PERTH (miningweekly.com) – Equity research company Resource Capital Research (RCR) is forecasting a possible supply shortfall for tantalum, tungsten and zircon.
In its September quarter report for rare and minor metals (RMMs), RCR noted that a tantalum supply shortfall is expected to hand a competitive advantage to companies that provide long-term supply of ethically produced product, while a lack of greenfield projects could create a zircon supply shortage and boost prices in the next three years.
The forecasts were based on expectations of increasing intensity of use in new or high-tech applications across all manufacturing sectors, as well as on related concerns about security of supply for manufacturers, in view of China’s dominance of some metal markets and its policy of mining restrictions and tariffs.
RCR noted that an increasing intensity in the use of lithium is also expected to require additional supply beyond 2014, while the industry forecasts for niobium suggested that consumption would grow by 15% a year, to 2014.
Rare-earth element prices were also expected to grow by between 20% and 30% a year until 2014, with reported prices currently up 355% year-on-year.
“Rising RMMs demand and prices over the coming four to five years should be met with increased supply from new and existing mineral projects,” RCR noted.
However, the firm added that RMMs projects could take up to five years to develop as mines, sometimes owing to geochemical complexity, and the challenge of financing projects that were considered to be outside the resource mainstream.
“This provides an opportunity for companies with relatively low-risk projects, and which are advanced or can be fast-tracked, to gain RMM market share and potentially substantial returns on investment.”
RCR analyst Trent Allen said on Thursday that the combination of anticipated shortfalls in supply and increasing demand over the next four to five years has pushed up the price of RMMs and of the share prices of resources companies that can, or plan, to supply them.
“Again, rare-earth elements are a good example, with reported oxide prices up an average of 355% year-on-year, and 235% in the past three months, leading to an average 16% gain in share prices for companies with one or more rare-earth element projects.”
Share price performances of 358 exchange-listed companies with one or more RMMs projects have seen that the unweighted average performance of these stocks over one month was a 13% increase, compared with a 0% change for Australia’s ASX S&P 200.
Three-month performance was up by 19% and 12-month performance was up by 42%.
Globally, RMM stocks have on average outperformed the ASX by a significant margin in the past 12 months.
Allen noted that despite this, the average share price is 42% below its 12-month high – but also 114% above a 12-month low.
The best performing stocks in the past one month are those with tantalum projects, up 14%, which have benefited from international efforts to stop illegal tantalum supplies from the Democratic Republic of Congo.
The Financial Stability Act, which was signed into law on July 21, requires American companies to submit an annual report to the Securities & Exchange Commission disclosing whether their products contain tantalum, tin, tungsten or gold sourced from the DRC or adjoining countries.
Rare-earth element stocks have also lifted with 12% owing to tightening of Chinese export quotas, especially on the light rare-earth elements. All six groups have outperformed over the quarter; the flattest was lithium at only 3%, for which the price has been comparatively stable.
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