Byproducts and Co-Products in Critical Mineral Supply

One of the most underappreciated sources of supply risk for critical minerals is byproduct dependency: the fact that many strategically important elements are not mined for their own sake but are instead recovered as incidental byproducts of other mining and refining operations. Cobalt is primarily a byproduct of copper and nickel mining. Gallium is recovered from the Bayer process waste streams during alumina production. Germanium is extracted from zinc refining residues and coal fly ash. Indium comes from zinc smelting. Rhenium is captured from copper and molybdenum roasting off-gases. Tellurium is recovered from copper anode slimes during electrolytic refining.

This dependency means that the supply of these critical minerals is governed not by their own demand or price signals, but by the production economics of the host metal. If copper prices decline and copper mines curtail production, cobalt supply contracts regardless of whether cobalt prices are rising. If aluminum smelters close or shift to processes that do not produce gallium-bearing residues, gallium supply falls even in the face of surging demand from the semiconductor industry. This structural decoupling between supply drivers and demand drivers makes byproduct minerals uniquely vulnerable to shortages and price volatility.

The Economics of Co-Production

Economists distinguish between byproducts and co-products based on their relative economic contribution to a mining operation. A byproduct is a secondary output whose revenue is minor relative to the primary product and does not significantly influence production decisions. A co-product is an output whose revenue is substantial enough to affect the economics and scale of the operation. Cobalt, for example, is a byproduct at many copper mines where it accounts for less than 10 percent of revenue, but it is a co-product at operations such as the Katanga Mining complex in the DRC where cobalt revenue is significant.

The distinction matters because co-products can justify investment in dedicated recovery circuits and can influence mine planning, while pure byproducts are typically only recovered if the marginal cost of extraction is low enough to be covered by whatever revenue they generate. Many mining operations do not recover all potentially valuable byproducts simply because the capital and operating cost of installing additional recovery circuits is not justified at current byproduct prices. This means that significant quantities of critical minerals are being discarded in tailings, slag, and waste streams because the economics of recovery do not meet conventional investment thresholds.

Key Byproduct Dependencies

Understanding specific byproduct relationships is essential for assessing supply risk:

• Cobalt from copper and nickel: Approximately 60 percent of global cobalt production comes from copper-cobalt mines in the DRC, with most of the remainder from nickel operations in Indonesia, Australia, and the Philippines. Cobalt supply is therefore hostage to the investment and production decisions of the copper and nickel industries.
• Gallium from alumina refining: Gallium is present at concentrations of about 50 parts per million in bauxite ore and is extracted from the sodium aluminate liquor in Bayer process alumina plants. Only a fraction of the world's alumina refineries have installed gallium recovery circuits. China's dominance of gallium production (approximately 98 percent of global output) reflects both its large alumina refining industry and its investment in gallium extraction technology.
• Germanium from zinc and coal: Germanium is recovered from zinc refining residues and, in China, from coal fly ash. Its supply is linked to zinc production volumes and the willingness of refineries to invest in germanium recovery. Global annual production is only about 130 tonnes, making it one of the most supply-constrained critical minerals.
• Indium from zinc smelting: Indium is recovered from zinc processing residues, with global production of approximately 900 tonnes per year. China, South Korea, and Japan are the dominant producers. Indium is essential for indium tin oxide (ITO) transparent electrodes used in flat panel displays, touchscreens, and thin-film solar cells.
• Tellurium from copper refining: Tellurium is recovered from anode slimes generated during electrolytic copper refining. Global production is approximately 500 tonnes per year. Tellurium is the key element in cadmium telluride (CdTe) thin-film solar cells manufactured by First Solar, the largest non-Chinese solar module producer.
• Rhenium from copper-molybdenum processing: Rhenium is captured from flue dust and off-gases during the roasting of molybdenite concentrates, which are themselves a byproduct of porphyry copper mining. Annual global production is only about 50 tonnes, with Chile, the United States, and Poland as the major sources.

Supply Implications and the Inelasticity Problem

The central supply chain implication of byproduct dependency is price inelasticity: the supply of byproduct minerals does not respond normally to increases in their own price. In a conventional commodity market, rising prices incentivize new production, which eventually brings supply and demand into balance. For byproduct minerals, this self-correcting mechanism is largely absent. Even if cobalt prices double, a copper mine cannot economically increase cobalt production without increasing copper production, which may not be justified by copper market conditions.

This inelasticity means that demand growth for byproduct minerals, which is surging due to the energy transition, semiconductor expansion, and defense modernization, can rapidly outstrip the ability of supply to respond. The result is price spikes and supply shortages that are difficult to resolve in the short term. The cobalt price spike of 2017-2018, driven by electric vehicle battery demand, demonstrated this dynamic clearly: prices more than tripled in 18 months before new supply from the DRC eventually brought the market into balance.

Strategies for Mitigating Byproduct Risk

Several strategies are being pursued to reduce byproduct supply risk. The development of primary deposits where the critical mineral is the main product, rather than a byproduct, can create supply that responds to its own market signals. Primary cobalt mines in Morocco and Idaho, primary gallium recovery from dedicated processes, and primary germanium production from specific zinc-germanium ores represent steps in this direction, though costs are typically higher than byproduct recovery.

Enhanced byproduct recovery from existing operations is another approach. Installing gallium recovery circuits at a greater number of alumina refineries, improving cobalt recovery rates at copper smelters, and developing technologies to extract critical minerals from mine tailings, metallurgical slag, and electronic waste can all supplement primary supply. Government incentives, including the U.S. Defense Production Act Title III funding and the EU Critical Raw Materials Act provisions, are increasingly directed at supporting enhanced byproduct recovery and primary critical mineral projects.

Substitution and demand reduction can also alleviate byproduct supply pressure. The battery industry's shift toward lower-cobalt and cobalt-free cathode chemistries (such as lithium iron phosphate and sodium-ion batteries) reflects a deliberate effort to reduce dependence on a byproduct mineral with concentrated and politically risky supply. Similarly, efforts to reduce indium consumption in displays through thinner ITO coatings and alternative transparent conductive materials address the byproduct constraint from the demand side.