EDITOR: | December 4th, 2014 | 2 Comments

Bismuth – the X Factor in the Chinese Dominance Challenge

| December 04, 2014 | 2 Comments
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It seems that there is no end to the number of metal that have gradually fallen totally under the sway of the Chinese. In fact thinking back over the years since the Industrial Revolution in the mid-1800s it is hard to think of another country that ever had such a corner on so much of the periodic table. Before anyone cries “Foul” the Chinese have managed to achieve this NOT by being colonialists and going forth and conquering resource rich regions but by cultivating their own extensive domestic resources. Interestingly though it’s not the bulk metals that the Chinese have the stranglehold on, but rather those metals that are up and coming technology metals or alternatives to existing metals that for one reason or another (mainly environmental) are in the dog-house. Lead being a good example.

That is not to say that some of the actions of China in central and southern Africa in recent times have not had a neo-colonialist tint to them. However, these are not the difference between dominance or not in a particular metal.

According to British Geological Service (BGS) data China is the leading producer of 22 metals, with the next largest being Australia and South Africa, with three each. The position in Rare Earths is well known and we have mentioned the role in Antimony before. Then there is Germanium and Gallium and the subject of this piece, Bismuth.

The Extent of Control

Frankly when we came to look at this metal we were surprised that China should have such a grip. We had imagined that as a well-known ancillary metal in many lead or copper deposits that the production mix would have made its production sources more widely distributed. Looking at the BGS Risk List of Critical Metals (the latest being that of 2012) the rankings have Bismuth at number four on the list (behind Rare Earths, Tungsten and Antimony). The world market for Bismuth is ~20,000 tonnes per year with China accounting for 60% of world reserves and 80% of world production.

bismuth_market_share

Thus we see that when China sneezes (just like in REE and Antimony) the rest of the market catches a cold. In Bismuth we have seen in recent years a repeat what happened in those other elements with it closing 20% of its production due to environmental and mine safety issues. Then it announced policies to restrict exports. Sound familiar?

The Nature of the Metal

Bismuth (with the chemical symbol Bi) has been known from ancient times, although until the 18th century it was often confused with lead and tin, which share some physical properties. However, Bismuth chemically resembles arsenic and antimony. Elemental bismuth may occur naturally, although its sulfide and oxide form important commercial ores. The free element is 86% as dense as lead.

The etymology is uncertain, but possibly comes from Arabic bi ismid, meaning having the properties of antimony or German words weisse masse or wismuth (“white mass”), translated in the mid-sixteenth century to New Latin bisemutum.

Bismuth is a brittle metal with a silvery white color when freshly produced, but is often seen in air with a pink tinge owing to surface oxidation. Bismuth is the most naturally diamagnetic element, and has one of the lowest values of thermal conductivity among metals.

Usage – Replacing Lead

Bismuth compounds account for about half the production of bismuth. They are used in cosmetics, pigments, and a few pharmaceuticals, notably Pepto-Bismol. It is also used in the manufacture of ceramic glazes, crystal ware, and pigments, and as an additive to free-machining steels and malleable iron castings. Bismuth’s unusual propensity to expand upon freezing is responsible for some of its uses, such as in casting of printing type.

Bismuth has unusually low toxicity for a heavy metal. As a result of moves to reduce exposure of the population to Lead, a wider market opened for bismuth as a metallurgical additive to lead-free pipe fittings and fixtures, and bismuth use in water meters and fixtures has increased in recent years. As the toxicity of lead has become more apparent in recent years, there is an increasing use of bismuth alloys (presently about a third of bismuth production) as a replacement for lead. Researchers in the European Union, Japan, and the United States continued to investigate the use of bismuth in lead-free solders.

Some feel that there is significant growth potential in the use of zinc-bismuth alloys to achieve thinner and more uniform galvanization. Another new application is the use of a bismuth-tellurium oxide alloy film paste for use in the manufacture of semiconductor devices.

One of the more intriguing uses we found out about (which is also massive) is in windscreen “frit”. This is the darkish colouring around the edges of a windscreen that protects the glue that holds the glass to the vehicle. This “trivial” usage is on a truly monumental scale with two ounces of Bismuth per car on 80 million vehicles per annum.

