The Pulse: Metals critical for Defence; Eritrea potash figures; Bank backs gold; Watch African uranium
That’s a great deal of dependency. What have been described as “important defence uses” for strategic metals include missiles and space vehicles (aluminium, chromium metal, columbium, molybdenum, zirconium); detection and navigation equipment (cobalt, silver, tungsten); ammunition (antimony, bismuth). The list goes on.
We reported earlier on the latest biannual Strategic and Critical Materials 2013 Report on Stockpile Requirements out of the Strategic Materials Advisory Council in terms of the needs for rare earths stockpiling.
But there are plenty of critical metals, as well, on that recommended stockpile list. Antimony: 22,575 tons needed at a cost of $182 million. Gallium: 17,686kg needed at a cost of $10.48 million. Germanium: 28,888kg needed, costing $35.66 million. With each of these, China is one of the leading suppliers, joined by Bolivia (antimony), Kazakhstan (gallium) and Canada and Belgium in the case of germanium.
Gallium is used in semiconductors and electron tubes, scientific research and development; germanium is used in fibre optics, infra-red optics and electronics.
This latest report focuses on beryllium metal which is used in computers, IT and nuclear applications, and whose main producers are the U.S., Kazakhstan and China. It recommends stockpiling 52 tons at a cost of $16.1 million, equivalent to two years’ defence demand. The report notes that it would take more than two years to modify and certify product designs and establish the production capacity necessary to use composites in place of beryllium metal. Possible substitutes are graphite fibre, carbon fibre, reinforced polymer or fibre metal matrix composites.
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POTASH: Roger Bade at brokers Whitman Howard in London says the latest scoping study from South Boulder Mines (ASX:STB) is disappointing. He says it shows that Colluli open pit project in Eritrea has an internal rate of return of only 15.1% The latest model is for a 1 million tonnes a year operation, growing to 2 million tonnes after two years, with a mine life of 28 years. He then provides calculations based on prices of $450/tonne and $425/tonne. They are complex but let’s go the bottom line.
Writes Bade: “These numbers are on an un-geared 100% project basis, but latest negotiations with the Eritrean government continue to suggest that South Boulder is still expected to fund 100% of the project for only 50% of the return, on which these numbers are clearly unacceptable”.
GOLD: The fall in the gold price is only a short-term phenomenon, says Hong Kong-based HSBC Bank (formerly the Hongkong and Shanghai Banking Corp). Gold’s price will be supported by rising global liquidity (“the Bank of Japan has joined the QE party and the Fed shows no let-up”), inflation tolerance and currency wars, an end to liquidation by exchange-traded funds because the bulk of investors have a buy-and-hold strategy, and HSBC expects stronger jewellery and coin demand — and lower scrap supply.
The bank sees gold ranging between $1,525/oz and $1,825/oz this year. “Near-term sentiment appears negative and bullion may remain on the defensive in the short term. Later in 2013, we expect monetary easing, escalating currency wars and geopolitical tensions to support gold prices up to c$1,800/oz,” the report says.
URANIUM: Increasing demand is going to see Africa’s role grow in supplying the globe’s uranium, says the latest edition of the London-based African Business magazine.
Niger: This Sahelian country now supplies 7.5% of world supply — mostly to France. But France’s Areva is developing the Imouraren project in that country that will add 5,000 tonnes to global supply. There is a problem though: Niger is insisting on a bigger share of Areva’s uranium profits.
Central African Republic: Over the weekend, we have seen rebel forces seize parts of Bangui, the capital, in a bid to topple the government. Areva has the Bakouma uranium deposit there.
As the magazine points out, China is already targeting uranium projects in Africa. China’s Guangdong Nuclear bought Kalahari Minerals in Namibia and Australia’s Extract Resources to gain ownership of the Husib uranium mine which will produce 6,800 tonnes a year.
One to watch.
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