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‘Black Swans’ in tin and
tantalum mining and
their implications for
electronics
manufacturers
Presented by: John P. Sykes123
Including input from: Nick Gardiner1, Allan Trench124, and Laurence Robb5
And with grateful acknowledgement of Peter Kettle6, Tom Mulqueen6 and Cui Lin6
1. Curtin University; 2. The University of Western Australia; 3. Greenfields Research Ltd;
4. CRU Group Ltd; 5. Oxford University; 6. ITRI Ltd
Argus Media-Metal Pages China Metals Week, Guangzhou, 18th Nov 2015
Argus Media-Metal Pages China Metals Week (Guangzhou)
The past is no indicator of the future in
the tin and tantalum industries
18th Nov 2015
?
0
10,000
20,000
30,000
40,000
50,000
60,000
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Pri
ce
(2
01
3 U
S$
/t)
Tin Prices (US$2013):1974-2013
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Pri
ce
(2
01
3 U
S$
/t)
Tantalum Prices (US$2013) – 1974-2013
?
'Black Swans' in tin and tantalum mining
Source: United States Geological Survey (USGS)
Slide 2 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Are the tin and tantalum markets
vulnerable to ‘Blacks Swans’?
“a rare bird in the lands,
and very much like a
black swan”
- Juvenal, 1st Cent AD
18th Nov 2015
• A surprise event with major impact;
• Rationalised with hindsight;
• If the relevant data were available it
could have mitigated
- Based on Nassim Taleb (2007)
'Black Swans' in tin and tantalum mining
Slide 3 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
THE CASE FOR ‘BLACK
SWANS’ IN TANTALUM MINING
‘Black Swans’ in tin and tantalum mining and the implications
for electronics manufacturers
18th Nov 2015
'Black Swans' in tin and tantalum mining
Slide 4 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Tantalum is ‘critical’ to the electronics
industry but vulnerable to supply shocks
18th Nov 2015
Source: Tantalum-Niobium International Study Centre (TIC) 0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Pri
ce
(2
01
3 U
S$
/t)
Tantalum Prices (US$2013) – 1974-2013
'Black Swans' in tin and tantalum mining
Slide 5 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Such as the switch from Asian tin slag
production to Australian mines
18th Nov 2015
0
200
400
600
800
1000
1200
1400
1600
19
98
1999
2000
2001
2002
2003
2004
Annual mined tantalum production (tonnes)
OtherAfrica
CentralAfrica
Canada
Brazil
Australia
Source: Tantalum-Niobium International Study Centre (TIC)
Source: United States Geological Survey (USGS)
'Black Swans' in tin and tantalum mining
Slide 6 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Then the rise of D.R. Congo artisanal
mining and “conflict minerals”
18th Nov 2015
0
200
400
600
800
1000
1200
1400
1600
2005
2006
2007
2008
2009
2010
20
11
2012
2013
2014
Annual mined tantalum production (tonnes)
ROW
Other Africa
Central Africa
Canada
Brazil
Australia
Source: United States Geological Survey (USGS) Image: Shutterstock
'Black Swans' in tin and tantalum mining
Slide 7 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Now we look set for another structural
supply shift as the conflict trade ends
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
200
6
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
Metal Pages Tantalite basis 30% Ta2O5 (EU) $/lb Ta2O5
18th Nov 2015
Closure of
Wodgina
mine
Passage of
Dodd-Frank
Act
Global Financial
Crisis
Source: Pete Souza (Whitehouse Photostream)
Post-spike demand
destruction?
'Black Swans' in tin and tantalum mining
Slide 8 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
But where will this new tantalum supply
come from?
35%
58%
3% 3% 1%
USGS Reserves Estimate (>150,000 tonnes)
Australia Brazil Canada
Ethiopia Other
41%
21%
10%
10% 9%
7% 2%
TIC Estimated "Likely Resources" (%)
South America Australia
Russia & Middle East China & SE Asia
Central Africa Other Africa
North America
18th Nov 2015
'Black Swans' in tin and tantalum mining
Slide 9 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Tantalum uncertainties: In summary
• Tantalum is ‘critical’ to the electronics industry but vulnerable to
supply shocks;
• As exemplified by the switch from Asian tin smelter slag
production to Australian mine production in the 1990s/ early 2000s;
• Then the rise of D.R. Congo artisanal mining and “conflict
minerals” from about 2010;
• Now we look set for another structural supply shift as the conflict
tantalum trade is brought to an end;
• But where will this new tantalum supply come from? There are
large tantalum resources but all with cost, technical and political
problems;
• What does this mean for the electronics industry? What is the likely
future availability and price of tantalum?
