black swans in tin & tantalum mining and their implications for electronics suppliers - sykes et...

‘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


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)


Slide 3 of 25


THE CASE FOR ‘BLACK

SWANS’ IN TANTALUM MINING

‘Black Swans’ in tin and tantalum mining and the implications

for electronics manufacturers

18th Nov 2015


Slide 4 of 25


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


Slide 5 of 25


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)


Slide 6 of 25


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


Slide 7 of 25


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?


Slide 8 of 25


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


Slide 9 of 25


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


Slide 10 of 25


THE CASE FOR ‘BLACK

SWANS’ IN TIN MINING



18th Nov 2015


Slide 11 of 25


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


Slide 12 of 25


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)


Slide 13 of 25


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


Informal

mining

Ageing

mines

Conflict

Minerals

Political risk

Slide 14 of 25


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


Slide 15 of 25


…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)


Slide 16 of 25


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


Slide 17 of 25


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


Slide 18 of 25


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


Slide 19 of 25


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


Slide 20 of 25


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


Slide 21 of 25


UNDERSTANDING THE

UNCERTAINTY



18th Nov 2015


Slide 22 of 25


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


Slide 23 of 25


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


Slide 24 of 25


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:

[email protected]

18th Nov 2015


Slide 25 of 25

black swans in tin & tantalum mining and their implications for electronics suppliers - sykes et...

Economy & Finance