TORONTO (miningweekly.com) – Despite China having not yet made significant inroads into securing tungsten supply from outside its borders, it might only be a matter of time before the country does, providing the incentive investors are looking for to finance several shovel-ready projects.

Tungsten, or wolfram as it is also called, is relatively abundant, not particularly difficult to mine and process, and the pace of project evaluations has become quite rapid.

Speaking at a ‘Specialty metals and industrial minerals’ presentation during the Prospectors and Developers Association of Canada’s 2015 convention, British market intelligence firm Roskill Information Services MD Robert Baylis told attendees that the asset-development pyramid was now top-heavy, with five projects at financing/permitting stage, five having completed definitive feasibility studies (DFS), or optimisation, and a further six or seven in the DFS or prefeasibility stages.

China dominated the industry, supplying about 54%, followed by Canada at about 8% and Russia at about 7%.

Tungsten's many alloys had numerous applications, most notably in incandescent light bulb filaments, X-ray tubes, electrodes, certain welding applications, superalloys and radiation shielding. About half were used in the form of tungsten carbide, a durable carbon alloy. Tungsten's hardness and high density also gave it military applications in penetrating projectiles, while tungsten compounds were also often used as industrial catalysts.

Baylis explained that the supply chain was, however, quite consolidated. meaning tungsten concentrate was not so easy to sell. With the exception of a few small tailings/stockpile retreatment plants seeing success in recent years, producing tens of tonnes a year of tungsten content, larger projects potentially producing hundreds and even thousands of tonnes were hitting a brick wall, as sales avenues were limited, leaving these producers out in the cold.

Only one significant project, Hemerdon, in the UK, had progressed to construction in recent times.

UNDERCUTTING CHINA
With adequate short-term supply in the market, developers would be forced to either wait for demand growth and/or existing mine exhaustion, or, Baylis suggested they could pursue a strategy of undercutting existing supply on price.

“The latter means having a competitive cost position, but with Chinese mining costs rising on falling grades and higher labour rates, there is an opportunity, perhaps even with Chinese processors. If a market could be found in China, then a commitment from the supply chain in Europe, the US and Japan to take a risk on winning back downstream market share from China in the long-term was required,” he said, noting that this would be a difficult process.

Chinese labour costs had been rising fast, diminishing labour-intensive tungsten mining competitiveness.   Government policies were simultaneously placing increased burdens on mining operations in an effort to improve safety and environmental conditions, while pushing through an agenda of industrial restructuring transformation, product upgrading and beneficiation, which had added to mine overhead costs.

“To convince financiers to front the debt required to progress projects to construction on either undercutting China or increasing rest-of-world competitiveness will be exceptionally tough,” Baylis said.

However, he noted that the recent entry of private equity funding into tungsten might be the catalyst for increased risk and its potential reward, and create a shift in the dynamics of the tungsten industry to the benefit of project developers.

Baylis explained that junior and mid-sized mining companies were attracted to the tungsten industry in the 2000s as demand surged. China’s dominant supply position, but strict export policies, also resulted in several significant countries designating tungsten as ‘critical.’ However, he noted that these ‘buzz labels’ were irrelevant and had little substance to price movement.

According to the analyst, the 94 500 t tungsten market last year was expected to grow at about 2.6% a year, reaching 105 000 t by 2018. Baylis also highlighted that tungsten prices had shown significant volatility over the last five years and reflected an unstable supply/demand position.

He said the short-term sentiment in tungsten, however, was no better than that of oil or iron-ore - there was just less transparency, in terms of numbers, to prove it.

“Roskill data suggests that the market has been oversupplied since 2012 and a lot of material has been stocked in China. The rest of the world’s future depends on reshoring downstream industry from China – that could take a decade to reverse,” Baylis emphasised.