18th Nov 2015
'Black Swans' in tin and tantalum mining
Slide 10 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
THE CASE FOR ‘BLACK
SWANS’ IN TIN MINING
‘Black Swans’ in tin and tantalum mining and the implications
for electronics manufacturers
18th Nov 2015
'Black Swans' in tin and tantalum mining
Slide 11 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
0
5
10
15
20
25
30
35
40
45
50
0 to5
5 to10
10 to15
15 to20
20 to25
25 to30
30 to35
35 to40
Tin prices were recently at 30 year highs
18th Nov 2015
Long-term tin price history US$/tonne, inflation adjusted 2014 prices Price range, $000/tonne, 2014 real terms
Number
of years
in each
price
band
Tin price histogram 1900-2014
© Greenfields Research; DiFrancesco et al., 2014 (USGS), Crawford et al., 2014 (USBOL), Kettle et al., 2015 (ITRI)
Prices
peaked is
this range
0
10000
20000
30000
40000
50000
60000
190
0
191
0
19
20
193
0
194
0
195
0
196
0
197
0
198
0
199
0
200
0
201
0
Prices peaked at 30 year highs
Prices now
in this range
'Black Swans' in tin and tantalum mining
Slide 12 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Driven by electronic solder and Chinese
manufacturing demand
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Lead-free solder Lead solder
18th Nov 2015
© Greenfields Research; Data: ITRI & IPC
Lead-free solder as a % of global shipments
Conversion to
tin solder drove
tin prices
Tinplate: 54,500t (16%)
Chemicals: 54,200t (16%)
Brass / Bronze: 18,600t
(5%)
Glass: 7,000t (2%)
Others: 37,500t (11%)
China: 102,900t (30% of
tin & 58% of solder)
ROW: 73,600t
(21% of tin & 42% of solder)
Solder: 176,500t
(51%)
Tin Consumption (2013e)
'Black Swans' in tin and tantalum mining
Slide 13 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
However mine supply has struggled to
meet this demand
250.0
275.0
300.0
325.0
350.0
375.0
Tin Supply-Demand Growth (Kt)
Refined Supply Mine Supply Refined Demand
18th Nov 2015
© Greenfields Research; Data: ITRI Tin Industry Review 2014
Demand
strength
driving prices
Supply
weakness
driving prices
'Black Swans' in tin and tantalum mining
Informal
mining
Ageing
mines
Conflict
Minerals
Political risk
Slide 14 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Whilst the tin mine project pipeline is
technically challenged…
0.01
0.02
0.03
0.06
0.13
0.25
0.50
1.00
2.00
4.00
8.00
100,000 1,000,000 10,000,000 100,000,000 1,000,000,000
Sn
Gra
de (
%)
Ore (tonnes)
Grade-tonnage curves for tin mines & projects
18th Nov 2015
© Greenfields Research; Data: Tin Industry Review & New Tin Supply 2014
NB: Size of bubble reflects relative amount of
contained tin in the resource (not all resources are
CRIRSCO compliant)
Mine Projects
Operating Mines
'Black Swans' in tin and tantalum mining
Slide 15 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
…and politically challenged, with few
new tin discoveries to improve its quality
1955 1965 1975 1985 1995 2005 2015
18th Nov 2015
Early
Exploration
Advanced
Exploration
Scoping
Pre-Feasibility
Feasibility
Permitting
Financing
Commissioning
Construction
Post-ITC
Discovery
Gap
Recent
Discovery
Gap
Discoveries still under
development:
• Pre-1800: 4
• Pre-1900: 11
• Pre-1955: 15
Low Political Risk
Moderate Political Risk
Very High Political Risk
High Political Risk
© Greenfields Research; Data: New Tin Supply 2014
NB: Size of
bubble reflects
relative amount
of contained tin
in the resource
(not all
resources are
CRIRSCO
compliant)
'Black Swans' in tin and tantalum mining
Slide 16 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
However tin supply suffers information
bias and is vulnerable to ‘Black Swans’
18th Nov 2015
Tailings mining?
Conflict tin? Myanmar
democracy?
San Rafael
closure?
New
Brazilian
supply?
Tin in
Colombia? Bolivian
expansion
slows
New
Russian
supply?
China?
SE Asia
revival?
New
African
supply?
New
European
supply?
Australian
slowdown?
