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Gippsland still sees tantalum shortage by 2011, expects offtake agreements for Abu-Dabbab project soon

Gippsland Limited (ASX: GIP, FRANKFURT: GIX) said the global tantalum market is still expected to experience a significant supply shortfall by 2011 and beyond despite the inflow of what it called cheap conflict tantalum from the Democratic Republic of Congo, which has forced a number of legitimate but high cost tantalum miners and projects including Talison’s Australian operations and Cabot Corporation’s Canadian Tanco operations out of business.

The company expects the tantalum supply shortfall to be further exacerbated by the constraints applied internationally to the use of conflict tantalum, mined by minors and adult workers under adverse conditions, to progressively exclude this material from the supply chain.

The unavailability of this kind of tantalum has sparked interest in the raw material from Gippsland’s Abu-Dabbab project with the company currently engaged in discussions with a number of major tantalum refiners over additional tantalum offtake and involvement in the project. Gippsland expects the shortage and the constraint on conflict tantalum usage to place it in a position to secure a long-term offtake agreement in the near future.

Gippsland already has an agreement with German tantalum refiner HC Starck GmbH for the delivery of conventional tantalum slags and concentrates. The two companies are currently in negotiations to vary the agreement for the delivery of a more valuable high purity synthetic tantalum concentrate (SynCon).

The Abu Dabbab Project has a JORC compliant mineral resource of 44.5 Mt (million tonnes) at a grade of 250 g/t (grammes per tonne) Ta2O5 (tantalum), while the Company's nearby Nuweibi tantalum deposit has a JORC mineral resource of 98 Mt at a grade of 147 g/t Ta2O5.

The total contained Ta2O5 content within the Abu Dabbab and Nuweibi deposits is 55 million pounds of Ta2O5, which Gippsland said was sufficient to satisfy global tantalum demand for more than a decade.

Abu Dabbab is scheduled to commence operations at an initial mill feed rate of 2 Mtpa (million tonnes per annum), producing in excess of 650,000 pounds of tantalum pentoxide per year, which by today's standards would make it the world's largest producer.

The company added that during sampling at its prospecting licenses in Eritrea,  anomalous results for gold, copper and zinc were recorded from all of the three 100 sq km (square kilometre) licenses. Based on these results, the company has decided to double its holdings in Eritrea by applying for a further three 100 sq km prospecting licenses in the Adobha region.

During the quarter Gippsland completed a renounceable rights Issue to all shareholders to raise $3.87 million for the company before costs.

Disclosure: The author holds no positions in the company