Research examining liquid lead-bismuth coolants for use in nuclear reactors was also ongoing. Work was proceeding toward developing a bismuth-containing metal-polymer bullet. However a key thing to remember is that if Bismuth is to even fractionally replace Lead usage then its production would have to be much larger than the current 20,000 tpa. Moreover we would note that Bismuth currently trades at seven times the price per lb for Lead.

Supply – Tight

As already mentioned the Chinese have a stranglehold on supply but this does not need to be the case, for as we shall see there are quite a lot of bismuth deposits (mostly as a secondary by-product) around the world.

One of the main reasons that China has pulled ahead was because the La Oroya Metallurgical complex in Peru was shuttered in 2009 owing to financial and environmental problems. According to the USGS though, Zinc production was reported to have begun in July 2012 and the lead smelter reportedly resumed operations during the first half of 2013. Although prior to the shutdown the La Oroya complex had been a significant producer of bismuth, it was uncertain whether bismuth production had resumed. Canadian production dropped significantly in recent years owing to ore depletion and closure of the Lead/Zinc Bathurst Mine in New Brunswick.

The chart below shows the estimated Bismuth reserves of the countries with most of the world’s known Bismuth. On Canada we would note that it consists of 5,000 tonnes of “Others” and 49,000 tonnes at Fortune’s NICO deposit.

bismuth_reserves

The United States ceased production of primary refined bismuth in 1997 and is highly dependent on imports for its supply. A small amount of bismuth is recycled by some domestic firms. Bismuth is contained in some Lead ores mined domestically, but the bismuth-containing residues are not processed domestically and may be exported. In 2013 the value of reported consumption of bismuth was approximately $17 million.

Bismuth Plays

As far as we can work out the plays with meaningful Bismuth in the mix include:

  • Blaze International (BLZ.ax) and Meteoric Resources (MEI.ax) at Barkly Creek
  • Emmerson Resources (ERM.ax) at Chariot East
  • Fortune Minerals (FT.to) at NICO
  • Frontier Resources (FNT.ax) at Stormont

Fortune –Cobalt with a Bismuth Chaser

The thing that initially piqued my interest in Bismuth was a conversation with Fortune Minerals, a TSX-  listed silver producer that also holds a coal project in BC and a Gold/Cobalt/Bismuth/Copper project in the North West Territories. While our enthusiasm for Cobalt has been aired here before, the Bismuth was the really surprising thing because of the sheer size of the Bismuth resource which represents around 12% of global reserves in this metal in what is also the world’s largest Bismuth deposit. The Proven & Probable Reserve of Bismuth at NICO is 102.1mn lbs.

Without going into too much detail at this point, NICO is envisioned by Fortune to hopefully be, when in production, a reliable North American vertically integrated producer of Cobalt and Bismuth.  The capex though is a doozey at CAD$589mn.

Conclusion

While China has the overwhelming proportion of the reserves compared to any other country there is no reason why the other countries with Bismuth reserves should not have a higher collective market share than the current mere 20% of global production. Slippage in non-Chinese production has allowed this woeful situation to develop. Canada probably has the most potential to push back into the top ranks with one deposit potentially skewing things in Canada’s favour. However, development of a number of mid-sized Cu/Au deposits in Australia might give a small fillip to that countries current poor positioning. On a broader scale though, the West’s decline might also be attributed to the lack of work on new Lead/Zinc mines. This is a situation we see being reversed in coming years with Zinc back into favour.

Investors should now be on the lookout for Bismuth as a kicker in the by-product mix of up and coming projects. The more metals in a polymetallic equation the better the chance that project’s bottom line will come out positive, with Bismuth being a positive X factor in such an equation.


Christopher Ecclestone

Editor:

Christopher Ecclestone is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten & Company in New York in 2003 ... <Read more about Christopher Ecclestone>


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Comments

  • Peter Gallop

    Hey Chris, thanks for this interesting report. You say the capex is a doozey, but what’s the NPV, and isn’t that the more important thing to evaluate?

    December 4, 2014 - 6:02 PM

  • Christopher Ecclestone

    This is where my perennial horse race analogy is useful (and this goes for all miners). If the starting gate won’t open (i.e. capex too high) and all the other horses sprint away then it doesn’t matter to be the best horse in the race or with the best odds… still a non-starter….

    Cobalt and bismuth make this a unique proposition for an offtaker/trader.. so we shall see…

    December 5, 2014 - 2:31 AM

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