Andrada Mining (LON: ATM) shares are down 4% today. ATM shares dropped on their announcement of the drilling results - yes, they've found lithium in the pegmatites and so on in Namibia. As with our earlier commentary many things are being done well enough at Andrada Mining: “Andrada is currently a tin company, working in Namibia. OK, that's fine, Namibia might be in Africa but it's a stable jurisdiction for mining enterprises. There's tin there, it can be extracted and so on. True, the tin price is down from recent highs but given the electronics revolution no one thinks demand is entirely going to fade away.
“One of the things about tin is that there's often a lithium content associated with deposits. They're just two metals that often enough do turn up in the same place. You'd rarely go mining such a deposit for the Li content, but if you're already there - with plant equipment etc - for the Sn then who not co-extract the Li? You're already covering most of the overheads and it's only the marginal costs of Li extraction that have to be covered by Li revenues.”
OK, that's all fine by us. What makes us a little less happy is this most recent announcement about tantalum. Because we think there's a big crunch coming in the global tantalum market.
Andrada Mining share price from London Stock Exchange
From today's ATM announcement: “The pegmatite intersections are positive for tantalum and provide additional upside, in the light of the near completion of the tantalum concentration circuit.” OK, yes, tantalum is often found in association with lithium in pegmatites. What used to be the world's larget tantalum mine, Greenbushes, was run as a Ta mine with lithium as the byproduct. Now it's run as a lithium mine with tantalum as the byproduct. OK.
But everyone and their Granny is now out there trying to mine spodumene for lithium. No it's not quite true that all such mines will have tantalum as a byproduct but it's close to being true. Which means everyone and their Granny is going to be producing tantalum soon enough.
And no, tantalum does not have a use in this new electrified world. The demand for tantalum is the same as it used to be - but the supply is about to increase by orders of magnitude. That's something that is not positive for the price of tantalum - to put matters very mildly indeed.
We worry about people who say they are going to make money out of tantalum. Simply because there are so many who are about to try doing so that none will.