TORONTO (miningweekly.com) – Prices for tungsten are rising “almost weekly” and the metal finds itself in almost an identical economic situation to rare-earth elements, with burgeoning demand and shrinking exports from China, the biggest producer, Malaga chairperson and CEO Jean Martineau said on Tuesday.
The metal, also called wolfram, with the chemical symbol W, is mainly used to make wear-resistant abrasives and cutters for machinery in the automotive industry, and drill bits for oil exploration.
Martineau said that, as is the case with rare-earth elements, China flooded the market with cheap tungsten concentrate in 1980s and 1990s, leading to an oversupply and prices low enough to squeeze out nearly all non-Chinese production.
The result has been a global shortage, with China – which accounts for over 80% of production – restricting tungsten exports.
Martineau went on to note that, for the past few years, the shortfall in mined supply has been filled by recycling, but that this has now reached maximum capacity, while demand continues to grow at around 5% a year.
Over the past year, prices for what is the world's hardest metal – with a boiling temperature of 5 700 Celsius, the temperature at the sun’s surface – have doubled to between $46 000/t and $48 500/t, and Martineau believed further increases are on the cards.
“The final consumers don’t really mind about the tungsten price, they mind about where they’re going to get it,” he explained
“We know that for the next four years there is no new production coming on line.”
Martineau told Mining Weekly Online in a telephone interview from Montreal that this meant the price for the metal will continue to climb.
“I think the tungsten price is going to continue going up... We still expect a significant increase in next 18 months to two years.”
TSX-V-listed Malaga owns the operating Pasto Bueno mine in Peru, making the company only one of two publicly traded tungsten miners, the other being Vancouver-based North American Tungsten.
The company plans to produce 800 t of the metal this year, lifting this to beyond 1 000 t in 2012.
Martineau said that by the last quarter of next year, the mine should be producing at a rate of 1 400 t/y – nearly double the 2010 level.
Pasto Bueno first started operating in 1941, but was forced to close early last decade after lower prices.
According to Martineau, the property had not seen any real exploration under the previous private owners, who mainly followed a practice called ‘vein chasing’ – simply mining the visible tungsten reefs.
Malaga has now embarked on a drilling programme which will run into next year, with the aim of significantly increasing measured and indicated resources, he said.
The company could then consider building a much larger operation, depending on what the drill rigs turn up.
Until then, it will likely be able to fund the exploration from internal cash flows, but may tap capital markets if there is a significant improvement in investor sentiment, Martineau noted.
Malaga earned $0.8-million in net income for the first quarter of 2011, compared with a $1-million loss for the same period the year before.
RARE EARTH COMPARISON
Martineau draws parallels between rare-earth elements and tungsten, given that there is a significant shortage of the metals, and China dominates production of both, and has been restricting exports.
A key difference is that rare earths are mainly used in new technologies, including smart phones, electric cars and wind turbines, making them “sexier”, and attracting more headlines, he commented.
About 70% of tungsten goes into industrial applications, on the other hand, while only a small, but increasing, percentage goes into modern technologies such as the Apple’s iPad touch-screen.
Malaga was trading at C$0.245 a share on Tuesday afternoon, valuing the company at C$45-million.