A strong growth in Chinese consumption, an unlikely substitute for the metal, and the high cost of getting new mines into operation will likely support tungsten prices over the next five years, according to Haywood Securities. In Haywood’s Tungsten Industry Report, they predict growth in consumption will require an additional three million metric tonnes of tungsten per year, a 32 per cent increase in current global production. By 2013, they predict that global demand will hit 125,000 tonnes per year, with China leading the way.
China is a recent net importer of Tungsten; and the largest producer of the metal on a global scale. The western world produces only a marginal supply, and is still reliant on China to supplement their needs. The increase in Chinese domestic demand threatens the stability of supply to the western world. The tungsten price has held steady this year; however, tungsten companies are seeing a decline in their share value. The discontinuity between tungsten focused equities and prices has recently widened as a result of the credit crunch compromising the ability of miners to obtain financing to grow their ventures. The inability of near-term western world suppliers from obtaining the financing they need for new mine construction could very well exacerbate the already tight market fundamentals for tungsten.
While the high tungsten price and positive fundamentals for the metal have instigated exploration and mine development ventures outside of China, the earliest that new production could be realized is 2013. In the meantime, the shortage will support higher tungsten prices.
Japanese Marubeni Corp is researching the possibility of working with the Russian firm Wolfram Co. to resume production at the Tyrnyauz Tungsten and Molybdenum Mining and Concentrating Plant. The plant closed down earlier this decade as a result of plummeting tungsten prices and the ensuing market flood in tungsten concentrate. With the return of feasible tungsten prices, the company is reevaluating the value of the project, with Marubeni as a potential financer. Marubeni executives are currently performing their due diligence on the project and if the results are favourable they will invest. In order to restore production, it would take between 36 and 42 months and cost about $120 million, and the mine will potentially produce one million tonnes of ore a year. Japan is in dire need of a stable tungsten supply as they are among the world’s largest users of tungsten.
The Tyrnyauz plant is located in the Russian republic of Kabardino-Balkaria in the Caucasus Mountains. The republic’s government owns the majority of the project and Wolfram Co, a Moscow-based company owned by businessman Mikhail Gorbachev, has a 25 per cent share. Russia has an estimated 14 per cent share of world tungsten reserves. Last year Russia lifted an import duty on tungsten ore and concentrate in a move that allowed Wolfram to secure more raw materials from abroad.
Largo Resources Ltd. announced that based on the significant results from the first 13 drill holes on their Northern Dancer Project, management has decided to wait for the results of the remaining 25 drill holes. Once they have all the results on hand, they will prepare an updated mineral resource that will serve as the basis for the preliminary economic assessment for Northern Dancer. Largo President and CEO Mark Brennan commented: “We believe it is in the best interest of Largo shareholders to base the Scoping Study on an updated resource estimate that incorporates the results of the 2008 drill program-designed as it was to upgrade and expand the existing resource and confirm higher-grade zones of mineralization. Based on the positive results in the first 13 holes, we expect that the updated resource model could significantly improve overall project economics.”