Tellurium - Take Advantage Of Growing Demand For This Rare Metal

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Includes: BDNNF, FSLR, GODYF
by: The Value Portfolio

Summary

Tellurium is essential to several different modern technologies such as solar panels and thermoelectric generators which make up 70% of tellurium demand.

In the coming years, these markets are expected to grow rapidly. Solar panel demand is expected to increase at high single digits while thermoelectric demand will increase at double-digit rates.

Boliden is one of the larger tellurium miners in the world. The company is growing its production, and as a result, is a strong play on the tellurium market growth.

Introduction

Tellurium is a chemical element related to selenium and sulfur. The element is essential to major applications such as iron, copper, stainless steel, and lead alloys. Tellurium helps with spectroscopy and decreasing the corrosiveness of sulfuric acid. At the same time, tellurium is essential to solar panels a rapidly growing and increasingly important market.

Solar Panels - Live Science

Tellurium makes up approximately 0.0000001% of the Earth's crust making it three times rarer than gold and comparable to the rarity of platinum. Despite this, the metal is essential to our modern industries. At the present time, tellurium is extracted through sulphide ores that are semi-products of copper, lead, and zinc mining. This shows how tellurium is difficult to get your hands out of.

Tellurium Demand

Now that we have a brief overview of the rarity of tellurium along with a discussion of its value, let's discuss the growing demand for tellurium.

Tellurium Demand by Application - Mcgroup

This image shows the world tellurium demand by application. Currently the vast majority of tellurium usage is from cadmium telluride solar panels using approximately 40% of the world's tellurium supply. Thermoelectric production converts heat into electric energy and uses another 30% of the world's tellurium supply. The remainder of the world's tellurium is used through metallurgy, the rubber industry, and smaller applications.

Cadmium telluride solar panels are an essential source to the future growth in the solar industry. According to First Solar (NYSE: FSLR) they provide high efficiency of just over 20% with the lowest energy pricing on a total cost basis. That means that billions of dollars will go into the development and placement of these panels. This shows how the demand for tellurium will increase in the coming years.

Global Energy Demand Growth - Oil and Gas 360

As we can see here, global demand for fuel from solar, wind, and biofuels is anticipated to grow by 5.8% annually over the coming years. In the immediate term, growth of the solar markets will be focused on minimizing cost. Given the low-cost of Cadmium Tellurite solar panels from companies such as First Solar, we can see how demand for these panels will grow even faster in the coming years.

Thermoelectric Generator Growth - Electronic EEtimes

At the same time, demand for sub-watt thermoelectric generators is growing rapidly. Growth in this market is expected to grow by 19.8% compounded annually from 2014 until 2020. We already saw above that the solar markets are growing, and above, we saw that the second largest source of tellurium is thermoelectric generators. This should help tellurium demand grow even further.

As we saw above, tellurium is an incredibly rare metal and one that is fairly difficult to get. Despite this, large amounts of tellurium are used in solar panel and thermoelectric device manufacturing. Given, as we can see above, how rapidly these markets are anticipated to grow, we can how tellurium demand can be expected to grow and the market opportunity associated with that.

Tellurium Demand Need Numbers

Now that we have an impressive discussion of our need for tellurium and the rapidly growing demand for it, let's discuss the numbers for the need for tellurium supply.

Tellurium Demand Requirements - Investor Intel

Starting in 2010, as a result of its use in solar panels and thermoelectric generators, tellurium demand is going to pick up rapidly. Demand is expected to grow from 250 thousand tonnes annually in 2010 to 1.5 million tonnes annually, a six fold growth. By 2050, this can increase even faster to more than 2.5 million tonnes annually.

These supply needs will need to come from somewhere. This shows how demand for this rare metal is growing. Now that we have an overview of this along with the numbers for the growth in tellurium demand, let's finish up by discussing how to invest in this opportunity.

Invest

Fundamentally, as we saw above, tellurium is produced as a by-product from sulphide ores, ores that are involved in copper, zinc, and lead mining.

Tellurium Mine - Investing News

Currently, there are two publicly traded companies directly involved in tellurium mining. Swedish mining company Boliden (OTCMKTS: OTCPK:BDNNF) is one of the larger suppliers of tellurium with a market cap of $7.2 billion. The company's tellurium production comes from its Kankberg gold mine, a mine that the company anticipates will add a respectable amount of tellurium to the annual markets.

This should help bring millions of dollars in additional income to Boliden helping the company's future earnings. However, given that Boliden is an enormous company, investing in Boliden is a small bet on the future of the tellurium markets. Unless the company chooses to make a major move into the tellurium markets, the needle won't be moved much.

An alternative, and much riskier play on tellurium mining, is Deer Horn Metals. Deer Horn Metals, publicly traded as Deer Horn Capital (OTCMKTS: OTC:GODYF) is a tiny company with a market cap of just $150 thousand. However, the company aims to develop Canada's first tellurium, silver, gold mine.

Will the company be able to do this? I don't know. This is an incredibly risky investment. However, this is a pure-play high-risk, high-reward play on the future of tellurium mining.

Conclusion

Tellurium is an essential component our modern society. High-efficiency and cheap solar panels use tellurium along with thermoelectric generators. These are all essential components of our modern world. As a result of these things, we can expect that tellurium demand will continue to grow rapidly, and this will require thousands of tonnes of tellurium that will need to come from somewhere.

Tellurium is difficult to invest in. Currently it is often produced as a small byproduct of other mining such as copper, lead, or zinc. One of the safe, yet best ways, to take advantage of this is by investing in the Swedish mining giant, Boliden. Boliden, as a multi-billion dollar mining giant, should see its earnings go up as it produces additional tellurium.

As a result, investors interested in taking advantage of growing demand for this rare-metal should invest in Boliden, or if they want a much riskier play, Deer Horn Metals.

Disclosure: I am/we are long FSLR.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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