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Indium Demand

Our Indelible Interest in Indium

Written by Luke Burgess
Posted January 15, 2007 at 8:00AM

BALTIMORE, MD-Indium: It's a metal that most folks have never heard of. But in today's high-tech economy, demand for this material is soaring in everything from thin-film solar panels to flat-screen TVs. The mounting demand for this rare, strategic metal presents us with a unique investment opportunity that could turn out to be the best investment most investors will miss.

Before we start talking about the investment side, let me briefly tell you a bit about the history and properties of this incredible metal.

Discovered virtually by accident in 1863 by two German chemists, Ferdinand Reich and Theodor Richter, indium was once thought to be incredibly rare. In fact, prior to 1924, only a single gram of indium existed in its isolated form.

Since then, however, we've found that this metal is fairly plentiful. As is turns out, indium is the 61st most abundant mineral in the earth's crust. That means it's about three times more abundant than silver or mercury. But that doesn't necessarily mean that we're busting at the seams with the stuff. Fact is, finding indium in high concentration is extremely difficult. For mineral firms, that means having a property with a lot of indium can be jaw-droppingly profitable.


Indium is a soft, silvery-white element named after the brightest line on the color spectrum, indigo, and has the abnormal characteristic of producing an odd sound when being bent. Metallurgists call this sound a "scream." I've personally heard this sound. To be honest, it sounds more like the soft crackle of a fire than a scream.

Although it has some reactive properties with certain acids, indium is highly stable in air and water. It is also faintly radioactive. But it is not regarded as dangerous, as the decay rate is almost 50,000 times slower than that of natural thorium. With such a low toxicity, scientists can safely handle, work with, or even lick a bare piece of indium . . . should they get the weird desire to do so.

So what the heck do they use this stuff for, anyway?

Some of indium's uses include making semiconductors, high speed transistors, specialized solders and other specialized alloys. It is also used in the control rods for nuclear reactors. But the main use of indium, almost 50%, is in the creation of thin-film coatings to make electronic devices such as thin-film solar panels and liquid crystal displays (LCDs), screens that transform electricity into light energy.

Now, even if you aren't as tech-savvy as you would like to be, I can promise that you've used LCDs at one point or another. In fact, it's likely that you're staring at a liquid crystal display right now. LCDs are used in a wide variety of products, including projectors, cameras, televisions, watches, cell phones, desktop monitors and laptop computers.

As you can imagine, with the explosion of the high-tech information age, the demand for LCDs is soaring. In fact, the Japanese electronics manufacturer Sharp Corp., the world's largest producer of LCD televisions, says that it expects this year's sales of LCD TVs to expand by 50% over 2006, to 68 million units.

Remember, all LCD products contain a thin film coating of indium. That's where our investment angle comes in.

Now, here's the best part.

Decades of underinvestment in the indium sector has led to an acute supply deficit. Global demand now far outstrips both main production and capacity. More importantly, demand growth over the past few years has been increasing heavy, while producers struggle to ramp up production.


This supply-demand imbalance has propelled indium prices nearly 900% higher since 2002! But the party's not over yet. Not by a long shot. The increasing demand for LCDs alone is enough to continue to push prices even higher.

For investors like us looking to cash in on the metal, this means mineral firms that are exploring for or producing indium are likely a pretty safe bet.

Now, like I mentioned earlier, finding indium in high concentrations is extremely difficult. This makes increasing production nearly impossible.

According to the U.S. Geological survey, the top five indium producing countries in the world in 2005 were China, Japan, Russia, Canada and Belgium. But as you can see in the chart below, of these five countries, only China was able to increase production in 2005 (figures for 2006 are not yet calculated).

 

The fact is, these producing countries won't be able to keep up with the staggering increases in demand. For consumers, that presents a problem with limited solutions.

Recycling is one of the promising opportunities arising in the face of failing indium supplies. In 2002, a Japanese program was able to recycle 155 tons of indium, 45% of the country's total consumption. But the process for recycling indium tin-oxide is very difficult and involves high costs and lengthy time periods (about three months) to complete.

The second solution to demand deficits is to use substitutes. Unfortunately for consumers, however, this is an even less promising outlook. Not only is it not very cost efficient to use an indium substitute, but many times consumers end up with an inferior product. Furthermore, in some cases the indium substitute is very toxic and harmful.

For example, gallium arsenide can be used in place of indium in solar energy cells, but the cost is so much higher that it can be considered uneconomical.

Bottom line: There's no question that the demand for indium is going to continue increasing over the next few years. With the increase in demand and the lack of new supplies coming online, indium prices are set to go even higher.

So how can you cash in?

Well, we've already told.

Argentex Mining Corp. (OTC BB: AGXM)

A few short months ago, Argentex discovered a treasure trove of indium, zinc and other metals on its Argentinean property called Pinguino.

Now, this property also hosts high grade quantities of silver and gold, which makes it a safe bet for a major upside in the coming months as the company develops the property and reveals just how much of these key elements it has.

Right now the company is working on a major drilling campaign at Pinguino. That means we've only got a few weeks before the drill results start coming out and the buzz begins.

The cat's not out of the bag yet, but the big companies are already sniffing around.

Shortly after Argentex released news of its discovery, the giant Japanese firm Dowa Mining, which happens to be one of the largest producers of indium, came calling.

Dowa signed a confidentiality agreement with Argentex (press release here: http://www.argentexmining.com/read_news.asp?newsid=1673). So the company is committed to looking at the project, and could make an outright offer at any time.

Usually, the hint of a deal like this is all it takes to light a fire under a tiny stock like Argentex.

And it will.

If you haven't done so already, I urge you to check out Argentex Mining for yourself. Visit their website at www.argentexmining.com.

Until next time,

Luke Burgess

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