Gallium and germanium: Buying hype or making history?

It’s July 2023. Critical minerals investors are in a frenzy.

Have you heard the news? China just banned the export of gallium and germanium products. Gallium and germanium. What is the Western world going to do without China’s steady supply of these metals?

This is a big deal. 

But, lo and behold, it turns out that half of your junior exploration investment portfolio has gallium and germanium somewhere in their landholding. Sure, they’ve never mentioned these commodities before, but have you read their latest announcements? They’ve got them right there.

Their share prices are rising. This is a make-or-break moment. You should probably top up your holdings or look to expand into a few more up-and-coming gallium and germanium specialists; after all, you don’t want to miss this boat. You’ve got to move quickly. 

Except there’s one problem: until now, you’ve never heard of gallium or germanium. 

Oh, well, the market’s talking, and you better listen. 

Unless, of course, China’s bans aren’t as scary as they seem…

An export ban and a fervent frenzy

In early July, China thrust gallium and germanium into the spotlight when it announced sudden export curbs of these 2 critical minerals, citing national security reasons. 

Under the laws, exporters of these products needed to apply for additional export licences for ‘dual use’ items and technologies, which China’s Ministry of Commerce defined as those with both military and civil applications. 

As it turns out, gallium and germanium slotted neatly into this bracket, and it caused sudden panic in the Western world as investors braced for a drop in international supply. 

This panic was seemingly appropriate given the stranglehold China has on the gallium and germanium markets: according to the United States Geological Survey, China produced a whopping 98% of the world’s gallium supply and 60% of the world’s germanium in 2022.

While there’s some minor production of these metals in countries like Japan, South Korea, Canada, and Ukraine (as well as a small stint in 1989 when Australia produced gallium as a by-product of bauxite processing at the Pinjarra alumina refinery in Western Australia), China has held the dominant market position for decades. 

As such, with the new export laws, analysts were predicting a major supply squeeze that would translate into a price surge for gallium and germanium. 

This price surge would be both weaker and shorter than expected.

China still needs buyers, and the world apparently still needs these metals. Chinese exporters were quick to apply for their new licences, and since the initial supply scare, it’s back to business as usual for the world of gallium and germanium. 

For now. 

It’s probably important here to ask what, exactly, are gallium and germanium, and how are they produced?

Small renown, wide impact

Gallium and germanium are little known, but their applications spread far and wide. 

According to Geoscience Australia Director of Mineral Resources Advice and Promotion Allison Britt, the Australian government defines gallium and germanium as critical minerals; that is, minerals essential to modern technologies, economies, or national security with supply chains at risk of disruption.

Gallium and germanium have important applications in semiconductors and modern electronics, with gallium used in light emitting diodes (LEDs) and as a component in some alloys and germanium used in fibre-optic systems, solar cell applications, infrared optics, and more. 

“These applications are particularly important for clean energy technologies, medical equipment, computers and the defence, aerospace, and telecommunications industries,” Britt says. 

“These applications are particularly important for clean energy technologies, medical equipment, computers and the defence, aerospace, and telecommunications industries”

A by-product specialty

What’s particularly interesting about these metals is that, in general, there are no gallium or germanium mines anywhere on the planet. Rather, as Britt explains, they are produced exclusively as by-products of other mineral processing work. 

“Approximately 90% of gallium is extracted from the processing liquor and ‘red slimes’ produced at alumina refineries. The remainder comes from processing zinc concentrates.

About 75% of germanium comes from processing zinc concentrates, and most of the remainder from coal.”

This means that given the relatively small market for gallium and germanium, there’s been little incentive for refining companies to invest in by-product recovery for the metals. Until now. 

“Gallium is a specialty metal and there are no effective substitutes for some defence and aerospace-related applications,” Britt says.  

“The likelihood of rapid growth in photovoltaics and clean energy technologies means the potential exists for bottlenecks to form in the gallium supply pipeline.”

“The likelihood of rapid growth in photovoltaics and clean energy technologies means the potential exists for bottlenecks to form in the gallium supply pipeline”

Britt says China’s recent export restrictions have prompted governments and companies to reassess gallium and germanium resource and production potential and supply chain vulnerability.

It’s a sentiment shared by Mount Burgess Mining (ASX:MTB) Chairman and CEO Nigel Forrester. Mount Burgess has been touting the gallium and germanium potential of its Kihabe-Nxuu Project in Botswana and Namibia since as far back as 2016.

Forrester explains that while China produces the majority of the world’s gallium and germanium, it doesn’t actually mine the necessary materials for by-product processing in-country. 

“China doesn’t get that production from their own ores. They are produced from imported ores.

That is why they’re the biggest producers: because in the States and places like that, it has just been too expensive for them to be able to do that.” 

This means when China announced its export bans, these countries that produced the zinc, aluminium, and coal required for gallium and germanium production suddenly had to look at pivoting to a Western processing chain.

And, as Forrester says, rising geopolitical tensions and the fear of a curbed Chinese supply sparked enough fear that Western countries are likely to continue looking at production outside of China. 

“I think what it’s going to mean is that you’re going to get countries that are zinc and aluminium producers now saying, ‘Well, these are strategic modern metals, and they are necessary metals. So we’ve got to look for our own production.’”

“‘these are strategic modern metals, and they are necessary metals. So we’ve got to look for our own production.”

