The price of little-known niobium is going up and these ASX small caps could benefit
Link copied to
The price of niobium has finally started gaining some momentum, rising 15 per cent so far this year.
That’s good news for ASX-listed niobium players — because they are a rare breed.
Niobium — sometimes referred to by its old US name of columbium — is a shiny metal used everything from hypoallergenic jewelry to jet engines to superconducting magnets.
Its major use — accounting for 90 per cent of world production — is in the making of high-strength, low-alloy steel (HSLA).
Ferro-niobium — an alloy of iron and niobium and the main agent used for HSLA steel — is in high demand, according to consultant Roskill.
There are only three mines in the world that make niobium as their primary product and there have been no new mines brought into production since the mid-1970s.
CBMM in Brazil is the world’s largest producer of niobium, supplying about 84 per cent of the global market.
China Molybdenum produces about 7 to 8 per cent of the world’s niobium from its mine in Brazil and Magris Resources produces about the same from its Canadian mine.
US wants more
Niobium is classified as a strategic metal by the US, with usage growth estimated to be 25 per cent over the next six years.
The Americas are the largest users of ferroniobium in steel, followed by Europe and Japan.
China, which is currently not a big consumer of ferroniobium, also presents an opportunity, particularly as it has no niobium deposits of its own.
The current global market is worth around $3 billion per annum, or three times the graphite market.
There are just two ASX-listed juniors that are looking primarily for niobium and there are 12 others who have projects that host niobium among other commodities, mostly lithium and tantalum.
Cradle Resources (ASX:CXX) has a 50 per cent stake in the Panda Hill niobium project in Tanzania, which it is working to move towards financing and construction.
The company is currently in a dispute with its joint venture partner, Tremont, regarding whether a definitive feasibility study has been delivered within the meaning of the shareholders agreement.
Until the dispute is resolved, the pair cannot reach a decision to mine.
The matter has been referred to arbitration, but a date has not yet been set for the hearing.
Globe Metals & Mining (ASX:GBE), meanwhile, restarted work on a feasibility study at its Kanyika niobium project in Malawi earlier this year.
Since late 2015, Globe had been looking at opportunities outside the mining sector and was particularly interested in making its foray into the agricultural and food and beverage sectors.
But a brighter outlook for niobium prompted the company to revisit its Malawi project.
Globe has been investigating its project financing, partnership and design options.
Alkane Resources (ASX:ALK) is advancing its $1 billion Dubbo rare earths project in New South Wales towards production that will also produce niobium.
About 30 per cent of Alkane’s product suite will be magnet metals neodymium, praseodymium, terbium and dysprosium, and 20 per cent will be niobium.
Managing director Nic Earner told Stockhead there is major pressure on CBMM because of the Brazilian elections and rising demand for niobium is driving the price up.
“Prices have been in the mid-$US30 per kilo for ages, but in early October it broke through $US42 a kilo,” he said. “So it’s increased 15 per cent this year.”
Alkane has a joint venture arrangement in place with a large Austrian ferroniobium company that could provide Alkane with a customer base for its product.
Mr Earner said there is strong demand for smaller tonnages than what CBMM supplies.
“We’re talking really small amounts versus CBMM, about 2 per cent of the world market,” he said.
“These are people that want small tonnages. A lot of people are really welcoming to another supplier in the market.”
Alkane is working to try and secure a financial backer or a significant off-take (sales) deal to get its Dubbo project off the ground.
“It’s a really dynamic market in that specialty metals space with the ongoing tensions between the US and China,” Mr Earner said.
“We’ve been ready to finance and execute [the Dubbo] project and continue to talk to all the major potential customers.
“There’s this growing pressure and tension on them to act.”