MDN starts niobium exploration, benefiting from growing demand for steel
Last August, MDN Inc. (‘MDN’, TSX: MDN) announced the start of exploration at its 100% owned Samaqua property, north of the town of Girardville in the Saguenay-Lac-St-Jean to determine the presence of a mineralized carbonatite. The results will be announced as soon as available and will extend over a period of 4 to 5 months. The property is very promising. It is adjacent to the Crevier niobium and tantalum property (72.5% owned by MDN and 27.5% by Niobec Inc., a subsidiary of Iamgold Corp.) and presents a magnetic geophysical response similar to that associated with the Niobec niobium mine inc. This magnetic signature lies 23 km southeast of the Crevier deposit and 130 km northwest of the Niobec mine. The heart of the Niobec deposit is niobium core surrounded by rare earths. There are only three major niobium producers worldwide. Brasileira de Metalurgia and Mineracao (CBMM) in Brazil owns the world’s largest niobium deposit and its Araxa mines supplies some 83% of niobium consumed around the world. Anglo American (UK) also extracts niobium in Brazil but no more than 3% of the world’s total, while Iamgold in Canada, thanks to its Niobec mine, is the second largest producer of niobium in the world, accounting for 9% of global supply.
In August, Iamgold confirmed that it enjoyed strong demand for its niobium in the first half of 2014, prompting it to increase its production forecast for the full year from 4.7-5.1 million to 5.2-5.5 million kilograms of the metal (while its gold output dropped). This confirms niobium’s high demand for the next few years. The highest niobium grades (over 99% purity) are used in optical and electronic devices. However, niobium is going to be growing in demand, because it allows for weight reduction, which in automotive and transportation ‘language’, translates to higher energy efficiency. MDN and Iamgold have already been working on a tantalum resource at the Crevier project. By developing a tantalum resource in Canada, in the mining friendly district of Quebec, MDN Mines will control a very high demand mineral, whose demand is increasing and whose global competition has been hampered by geopolitical risk. Brazil enjoys an overly dominant – one might say hegemonic – position over niobium. Given that the European Union and the United States consider niobium to be a critical metal, they are both interested in reducing reliance on Brazil and identifying new sources closer to home. The limited supply and number of plays – and the long supply routes – simply adds too much pressure on prices while CBMM is the only niobium producer that is able to deliver all the varieties, including the highest grades. Therefore, MDN’s new niobium venture will be welcomed by the market.
Niobium is mainly used in steel alloys to create high strength low alloy steels (called “High Strength Low Alloy Steels”), stainless steel and heat resistant steels. Niobium’s properties have generated considerable demand from advanced industrial sectors because it helps increase steel’s resistance to high temperatures, corrosion while raising superconductivity. Niobium has, therefore, become essential in the automotive industry, heavy engineering and infrastructure (i.e. bridge construction and earthquake resistant buildings), the petrochemical industry, power plants and oil & gas pipelines. A smaller percentage of high grade niobium is used exclusively to make superalloys used for the manufacture of aircraft engines.
Chinese international investments in niobium production reflect niobium’s growing strategic value and the geopolitical risks that have prompted demand for additional niobium production in North America. Indeed, China and Australia had a small diplomatic incident over Baosteel Group’s sizeable investment in CBMM, the world’s largest producer of niobium. Niobium is a rare metal used to have strongly hardened steels. The Chinese logic is basic. Instead of importing five separate loads of iron ore, one coal and one oil from Australia to produce steel in China, it has decided that it is better to use iron ore, niobium, petroleum, energy, and work in the new Brazilian steel complex built by the Chinese in Brazil. Then, only one ship will transport steel products in China, and Brazil will also benefit from the production of steel to develop its automobile industry. Reacting China’s decision, Australian Prime Minister Tony Abbott canceled talks with their Chinese counterparts on the rapid improvement of bilateral defense relations in that would have allowed a Chinese military presence in Australia.