China’s gallium and germanium export ban could spark minor metals boom
China’s threat to curb exports of gallium and germanium has sparked investor interest in the metals but they are just two of a group classified as minor metals which have the potential to surprise.
The common threads connecting thinly traded commodities such as minor metals are emerging uses in modern technologies and the tight control held by a handful of producers with some willing to weaponise supply.
Rare earths are the best example of what can happen when a big producer squeezes the supply pipeline creating an opportunity for new projects, which is why Lynas Rare Earths (ASX: LYC) rose from nowhere to a top 100 rank on the ASX and a value of $6.5 billion in less than 10 years.
But rare earths could be just the tip of a minor metal iceberg which has been floating aimlessly for decades waiting for the properties of the different metals to be fully understood and for demand to develop.
Gallium and germanium, which were discovered in the 19th century, are examples of how minor metals can “hide in plain sight” with limited commercial use until the invention of computer chips.
Explorers on the hunt
At least five small Australian explorers with gallium and germanium connections are on the hunt for the metals, with varying degrees of success.
Mount Burgess Mining (ASX: MTB), which was an early responder to the Chinese threat of a trade ban, reported the discovery of germanium in drilling at its Kihabe/Nxuu zinc project in Botswana. The stock rose from 0.1c to 0.6c in late July before slipping back to 0.4c.
Gold 50 (ASX: G50) moved up quickly from 14c to 23c thanks to interest in the gallium in its Golconda project in Arizona before easing back to 16c.
Battery Age Minerals (ASX: BM8) rose from 38c to 46c after reports of germanium and gallium in its Bleiberg project in Austria but is now back to 38c.
Golden Deeps (ASX: GED) almost doubled from 6c to 11c after interest was sparked in the potential for gallium and germanium in its Nosib vanadium project in Namibia but is now back at 6.8c.
West Cobar Metals (ASX: WC1) moved up from 8c to 9c after detecting concentrations of gallium during the examination of drilling results at the Salazar rare earth project in WA.
Those price moves are encouraging but largely as a pointer to future potential, with all of them worth watching if China perseveres with a squeeze on supplies of the metals under its control.
Australia’s relationship with gallium
Australia’s history with gallium can be traced back to a rush more than 30 years ago when Alcoa, a big aluminium producer, was part of an attempt to monetise the gallium in the caustic liquor circuit at its WA alumina refineries.
Demand for the metal was hot back in the late 1980s thanks to the first recognition of its properties in computer chips, leading to a plan to extract gallium from the Alcoa refineries before it was sent to a dump with waste rock.
Rhone Poulenc, a big French chemical specialist led the gallium extraction project, invested $50 million in a plant near Pinjarra south of Perth to capture the minor metal.
The plant opened in mid-1989 but closed in mid-1990 thanks to a combination of limited demand from chip makers and government opposition to other proposed metal extraction processes.
To put gallium into perspective, it is a metal which is reported to enjoy global annual production of around 500 tonnes, selling at around US$250 a kilogram.
Germanium, generally produced as a byproduct of zinc and lead mining, commands a higher price at around US$1,350/kg, and is used as a semiconductor in electronics and fibreoptics.
Price volatility in the minor metals market
Price moves by minor metals can be sharp, but they can also be short-lived which is a warning and probably makes them more suitable for speculators than buy-and-hold investors.
The germanium price, according to data published by Trading Economics, has risen by 14% over the past year, from US$1,005/kg to the US$1,350/kg mentioned earlier, close to an all-time high.
Gallium has been recovering after a steep fall last year which saw it drop to US$190/kg before a slow recovery to around US$250/kg without any evidence yet of the sort of market reaction which might have been expected after the Chinese trade threat.
A closer look at molybdenum
A sharp upward move could come if a ban is introduced with gallium and germanium primed for the sort of price moves seen in other minor metals such as molybdenum, which has risen by 48% over the past 12-months to US$53.63/kg without anyone seeming to notice.
Eye-catching as that upward move by molybdenum (or moly for short) might be, it needs to be noted that earlier this year when there was a rush for supplies, the price of moly reached US$95/kg.
Moly’s time will come again but high prices will also encourage additional supply from copper mines which produce it as a byproduct.
If the lessons of gallium, germanium and molybdenum are not sufficient warning about how minor metal markets can quickly lurch from under to over supply consider the fate of Australia’s vanadium industry.
Despite having an abundant supply of vanadium, which is used to harden steel and has an emerging market in batteries, Australia has struggled to join the world market.
Australian Vanadium (ASX: AVL) with its Gabanintha project in WA is currently at the top of a list of Australian vanadium hopefuls, following a path blazed by the Wundowie project near Perth, followed by the Windimurra and Barrambie projects which have shown promise but are yet to really deliver.
Hafnium a potential rising star
Hafnium is another metal waiting for its turn in the limelight thanks to being one of the hardest known elements with properties that make it perfect for use in control rods used to manage the rate of fission in nuclear fuel.
Minor metals can be fun to watch as their prices oscillate but they are thinly traded and until they develop a deep market, like rare earths, they are risky investments complete with sharp price moves, up and down.