MDN poised to take advantage of higher than expected niobium demand
MDN Inc. (‘MDN’, TSX: MDN) is one of the very few North American companies targeting niobium production. Last August, MDN started exploration at its 100% owned Samaqua property, in the Saguenay-Lac-St-Jean area of Quebec, due to its physical proximity to the Crevier niobium and tantalum project (72.5% owned by MDN and 27.5% by Niobec Inc., a subsidiary of Iamgold Corp.). Niobium, formerly known as columbium, is not technically a rare metal, as its atomic number falls outside the boundaries of the lanthanides; however, it is rare and most of it (over 80%) is mined in Brazil. Canada also has significant niobium deposits and Iamgold, thanks to its Niobec mine, is the second largest producer in the world, accounting for 9% of global supply and MDN has an opportunity to become a leading company in the sector. Last December, MDN announced that it has a high intensity magnetic survey has revealed the presence of several niobium targets at Samaqua. MDN will proceed with drilling activities on the site, pending the necessary permits, while service providers are preparing to start work. The start of drilling, encompassing some 1,500 meters, is expected to start this very January.
Niobium is a metal essential for Europe and the United States and has never been produced in these countries over the last 30 years. It is also essential to China, which has become the largest consumer of niobium in the world, because of the booming infrastructure activity and construction improvements leading to better quality steel. The most recent earthquakes, leaving dramatic loss of life and damage, have highlighted the consequences of the use of inferior construction materials and even a small amount of niobium (0.1%) adds greatly to the quality of any steel alloy. Yet, even as China needs more niobium, unlike the rare earths or graphite, zinc and iron ore, it cannot not produce even a gram of niobium. But it’s not just the Chinese; Japanese and Koreans have joined China in securing exclusive supply contracts with Brazil’s CBMM (Companhia Brasileira de Metalurgia and Mineração, the world’s largest producer of niobium) amounting to 85% of all global supplies. What is most shocking is that Western companies were left completely cut off from the contract negotiations. Clearly more niobium sources must be found and developed and MDN is poised to take advantage from the great demand.
MDN is expected to undertake a feasibility study during the second quarter of 2015 to be followed by a fundraising to the tune of at least CAD$ 300 million, ultimately leading to the construction of a niobium and tantalum processing plant. The Project is some time away from production but there is reason for optimism considering that the property is host to some of the highest quality niobium and tantalum deposits in the world. This suggests that project economics are favorable, given that the high value potential of the ore is increasingly high. Tantalum and niobium are among the most strategic metals because they are considered essential metals for the high-tech industry as well as the aerospace sector. 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. Niobium is also an ideal metal for space exploration craft because of its high resistance to heat, making it ideal for use in rocket engines. A smaller percentage of high grade niobium is used exclusively to make superalloys used for the manufacture of aircraft engines. MDN will likely be on the lookout for strategic partners to help raise funding; to this end, the Government of Quebec has sent favorable signals, encouraging mining projects in the Province.
As for the niobium market itself in Canada, last August, Iamgold said that niobium demand was higher than expected 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 suggests that 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.