Images: Shutterstock/Minsur
'Black Swans' in tin and tantalum mining
Slide 17 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Such as Myanmar: now the world’s third
largest tin miner
-1000%
0%
1000%
2000%
3000%
4000%
5000%
0
20000
40000
60000
80000
100000
120000
Global Tin Production 2014 (t) and % Change from 2009
18th Nov 2015
© Greenfields Research; Source: ITRI & Gardiner et al., 2015
'Black Swans' in tin and tantalum mining
Slide 18 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Tin in Myanmar: a riddle, wrapped in an
enigma inside a ‘Black Swan’ Huge potential
• 2nd largest SE Asian country by area, with abundant
natural resources;
• But significant economic decline over past 60 years;
• New constitution (2008), start of reforms and
sanctions lifted (2011), elections just occurred;
• Renewed interest in foreign investment…
But this is not the story…
• Recent upsurge in tin production is not related to the
political ‘opening up’ of Myanmar;
New supply not from traditional tin mining areas
• Main tin mining areas historically in the south;
• New production from Man Maw mining district, Wa
State;
• Not a traditional tin mining area;
• Autonomous, unrecognized state, ethnically
Chinese.
18th Nov 2015
© Greenfields Research, Gardiner et al., 2015
'Black Swans' in tin and tantalum mining
Slide 19 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
But are these operations sustainable?
• No geological data
• Reserves unknown
• Mine lifetimes
unknown
• Infrastructure poor
• Bad roads
• New power station
still under
construction
• Security issues on
the border
18th Nov 2015
© Greenfields Research, Gardiner et al., 2015
'Black Swans' in tin and tantalum mining
Slide 20 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Tin uncertainties: In summary
• Tin prices were recently at 30 year highs, driven by electronic
solder demand and Chinese manufacturing;
• However mine supply has struggled to meet this demand, with
current tin mine supply facing many problems;
• In addition, the tin mine project pipeline is technically and
politically challenged, with few recent tin discoveries;
• However tin mine supply analysis suffers information bias and is
vulnerable to ‘Black Swans’, as exemplified by Myanmar;
• Myanmar is now the world’s third largest tin miner, but questions
remain about whether these operations are sustainable?
• What does this mean for the electronics industry? What is the likely
future availability and price of tin?
18th Nov 2015
'Black Swans' in tin and tantalum mining
Slide 21 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
UNDERSTANDING THE
UNCERTAINTY
‘Black Swans’ in tin and tantalum mining and the implications
for electronics manufacturers
18th Nov 2015
'Black Swans' in tin and tantalum mining
Slide 22 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Tin and tantalum consumers should
prepare for a high and low cost future
18th Nov 2015
Marg
inal C
ost
/ P
rice
Cumulative Supply
High Cost-
Low Growth
Scenario
Industry margins
eroded as price
moves to marginal
cost of production
WE ARE
HERE!
Higher prices needed
to encourage project
pipeline / by-product
operations on stream
High prices encourage
demand destruction,
margins rapidly erode and
industry remains small
Low Cost-
High Growth
Scenario
New low cost supply (Myanmar /
Central Africa etc) expands
pushing high cost supply out of
the industry and lowers the long-
run marginal cost of production
Only new low cost supply
(high quality discoveries /
new technologies etc) is
competitive in the long-run
Low cost supply
encourages demand
innovation and the
industry expands rapidly
© Greenfields Research
'Black Swans' in tin and tantalum mining
Slide 23 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
Dealing with uncertainty in tin and
tantalum mine supply: In summary
• Tin and tantalum mining has a history of rapid structural change;
• Both tin and tantalum mining are currently strained by technical,
economic and political factors;
• Although there are lots of tin and tantalum resources, many are
uneconomic and politically inaccessible;
• So where will tin and tantalum mine supply come from in the
future?
– High cost-low growth scenario – known high cost project pipeline leading to
demand destruction in the long term; or
– Low cost-high growth scenario – as yet unknown low cost supply, from new
countries, discoveries, technologies etc., creating a fast growing market;
• Tin & tantalum consumers should prepare for both a high and low
cost future, and likely a future bouncing between the two extremes.
18th Nov 2015
'Black Swans' in tin and tantalum mining
Slide 24 of 25
Argus Media-Metal Pages China Metals Week (Guangzhou)
THANK YOU
For more information: • Kettle, P., Pearce, J., Lin, C., Sykes, J.P., 2014. Tin Industry
Review: Managing the Next Tin Crisis, ITRI Ltd.
• Kettle, P., Sykes, J.P., Staffurth, N., Davies, S., 2014. New Tin
Supply: A Global Survey of Potential Mine Projects, ITRI Ltd
and Greenfields Research Ltd.
• Gardiner, N.J., Sykes, J.P., Trench, A., & Robb, L.J., 2015. Tin
mining in Myanmar: Production and potential, Resources
Policy, 46 (December), 219-233.
Contact information:
• John P. Sykes:
18th Nov 2015
'Black Swans' in tin and tantalum mining
Slide 25 of 25