The Forgotten Players,Chocolate Lovers Should Stock
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Technology Metals: The Forgotten Players Brazil a future rare earth powerhouse? Poland a leading silver player anytime soon? India a forgotten graphite producer? And all that antimony in Bolivia! (And does anyone remember that large potash deposit lying under central Michigan?) A browse through the latest commodity reports compiled by the U.S. Geological Service is a timely reminder for many of the complexity of potential supply sources of resources of various technology metals. Call them the forgotten players. Antimony: In late 2013 a producer restarted an historic antimony mine near Reno, NV. A Canadian company produces the metal in the Australian state of Victoria, another mine in New South Wales is being brought back into production and, as we know from Christopher Ecclestone, hisGeodex Minerals is planning to get into producing antimony in Canada and elsewhere. But we also know that China is, by far and away, the dominant player. According to USGS, that country accounted for 125,000 of the 160,000 tonnes mined worldwide in 2014. The next biggest player was Myanmar (the USGS still calls it Burma) with 9,000 tonnes. But then go the USGS estimates of reserves. China still leads with 950,000 tonnes and there is Russia with 350,000 (and producing just 7,000 tonnes last year) and, in third place, is Bolivia with reserves of 310,000 tonnes (and mining 5,000 tonnes in 2014). Then it’s a big drop-away to the next reserves figure, Tajikistan at 50,000 tonnes (and mining 4,700 tonnes last year). Graphite: All these discoveries, all that exploration, all those off-take agreements — but very little showing up yet on the USGS database. No mention of Australia, Tanzania, Mozambique, and various other countries where explorers are turning up graphite. Of course, much of what has been reported from explorers so far comes into the category of resource rather than reserves, with only five countries listed as having the latter. China, as would you expect is in the lead, with 55 million tonnes. The No. 2 reserves holder is Brazil (40 million tonnes) followed by India (11 million). The only other listed are Mexico (3.1 million tonnes) and Madagascar (940,000 tonnes). In terms of production, only one country comes anywhere near China’s 780,000 tonnes last year, and even then India is a distant second at 170,000 tonnes. But, in terms of reserves, expect that USGS database to undergo some radical revisions as the global exploration explosion firms up figures of new graphite resources. Rare Earths: China, again, with 55 million tonnes left is in the lead — although one wonders about that figure, and it is somewhat meaningless anyway because it is not broken down into light and heavy elements, and so gives no clue to as the remaining reserves of the latter; and without the grades it is not much help. However, that is not the point of today’s exercise: rather it is to look at the other potential players. According to the USGS, Brazil has 22 million tonnes, Australia 3.2 million tonnes, India 1.8 million tonnes, the U.S. 1.8 million and Malaysia 30,000 tonnes. As with graphite, this pecking order will change: Tanzania is just one country that will, at some stage, show up on the USGS table. Niobium: There has not been any niobium production in the U.S. since 1959 and only Brazil and Canada make it on to the USGS table, although the agency notes that the U.S. has 150,000 tonnes of niobium identified resources, although in 2013 these were considered uneconomic. Tanzania could soon be added to the list with an Australian company having defined a decent- sized resource. Silver: Yes, it is a technology metal, being in solar panels, medical equipment and used for water purification (among other tech things). Mexico and Peru are the big bananas in this business, and Australia has the world’s largest silver producing mine. But when we look under reserves, Peru is in the lead with 98.9 million tonnes, but then on second-equal are Australia and, surprisingly, Poland, both with 85 million tonnes still in the ground. Chile is fourth with 77 million tonnes. But Poland: even as someone who has been writing about silver for many years, this comes as a surprise. Potash: Canada by a country mile, both in production and reserves (1.1 billion tonnes of the latter in terms of recoverable K2O). For the U.S. the report cites the Paradox Basin in Utah and the Holbrook Basin in Arizona as containing potash. But then here’s something you may not know: “A large potash resource lies about 2,100 metres (just under 6,900 feet) under central Michigan and contains about 75 million tonnes”. Not likely to be