All right, so Taseko Mines'
Taseko has found a potential back alley leading straight to profitville. Successful exploration of the company's Aley property in 2010 now has the miner charting a path that leads right through a rare and useful element. The miner has encountered some seriously thick intercepts of high-grade niobium, beginning near the surface, at its Aley property in British Columbia. The discovery appears very promising for supporting a major open-pit mining operation for this obscure resource.
I had never heard of niobium, either, until I first purchased shares of gold miner IAMGOLD
IAMGOLD's Niobec mine in Quebec is one of only three major niobium mines in the world, and the only significant producer located outside of Brazil. The operation is a growing and reliable cash generator for IAMGOLD. Following capacity improvements and modifications to its underground mining methods, IAMGOLD is targeting between 4.7 million and 5 million kg of production for 2011, at an operating margin of $15 to $17 per kilogram.
Growing demand, meet static supply
Global reserves are estimated at about 2.9 million tons, with annual production of 62,000 tons recorded for 2009. Niobium prices are holding steady near $50 per kilogram, but the element's range of applications results in multiple fronts for potential demand growth. As Taseko CEO Russell Hallbauer explains: "With limited near-term niobium production on the horizon and demand steadily growing, an open pit mining operation at Aley has strong potential to become a key asset for Taseko."
As export-focused miners like Peabody Energy
Foolish showdown: niobium vs. molybdenum
When I compare the niobium market to the better-known molybdenum market, I find that global reserves to 2009 production volume yields a similar landscape for supply between the two elements. Molybdenum reserves provide about 43 years of worldwide production at 2009 levels, while niobium reserves equate to nearly 47 years.
However, whereas molybdenum is produced in vast quantities as a byproduct of mines that primarily target copper, niobium is mined exclusively by targeted operations. This is important, because if world copper demand grows faster than steel demand over the long term, as I believe it will, then byproduct molybdenum volumes from major copper producers like Freeport-McMoRan Copper & Gold
On the demand side, the most salient difference that I have spotted between niobium and molybdenum relates to geography. China, the world's leading steelmaker by a huge margin, happens also to be the world's leading producer of molybdenum. China's 77,000 tons of 2009 molybdenum production accounted for 38.5% of the world's total. By contrast, China must import its niobium consumption, which in my view renders niobium a potential focal point of competing interest from eager importers.
Situated a good deal closer to China than any of the three existing mines, Taseko's Aley project in particular may draw considerable interest from Beijing. We have already witnessed China's unrivaled commitment to securing future supplies for all manner of strategic resources, and even seen a Chinese state-owned enterprise ink a long-term supply agreement with Coeur d'Alene Mines
Taseko's strategic grand slam
If you're having trouble discerning whether molybdenum or niobium presents the greater investment opportunity, then get ready to eat your cake, too. Taseko already produces significant quantities of molybdenum at its flagship 75%-owned Gibraltar mine, which yielded 940,000 pounds of the stuff during 2010. The prospect of adding niobium to the mix with the development of Aley can only sweeten a resource investor's many-sided rationale for owning a slice of Taseko Mines. Taseko's shares surged by more than 15% Tuesday following the company's announcement of the niobium discovery, which I consider a rather muted initial adjustment for a find of this magnitude.
Fool contributor Christopher Barker is the nobleman of niobium. He can be found blogging actively and acting Foolishly within the Motley Fool CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Coeur d'Alene Mines, IAMGOLD, Peabody Energy, Taseko Mines, and Thompson Creek Metals. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool's disclosure policy has an estimated mine life of umpteen gazillion years.