It’s one thing to find it, it’s another thing to refine it

With gallium and germanium so important to so many sectors and the Western world looking for new supply, it’s no surprise a throng of juniors suddenly started assaying for these metals and touting the results over July and August. 

However, while sentiment shifts quickly, change happens slowly. Even in the event that these companies genuinely add gallium to their portfolio and look at partnering with processing facilities to produce the metal down the line, that’s not going to patch any supply chain disruptions any time soon. 

Gallium and germanium prices have continued to rise steadily since the announcement of the Chinese export curbs, and interest in the critical minerals has seemingly died down.

You see, while interest can be difficult to quantify, Google search trends over the past six months show a five-fold spike in searches for both gallium and germanium in July. Since the start of August, however, search numbers have fallen to almost exactly where they sat in late June. 

And while correlation does not always equal causation, the search graph is strikingly similar to the share price graphs of many companies that announced gallium and germanium assay results following the export ban. 

Battery Age Minerals (ASX:BM8), for example, in August joined the European Raw Materials Alliance (EMRA) to work with end-users seeking a reliable and sustainable supply of gallium and germanium following reports of the metals at the company’s Bleiberg project in Austria. 

Battery Age shares quickly spiked from around $0.38 to $0.46, but a fortnight later had retreated back to $0.38. As of 22 December 2023, company shares sit at $0.18. 

Around the same time, Golden Deeps shares (ASX:GED) nearly doubled in value from $0.06 to $0.11 thanks to the gallium and germanium potential of its Nosib Vanadium Project in Namibia, but shares retreated back to $0.06 shortly thereafter.

Golden Deeps shares now trade at $0.047. 

Similarly, Talga Resources (ASX:TLG) flagged gallium in its Swedish holdings in late August, and in the days that followed, company shares rose 22% from $1.17 to $1.43. 

Talga, too, had fallen back to $1.17 by mid-September and as of 22 December trades at $0.78. 

Now, to be clear, this is not to insinuate that any of these companies have been trying to dupe investors to drum up their share prices. The assays are real, the potential is there, and there are myriad factors that could have influenced these share price movements. 

However, investors who bought into the hype during the short-lived gallium and germanium frenzy likely saw the value of these shares decline significantly in the weeks thereafter. 

Perhaps some were making long-term prospects. Perhaps some were already invested in these juniors and just topped up their holdings. And perhaps some saw a shiny new investment opportunity and have now been left in the lurch. 

Dumb money versus smart investments

The question, then, becomes about how investors in the mining space can make sure they don’t get sucked in by hype. 

The Australian Securities and Investments Commission (ASIC) launched its Dumb Money campaign in late October 2023 to warn investors against this very issue.

While the campaign is not specifically focused on the mining sector or the gallium and germanium hype (after all, hype is prominent across the share market, especially in sectors such as technology and medicine), ASIC Senior Executive Leader, Market Supervision Dr Rhys Bollen says it’s important for investors to understand the relationship between risk and reward. 

“Hype around the ‘next big thing’ is a periodic phenomenon in the market,” Dr Bollen says.

“Don’t get caught up in the urgency, the hype, the FOMO — fear of missing out.” 

“Don’t get caught up in the urgency, the hype, the FOMO — fear of missing out” 

He describes FOMO as a well-known marketing concept — take Black Friday sales, for example — but says it’s not a good way to arrange one’s investment affairs. 

“Long-term investment decisions should be based on research, should be based on diversification, should be based on an investment concept that you understand. “

While part of the responsibility certainly lies on companies to report fairly and accurately, it’s not often companies themselves that are driving hype. Further, it’s fair play for a company to change tactics and strategies in response to market movements when trying to get investors the best bang for their buck. 

“It’s not a hindsight test. We look at what companies knew at the time,” Dr Bollen says. 

Take the new interest in gallium and germanium among ASX juniors, for example. It is perfectly reasonable for these businesses to begin assaying for gallium and germanium and sharing the results if they think these metals could bring returns to shareholders over the years. 

However, it can often be the case that market sentiment gives more weight to these types of movements than they might deserve — meaning the onus is ultimately on investors to properly assess their portfolios.

Dr Bollen says it’s about research, consideration, and avoiding hasty decisions.

In the same vein, companies that suddenly pop up to talk about the latest fad likely have a long way to go to turn this into real value, providing they actually commit to a long-term play in the hyped sector.

Relating this to the gallium and germanium space, companies like Mount Burgess Mining have years of announcements and research behind them — proving that for them, this isn’t a fad, but a core business focus with hours of development and stacks of cash to support it. 

“These people that come up and say, ‘Oh, we’ve got gallium and germanium’ … That’s all very well,” Mount Burgess Non-Executive Director and long-term metallurgist Rob Brougham says.

But I’ve been in base metals a long time.” 

At the end of the day, ASIC’s Dr Bollen says the old adage, most of the time, stands true:

If it seems too good to be true, it probably is.” 

Write to Joshua Smith at Mining.com.au

Images: Golden Deeps, Mount Burgess Mines, Pexels, and iStock
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Written By Joshua Smith
Joshua Smith has years of experience in the media sector, having worked as a markets reporter, features writer, and editor since completing a Communications and Journalism degree and a Creative Writing degree. Josh is an avid board game fan and a self-professed coffee snob.