The tantalum industry is a very small place, so the news that one of the major tantalum processors, Global Advanced Metals (GAM) is for sale might strike one initially as a “small earthquake in Chile” type of news story. The total annual value of mined tantalum is less than US$500M, inconsequential when set against industries such as iron ore (around US$300Bn) or copper (about US$150Bn).
However, there’s more to this event than meets the eye. Tantalum is a critical metal in a broad range of applications that shape modern life. It is essential in the production of computer chips, is a key component in wireless telecommunications, and is crucial to the operation of current-generation jet engines. Emerging applications include resistors, biomedical implants and nuclear energy applications, and at the basic science level tantalum is under evaluation in lithium-ion battery compounds and in high entropy alloys.
GAM itself is a highly integrated business, from mines in Australia to electronic materials production in the United States and Japan (via its U.S. ore refinery). CPM Group believes GAM has a global low-cost position in ore thanks to the astute way the company has managed its mineral assets there over the past decade. The U.S. refinery possesses advantages in its ability to receive and process radioactive ores (tantalum ores are frequently above the threshold for classification under maritime regulations as radioactive. The threshold is low, about 0.1% uranium oxide by weight. Other important ores including most rare earth ores also fall into the radioactive ore category). And at the refined product level, GAM has ample capacity to meet current and likely medium-term tantalum demand.
CPM projects that global tantalum demand could roughly double in the next ten years. Major drivers of projected growth include transport electrification, rapidly growing volumes of mobile data and connected devices, high growth in semiconductors, and strong demand in aerospace. GAM is well placed to profit from enabling these global trends and is likely to be valued accordingly.
However, the individual parts may conceivably be worth more than the sum of the parts. GAM does not own or operate its mines, which it has steadily divested to lithium miners while retaining title to (and operating processing equipment to beneficiate) the tantalum in these mines. In fact, GAM recently divested its last large lithium holdings at Tabba Tabba, to Wildcat Resources. The mining rights to tantalum may offer significant value to one or more of GAM’s operating partners.
The downstream end of GAM’s business is focused on electronic capacitor powders, and metal specifically tailored for semiconductor manufacturing markets. Capacitor powders are sold into a relatively concentrated set of customers for conversion into capacitors, a market CPM projects to grow strongly because of the trends listed above. Concentration in markets always raises competition concerns, yet nevertheless there are real advantages in integrating the production of powders with the production of capacitors.
Likewise, the semiconductor market may see value in a standalone supply of suitably produced tantalum metal. Here, interest could range as far downstream as OEMs and capital equipment makers, although sputtering target makers themselves may be too fragmented to capitalise on the scale of production GAM offers.
And, sitting in the middle, the U.S. refinery offers a capacity to refine and deliver intermediate commodity products at world scale, something of increasing importance as the downstream industry, outside of capacitor powders, has become progressively more fragmented. Firms in the aerospace and electronics industries may well find advantage in the refinery operation alone.
So, the next few months will be of close interest in the fishbowl world of tantalum. But there is an ocean of customers and consumers that should also be paying attention as the sale unfolds.
By Andrew Matheson and Patrick Stratton
CPM Group is an independent commodities research, consulting, and investment banking advisory company headquartered in New York. The company is considered the foremost authority on markets for precious metals, along with manganese and molybdenum. Its entry into tantalum research came through a new collaboration with Andrew Matheson and Patrick Stratton, who are both recognised experts in the tantalum market.
