarter, produces about a third of the world's supply of the metal from its West Australian mines, a figure that will rise to more than half in the next year.
Now Australasian Gold Mines (AGM) (ASX:ATE) has concluded an agreement with the American tantalum processor KEMET Corporation, which assures it of sufficient capital to press on with plans to ultimately produce 10 per cent of global consumption, meaning Australia would supply nearly two-thirds of the world's tantalum needs.
The two local tantalum miners are well placed to exploit growing demand for tantalum, which is a key metal in the electronics industry and has experienced a boom through mobile phone production and its use in devices such as Sony's Playstation 2.
AGM plans to lift its modest production to 250,000 pounds a year within the next two years, then double that figure in the following two.
KEMET is the largest manufacturer of solid tantalum capacitors in the world and its participation confirms a trend in which users of raw materials seek to ensure access by becoming participants in the mining phase.
Mines in Africa and Brazil also supply world tantalum markets and there is a considerable flow from the treatment of tin slag, although this source will progressively decline in the next few years. Australia is seen not only as the prime supplier - Sons of Gwalia alone holds half the world's reserves - but the most stable source of the material.
Sons of Gwalia has produced 1.4 million pounds of tantalum in the first nine months of this financial year and expects to lift output to 2.4 million pounds before 2003.
AGM's deal with KEMET creates a joint venture company, Tantalum Australia, with an injection of $10 million for a 50 per cent interest and a $4.6 million placement by AGM to KEMET -- enough to fund development for at least several years.
KEMET will help to secure project finance of up to $40 million to build a full-scale plant at Dalgaranga, Western Australia, where modest production has already begun. KEMET's support follows a frustrating period in which AGM failed to attract sufficient investors on the equity market.
However, intense demand has driven the price of some tantalum end products as high as $600 per pound in recent months, although Sons of Gwalia sells under long-term contracts for much less.
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