June 9, 2010 / 3:49 PM / in 7 years

Talison Tantalum eyes mid-2011 Wodgina restart

* Sees demand rising, prices to top $100

* Says inventories still high as traders hold back stock

By Michael Taylor

LONDON, June 9 (Reuters) - Australian miner Talison Tantalum said it was considering restarting its Wodgina mine, formerly the world’s top producer, in mid-2011 on expectations of higher demand and rising prices.

The mine in northwest Australia in late 2008 suspended production of tantalum, which is used in aerospace and computer manufacturing, due to a combination of oversupply and reduced demand in the global economic downturn. [ID:nSYD479828]

“My gut feeling is that bringing it (back) in ... might now be pulled forward by six months,” Bryan Ellis, head of marketing at privately held Talison Tantalum told Reuters on Wednesday.

Ellis said the initial target date had been 2012, although last September a Talison spokesman said the company planned to to restart production in mid-2010. [ID:nSYD479828]

Ellis said he expected global demand for tantalum to recover next year to the 2007 level of 6 million pounds, after falling to about 4 million lbs in 2008 and 2009, and then to continue climbing as demand from the electronics industry grows.

Talison, which emerged from the collapse of miner Sons of Gwalia, has the capacity to produce between 1.3-1.4 million lbs of tantalum per year at its Wodgina mine.

“Maybe by the end of this year, signs from the market will say to us, ‘Can you start thinking about pressing the button’,” Ellis said.

European spot prices of tantalite TANT-LON, which is used to make tantalum metal, currently trade near nine-year highs at about $49 a lb.

Ellis said, however, that contract prices often differ from quoted spot prices and are still too low. “We could not possibly re-enter the market place with the numbers where they are today. We would lose a fortune on it.”

He said he expected spot prices in the long term to go above $100 a lb.

NON-CONFLICT TANTALUM NEEDED

In recent weeks, many traders of minor metals have bemoaned the lack of tantalite metal from non-conflict countries and have urged producers to re-start. [ID:nLDE6521ST] [ID:nN21540796]

Governments and the electronics industry seek to source more material from producers other than war-torn countries such as the Democratic Republic of Congo. [ID:nN17181719]

Tantalum is far less expensive to produce in the DRC compared with mining operations in countries such as Canada and Australia and is often associated with human rights violations.

Ellis sees current global inventory levels at about 3 million lbs, despite traders’ concerns.

“I still don’t see a shortage today. What inventory is out there is not evenly spread,” said Ellis, who has over 30 years experience in the mining industry.

He added that the market is moving in the right direction, and expects prices to rise in the next couple of months, before surplus inventories are sold and prices then ease back.

“We will press the button when the real players tell us it’s time, not when the players in the marketplace who have their own agenda say it’s the right time,” Ellis said.

Ellis said that most of the costs of suspending production at the mine, meanwhile, are being covered by an agreement with fellow miner Atlas Iron (AGO.AX) to use some of Tantalum’s facilities for its nearby iron ore project.

“We’ve said yes to this year, but for next year all they can have is 50 percent of our capacity,” Ellis said. “That leaves us with the ability to re-start Wodgina at 700,000-750,000 lbs a year, but keeping the costs under control.”

The company also maintains a lithium-producing arm called Talison Lithium.

Talison Tantalum is owned by a consortium of private equity companies and may go public at some stage, but that move is not currently “on the radar”, Ellis said.

Reporting by Michael Taylor; editing by Jane Baird

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