developed in the coming decade or two, given Russia, Belarus, Israeli and North American output and costs (or production near surface from salt lakes in the not too distant future), but something future generations might find comes in handy. Chocolate lovers should stock up as Ebola threat sparks speculation in cocoa futures Ebola and chocolate don’t have much in common; however, the price of the latter has become inextricably linked to the spread of the former. Chocoholics don’t have to visit West Africa to be affected by the Ebola virus; chocolate is at risk because the price of cocoa is skyrocketing. Fear of the Ebola virus spreading to the Ivory Coast, the world’s largest producer of cocoa, and to its neighbor Ghana, one of the fastest growing cocoa producers. Neither country have yet recorded any cases. Ivory Coast has long shut its borders with neighboring Liberia and Guinea, which supply many of the seasonal workers who would now have been arriving on the cocoa plantations to supply the labor for the harvest. The Ivory Coast produces an average of about 1.6 million tons of cocoa a year, 33% of the world’s total and the shortage of laborers combined with market speculation over the Ebola epidemic will send prices of chocolate products skyrocketing ahead of the Christmas season, when demand for the delicious bean is highest. Prices – and quality chocolate consumers – have already felt the shock on prices (cocoa futures have surged), while major international companies in the sector are organizing to raise funds to donate in aid to combat and prevent the virus. The World Cocoa Foundation (WCF) has asked its 15 members, including Nestlé and Mars, to donate while Barry Callebaut, one of the largest international companies operating in Ivory Coast’s cocoa sector, have already adopted on the spot preventative measures for all employees. The Ivorian government has ordered the closure of borders with its neighbors since last August and September the cost of cocoa futures have surged from an average of between USD$ 2,000-2,700/ton to between USD$ 3,100 – 3,400/ton thanks to unfettered speculation in global markets. As is the case for so many commodities from oil to iron ore and agricultural basics, there are inevitable consequences for consumers. Financial speculators have already laid their hands on cocoa, whose crops in the Ivory Coast and Ghana have been threatened, but not yet touched by the Ebola epidemic. West Africa, hard hit by the Ebola virus, is an area dominated by agriculture. Agriculture is the leading productive sector and the major source of income for most of the population in the three countries where the virus has left its biggest mark while neighboring countries suffer the consequences. Their main products are palm oil, cereals, rice and cocoa are the main products, most of which are for export. Increased use of mineral fertilizers such as potash have contributed to the increased and more efficient cocoa bean production. Yara International has sponsored various initiatives in Ghana to train farmers on such ‘best practices’ as correct fertilizer application techniques to improve cocoa yields. The epidemic threatens to generate some USD$ 33 billion dollars in losses in West Africa alone. The agriculture sector is the most affected by the spread of Ebola. Panicking farmers have abandoned the countryside leaving their plantations behind, especially cocoa plantations that are the most profitable for the area. In recent weeks, in fact, the cocoa bean has been the target of a kind of ‘splash and dash’ financial speculation on the international market. In late September, cocoa price levels were starting to match the record highs set in 2011 levels only to collapse dramatically in the first week of October. Cocoa bean futures touched record values at the London stock exchange (GBP 2,187 pounds/ton and USD$ 3,399/ton on Wall Street. Values not seen since 2011, on the eve of the civil war in Ivory Coast. The enthusiasm, however, lasted for the space of a few days. The value has dropped to GBP 1,990 pounds in London and USD$ 3,079 in New York. This sort of swing reflects the kind of speculation borne in fear and crisis even though the numbers one and two in global cocoa production – Ivory Coast and Ghana – have not been touched by the contagion and have put in place preventive health measures to reduce the risk of infection, while speculators have been ‘banking’ on the high probability of the epidemic spreading from Guinea, Sierra Leone and Liberia. The main problem is that in October, the traditional month of the cocoa bean harvest, seasonal workers from Liberia and Sierra Leone cross the border with the Ivory Coast to find work in the plantations.