What Is Tellurium?

Tellurium is a silvery-white metal with the atomic No. 52. It's closely associated with selenium, its periodic table neighbor, and the two metals are often found together.

Tellurium was discovered in 1782 by the Austrian aristocrat Baron Franz Joseph Müller von Reichenstein, as he was examining samples of gold mined in Hungary's Börzsöny Mountains. But it wasn't until almost 20 years later that a German chemist named Martin Heinrich Klaproth confirmed his discovery, naming the metal "tellurium," after the Latin word for earth – tellus.

Rarely found in its pure state, tellurium is most often found as a compound in ores of bismuth, copper, gold, lead, mercury, nickel, silver and zinc. The metal itself is also quite rare: Some research has found it to be even less common in the earth's crust than gold, platinum or silver.

When ingested, tellurium can be harmful, causing drowsiness, constipation, vomiting and even damage to the central nervous system. It will also make you reek of garlic – even the smallest amount will make your breath, your sweat, even your urine stink. And it's not worth trying to drink the smell away, as the alcohol tends to increase the formation of ethyl telluride, making bad breath even worse! Perhaps this was the reason behind one of tellurium's older names: "metallum problematum."

However, unless you're a jewelry maker and get careless with the oxidizing solution that creates a black patina on bronze, silver and gold, it's unlikely you'll ever knowingly encounter tellurium in your daily life.

Finding Tellurium

The vast majority (around 80%) of the tellurium produced today is a by-product of copper smelting and electrolytic refining; the metal is recovered from the anode slimes. The remaining 20% comes mostly from the ground as a by-product from bismuth, gold, lead, nickel and zinc mining, both from current operations and the refining of tailings from past mining activities.

But of all the minor metals, tellurium is one of the most difficult about which to find any really reliable production or consumption data. In its most recent profile of the metal, even the U.S. Geological Survey (USGS) can only provide refinery production figures for Canada and Peru – 8 tonnes and 30 tonnes, respectively, in 2008 – with an undisclosed amount for the U.S. It also notes production in other countries, including Australia, Belgium, China, Germany, Kazakhstan, the Philippines and Russia, but offers no output or production numbers. (It doesn't even include Colombia, Mexico and Poland, countries that also produce refined tellurium.)

Uses Of Tellurium

As with a number of the minor metals, tellurium's main use is as an alloy, particularly in steel. According to the USGS, the metal is used as a "free-machining additive," improving vibration and fatigue resistance in copper, controlling the depth of chill in cast iron, and acting as a carbide stabilizer in malleable iron.

Tellurium has a range of applications: It's used in blasting caps and rubber processing; it makes a good vulcanizing agent and catalyst in synthetic fiber production; and it acts as a colorant both in ceramics and glass.

Tellurium is also increasingly used in electronics, where the metal is employed in a variety of devices, including phase change memory, Blu-Ray discs, Peltier and thermoelectric coolers in thermal imagers and solar cells.

It's this last application that has, over the last couple of years, given the metal an important place in the imagination of certain investors. Some have even started to wonder how and where solar cell producers like First Solar Inc (NASDAQ: FSLR) source their supplies of tellurium.

Tellurium Producers

In the U.S., the largest commercial-grade tellurium producer by far is Arizona-based ASARCO, which operates a refinery in Amarillo, Texas. Perhaps not surprisingly, ASARCO also happens to be the country's third-largest copper producer.

ASARCO has operated in bankruptcy since August 2005, but Sterlite Industries (India) Limited – a subsidiary of Vedanta Resources plc (L: VED) – announced earlier this year that it planned to purchase ASARCO's operating assets. However, with a number of other interested parties now in the picture, there could well be a bidding war for the company assets.

For many U.S. copper producers, however, tellurium is considered a contaminant, not an asset, and the metal is certainly not something they are going to go out of their way either to recover or to refine themselves.

Other tellurium producers exist in the U.S., but they further refine commercial-grade tellurium and tellurium dioxide, rather than recover the raw metal from anode slime and skimmings. To find companies specifically involved in tellurium production, you have to look internationally.

In Canada, one of the leading players is 5N Plus (TO: VNP), a company that both refines and recycles various metals, including selenium and tellurium.

