New Trade Tensions With China Could Increase Squeeze on Solar Metal

Tensions over imported solar panel technology continue to increase between China and the United States, and the result could put even more of a squeeze on critical elements like tellurium.

China recently announced it would restrict the export of two important semiconductor elements and has warned it could also ban the export of solar panel technology. PV Magazine now reports that restrictions by the U.S. Customs and Border Patrol could result in a near-total ban on certain Chinese solar modules entering the U.S.

The Chinese panels in question are made from silicon, the most common solar technology in the world. First Tellurium Corp. (FTEL:CSE; FSTTF:OTCQB) is on the hunt for tellurium, a component in the second-most-common solar technology, cadmium tellurium (CdTe) cells, which are cheaper to produce, and 22.1% efficient in converting sunlight to electricity, company officials said.

First Solar Inc. (FSLR:NYSE), which competes directly with Chinese solar panel producers, buys more tellurium than any other user in the world, said asset manager Chen Lin, author of the What's Chen Buying? What's Chen Selling? newsletter.

If China restricted tellurium imports, it could result in a supply crisis in the West, leaving an opening for new producers.

First Tellurium has been a quarterly pick of Chen's several times in the past year. He recently wrote that the company could "have a huge 2023."

"We're approaching a critical phase in the domestic supply chain for cadmium telluride solar panels," First Tellurium President and Chief Executive Officer Tyrone Docherty said. "Rapidly increasing demand, combined with import restrictions, have led First Solar to double its manufacturing capacity this year. Domestic supplies of tellurium will become even more critical."

Tellurium is one of the least common elements on the planet, according to the U.S. Geological Survey. Most rocks contain an average of about three parts per billion, making it eight times less abundant than gold.

First Tellurium has been a quarterly pick of Chen's several times in the past year. He recently wrote that the company could "have a huge 2023."

"We will hit the jackpot as FTEL is the only pure play in tellurium," Chen wrote. 

The Catalyst: Reducing Dependence on China

China recently announced it would restrict the export of gallium and germanium, both essential for semiconductor production. But the country also produces about 60% of the world's tellurium, First Tellurium noted.

Both the U.S. and Canada are trying to reduce dependence on China for such critical metals. U.S. President Joe Biden has banned solar panels coming from Chinese companies that use forced labor.

"We've got the best of both worlds: great precious metals and this wonderful mineral tellurium," Docherty said. "We're sitting very, very good compared to anyone else."

The U.S. also established a US$20 million initiative to make CdTe solar cells, which were first developed in the U.S., cheaper and more efficient and to develop new solar markets.

PV Magazine reported that the Chinese silicon solar modules supplied by Tongwei are being excluded from entering the U.S. market under-enforcement of the Uyghur Forced Labor Prevention Act (UFLPA).

"The ban of Tongwei polysilicon-supplied Longi panels may mark a 'de facto ban on Chinese polysilicon,' warned a pv magazine USA industry contact," the magazine wrote.

Tongwei was the world's largest polysilicon provider in 2022, and according to the magazine has no presence in the Chinese province banned under the law.

'We're Sitting Very, Very Good'

First Tellurium's Klondike project in Colorado is considered America's top tellurium exploration project and was previously owned by First Solar as a potential source of raw tellurium for its solar panels, Docherty said.

Technical Analyst Clive Maund rated First Tellurium as an immediate Buy in March.

The CEO told Chen in a recent interview published on Streetwise Reports that the tellurium results at Klondike "are on another planet" compared to the company's Deer Horn project in British Columbia, which features high-grade tellurium, gold, and silver.

"We've got the best of both worlds: great precious metals and this wonderful mineral tellurium," Docherty said. "We're sitting very, very good compared to anyone else."

First Tellurium is also conducting geophysics work at its flagship Deer Horn project in British Columbia this summer to help develop targets for a drilling campaign. The project is known to have the only positive preliminary economic assessment (PEA) for a tellurium project in North America.

Market Expected to Triple

The U.S. solar industry had its best first quarter in history this year, installing 6.1 gigawatts (GW), according to a report released last month by the Solar Energy Industries Association and Wood Mackenzie.

The solar market is expected to triple in size over the next five years, bringing the total installed solar capacity to 378 GW by 2028, the report said.

The market for tellurium is expected to grow by about 60 metric tons from 2020 to 2024, according to research by Technavio.

"Factors such as increasing urban population, rise in disposable income, strong supply chain, and high internet penetration are driving the growth of the global consumer electronics market," the research firm said in a release. "The increase in demand for consumer electronics will, in turn, drive the demand for tellurium over the forecast period." 

Tellurium is also used in thermoelectric applications, lithium batteries, vulcanizing rubber, tinting glass, and manufacturing rewritable CDs and DVDs.

First Solar stopped its raw materials exploration program at Klondike in 2012 and sold the property to Colorado Klondike LLC, which optioned Klondike to First Tellurium.  

"Surface sampling by First Solar Inc. in 2006 found very high tellurium grades of up to 3.3% (33,000 ppm), along with locally high gold grades," the Colorado Geological Survey and the Colorado School of Mines reported on First Solar's Klondike exploration. "Tellurium grades at Klondike were the highest encountered in the company's nationwide exploration program." 

Technical Analyst Clive Maund rated First Tellurium as an immediate Buy in March.

Ownership and Share Structure

According to the company, 11% of First Tellurium is owned by management and insiders.

Docherty owns 10.6% or 7.7 million shares, Director Josef Anthony Steve Fogarassy has 1.38% or 1 million shares, and Director Lyle Allen Schwabe has 0.73% or 0.53 million shares. The rest is retail.

The company has a market cap of CA$11.26 million, with about 73 million shares outstanding and 63.4 million free-floating. It trades in a 52-week range of CA$0.25 and CA$0.085.

Sign up for our FREE newsletter

Important Disclosures:

1. First Tellurium Corp. has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of First Tellurium Corp.
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
4. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

For additional disclosures, please click here.