Tungsten - An investor secret

Press/Media: Press / Media

Description

Discusses the global market for tungsten

Period15 Apr 2012

Media contributions

1

Media contributions

  • TitleTungsten - An Investor Secret
    Degree of recognitionNational
    Media name/outletResourceStocks Magazine - Aspermont
    Media typePrint
    Duration/Length/Size1 page
    CountryAustralia
    Date15/04/12
    DescriptionAsk a resources investor to make a list of the key metals markets that could experience a critical lack of supply in future and the chances are that tungsten would appear only on the lists of the very knowledgeable few.

    Tungsten supply, like several other minor metals markets, is dominated by China. As a consequence, Australian investors hear little of developments in the sector - but that is about to change. As for the rare earth metals markets – where Australian investor awareness has risen markedly in recent years - western world production of tungsten needs to play an ever increasing role in supplying future global demand.

    So what is so special about tungsten? Let’s shed some light on that issue first. Tungsten is used as cemented carbides for cutting tools and drills due to its extreme hardness. Indeed, cutting tool uses contribute over half global tungsten demand by end use sector. Steel alloy demand contributes the next largest end-use at 20% - with the metal’s well-known application in lamp filaments only a small contributor.

    The market remains modest in size, with global consumption estimated at around 70,000 tonnes tungsten content for 2011 (rare earths by comparison sits at around 120,000 tonnes).
    Tungsten is traded both in concentrate form and as finished metal – with pricing settled through direct buyer-seller negotiations. Indicative prices for tungsten products, including oxide, carbide powder and concentrates, can be viewed at www.metal-pages.com/metalprices/tungsten/

    As stated, China is the name of the game in tungsten supply – but also in demand too. Daylight comes second on both counts. Various estimates of China’s mine output exist – and a notable proportion of China’s production goes unreported. The main Chinese provinces that produce tungsten are Jiangxi and Hunan with Guangxi, Yunnan, Henan and Guangdong provinces also contributing mine supply.

    China’s strategy in tungsten is to focus upon growing market position in downstream processing. As such, the export of intermediate tungsten products is discouraged and ore and concentrate exports are not permitted. Major producers include Minmetals Nonferrous Metal Corporation, Jiangxi Rare Earth and Rare Metals Tungsten Group, Jiangxi Tungsten Industry Group, Hunan Nonferrous Metals Group, Xiamen Tungsten Group and Zijin Mining Group.

    Beyond China, other producing countries include Russia, Austria, Portugal, Bolivia, Peru, Myanmar, Kazakhstan and Uzbekistan. For perspective, whilst Australia sees a number of emerging companies seeking to mine tungsten ores, China already has over 200 mines.

    Recycling is important to the supply-demand balance – and responds to price. Some 30 per cent of tungsten consumed in the production of tungsten products is sourced from scrap.

    The geology of tungsten is intriguing: The main commercial ores are wolframite ((Fe,Mn) WO4) and scheelite (CaWO4). Scheelite ores dominate China’s reserves base – with wolframite and mixed ores comprising less than 30%: Wolframite ore and concentrates can attract a price premium over scheelite. Tungsten mineralisation commonly occurs in hydrothermal veins and skarn style deposits related to granitic intrusive rocks, often in combination with tin.

    Typical resource grades lie between 0.1-0.3 per cent WO3 depending upon the lower cut-off grade applied in the resource estimation. High grade tungsten resources containing 1-2% WO3 are reported at several wolframite vein deposits, however production capacity is limited due to narrow underground mining widths.

    Tungsten has a value chain that starts with tungsten concentrate as the first saleable product. In order of increasing value-add, the downstream tungsten products are then Ammonium Paratungstate (APT), tungsten metal powder, ferrotungsten, tungsten carbide powder and tungsten products used for industrial (and consumer) applications.

    Tungsten has been deemed a ‘critical’ strategic metal by the European Union and prices have moved higher in recent years to support its importance in global manufacturing. While tungsten prices will move with global demand for machine tools and other uses – the supply-side, notably the predominance of China and the presence of export quotas limiting ex-China supply, is a key factor.

    The long term fundamentals for tungsten appear strong. Nevertheless, it is also clear that a downturn in economic conditions has been proven to have significant impact upon tungsten prices previously, so a dampened world economic growth led by challenging conditions in the Eurozone is a downside risk to the market.

    Australian listed stocks with tungsten exposure include Carbine Tungsten (CNQ), Hazelwood Resources (HAZ) and Wolf Minerals (WLF) – all at an advanced stage – and explorers Carpentaria Exploration (CAP), Cullen Resources (CUL), TNT Mines (an unlisted subsidiary of Minemakers, MAK), Northern Minerals (NTU) and Thor Mining (THR).
    Producer/AuthorAllan Trench
    PersonsAllan Trench

Keywords

  • tungsten
  • mining