In Peru, the most significant producer of tellurium is Doe Run Peru (a unit of The Renco Group Inc.), which produces the metal at its La Oroya complex in the Peruvian central Andes. But Doe Run Peru has had its share of troubles this year; on June 9, Bloomberg reported that the company would be suspending production at its zinc and lead smelter for 90 days, after failing to reach an agreement with banks and suppliers.

Among some of the more interesting "would be" tellurium producers are Mexivada Mining Corp (V: MNV) and the OTC companies Unico, Inc. (OTC: UNCO.OB) and Apollo Solar Energy, Inc. (OTC: ASOE.OB).

Mexivada is a Vancouver-based junior mining and exploration company that approaches tellurium from the gold and silver angle. It has prospects in Nevada and (appropriately) Mexico.

In the U.S., Unico, a precious metals miner, announced in February that it had discovered "significant levels" of tellurium at its Deer Trail Mine in Marysvale, Utah. Since this company too is more focused on gold and silver (together with copper, lead and zinc), it will be interesting to see what, if anything, it does with the tellurium it has discovered.

Apollo Solar, a U.S. company operating through its wholly owned Chinese subsidiary, Sichuan Apollo Solar S&T Co., Ltd. (based in Chengdu, Sichuan province) describes itself as "a vertically integrated miner and refiner of tellurium (Te) and high-purity tellurium-based metals for specific segments of the electronic materials market."

While the company currently sources its tellurium from third parties, it also owns one tellurium mine at Dashuigou in Sichuan province and has the mining and exploration rights to another in Shimian, Majiagou. According to Apollo Solar's latest 10Q filing, these two mines could be extremely valuable, as they're the only two known deposits in the world where tellurium is the "primary commodity of economic interest." By the end of 2010, the company said, it hopes to obtain 60%-70% of the tellurium it needs for its products from these two mines, but it remains to be seen whether either mine actually delivers the said tellurium in this time frame. (Or, indeed, whether either ever does.)

Other producers of the refined tellurium in China include: Vital Specialty Materials Co., Ltd., based in Qingyuan City, Guangdong province; Xiandao Rare Metal and Chemical Co.; and, Sichuan-based Emei Semiconductor Material Co. Presently, however, all of them are privately owned companies.

Some other producers of refined tellurium outside China include PPM Pure Metals in Germany, part of the French Recylex Group (PA:RX), Japan's Nikko Materials and both JGI/Hydrometal and Umicore out of Belgium.

Indeed, Umicore (EBR:UMI) states that its Precious Metals Refining division has an annual tellurium production capacity of 150 tonnes – significant, considering some current estimates place annual world production at around 100 tonnes, or even less. However, Umicore offers no figures for actual tellurium production.

Prospects For – And In – Tellurium

Tellurium will continue to be used as an alloy both in steel and nonferrous metals, as well as in catalysts and certain specialty chemicals.

Demand for tellurium increased in 2007 and 2008 and continues to rise, as the metal becomes increasingly in demand for thermoelectric cooling devices (particularly in military materiel), memory, optical storage devices and CdTe solar cells.

There have even been supply concerns about an imminent tellurium shortage that could force the price skyhigh. Because tellurium comes from smelted copper that has been refined electrolytically, both reduced copper production and an increase in the use of alternative methods of copper extraction could affect the availability of tellurium. In addition, current extraction processes in mining operations probably achieve only a 50% recovery rate, at maximum, and there's a mass of tailings from the copper, lead, nickel and zinc refineries from which tellurium has not yet been extracted.

Still, even if supply shortages occur, replacements for tellurium exist for most of its applications, although none is a perfect substitute.

As for prospects in tellurium, the market remains, as described by "a Special Contributor" in the 2005 Mining Journal report on the metal, "... small and complex." A contributor to this complexity is, not least, the dearth of publicly available data both on the metal and the market itself.

Currently, there are no "pure" tellurium plays and, as so often, for most participants in the tellurium market (whether large or small), the metal is just one of many in which their businesses are involved. So, unless you are either going to go out and buy bars of the stuff – watch out how you handle it! – or buy tailings and get the tellurium extracted on a toll basis, there are few, if any, ways an investor can participate in the tellurium market. For some, this will only add further meaning to its ancient name of "metallum problematum"!