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ANALYSIS-Tantalite to rise as conflict-free supplies needed

 * Electronics metal tantalite to go above $120 lb next year
 * DRC ban hinders traceability schemes; Wodgina restart eyed
 By Michael Taylor
 LONDON, Nov 10 (Reuters) - Tantalite prices are likely to
test new highs above $120 a lb next year as industrial consumers
scramble for ethically mined material outside of the Democratic
Republic of Congo (DRC), the top global producer.
 But mine restarts and new projects in other, conflict-free
countries may take years to get underway or require a sustained
period of high prices to become economically viable.
 Prices for tantalite TANT-LON, which is used to make
tantalum metal for iPods and BlackBerry smart phones, have
soared by about 150 percent this year. The minor metal traded at
about $87.50 a lb on the European spot market, well below $36 a
lb hit in January. <STRATEGIC/EU>
 Eastern Congo is in the grip of conflict years after the
formal end of a 1998-2003 war, which sucked in six neighbouring
armies and led to an estimated 5 million deaths.
 International pressure on DRC is growing to stop armed
groups profiting from mining, but analysts say a clampdown on
so-called "conflict minerals" will be difficult because
government troops are themselves heavily involved in the trade.
 Production data is complicated by a considerable black
market, but output in the DRC last year accounted for about 90
percent of global production at around 2 million lbs, according
to exploration company Commerce Resources Corp CCE.V. 
 Commerce Resources said the electronics industry accounts
for 75 percent of tantalum consumption, aerospace companies 15
percent and medical industries 10 percent. The Canadian firm
added that China was the world's top importer.
 
 CRACKDOWN
 An international crackdown on sourcing from conflict areas
and a scarcity of tantalite from other countries have led to
sharp price rises since early summer. [ID:nLDE65N1AL]
 "Prices for raw materials on the world markets have gone up
drastically, especially due to UN initiatives and a new law in
the United States regarding materials from central Africa," said
David O'Brock, chief executive at producer AS Silmet of Estonia.
"I've heard that it (tantalite) could go up to $120 a lb."
 Silmet buys Brazilian ferro niobium tantalum.
 The pressure comes in part from a U.S. "conflict minerals"
bill, due to come into force in April next year. The new law
will require companies to prove that materials extracted from
the DRC and its nine neighbours are not linked to conflict.
[ID:nN15459722] [ID:nLDE66J1TE]
 "Prices are just going to continue going up. The increases
have been quite dramatic recently ... $120 a lb is viable," said
Candida Owens, a trader at German-based Cronimet.
 "I was dismayed to hear the other day that apparently alloy
makers are not now accepting Chinese tantalum bars because of
the whole Congo connection," she added. "That has knock-on
affects down the chain -- impacting miners' livelihoods."
 Industry groups are moving to try and put in place by April
recognised schemes to trace materials from African sources
including some DRC mines that can be certified as not involved
in conflicts. One of the frontrunners is a system run by the
Tantalum-Niobium International Study Center and tin consultants
the ITRI. [ID:nLDE68C1RS] [ID:nLDE68A07E]
 Hindering their efforts in the DRC, however, is a ban on all
mining operations in the eastern part of the country as the
government seeks to undermine illegal networks. [ID:nLDE6A71WS]
 "All material movement has stopped. If it's not moving, it
can't be tagged," said William Millman, executive committee
member at the Belgium-based Study Center. "We are losing
tremendous ground here. The timescale to get it (the scheme)
spread evenly and properly across the region is in an abeyance."
 Industry sources in the DRC say it is unlikely the ban will
be lifted before the end of the year.
 
 NON-CONFLICT TANTALUM SOUGHT
 Miners in countries such as Canada and Australia say they
hope to provide a solution to the supply shortage caused by the
conflict issue.
 But traders, analysts and consumers say they are withholding
judgment on whether a number of planned projects will be able to
achieve their targeted output levels.
 Commerce Resource Corp's Blue River Project in British
Colombia, for example, is looking to produce up to 1 million
pounds of tantalum per year by late 2012. [ID:nN17181719]
 Traders are also closely watching Global Advanced Metals'
Wodgina mine in northwest Australia, formerly the world's top
tantalum producer, where production was suspended in late 2008.
[ID:nLDE6530TW]
 "We are still working on the re-opening program and have
made no final decision as yet," Bryan Ellis, chief executive at
the Australian miner, formerly known as Talison Tantalum, said
in an email.
 "It is not only the price of the product but the exchange
rate that will influence our decision ... currently (the)
Australian dollar is too strong," Ellis added.
 Existing stockpiles of tantalum could run dry within two
years, industry analysts say. [ID:nN21540796]
 This would be compounded if, as Ellis expects, global demand
recovers next year to 2007 levels of 6 million lbs, from about 4
million lbs in 2008 and 2009. [ID:nLDE6530TW]
 "Talison are probably looking closer to $120 a lb to
restart," said Bill Hattan, a U.S.-based independent minor
metals broker. "The market is going up more on production
shortfalls, versus overall demand. If demand were good right
now, you'd see these prices really rocketing."
 (Additional reporting by Katrina Manson in the DRC; editing
by Jane Baird)

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