The case for tungsten

While gold, silver, copper and rare earths have been drawing much of the markets’ attention in the metals space recently, another metal has been quietly gathering steam.

Tungsten, which is one of the earth’s heaviest metals and is used  in lightbulbs and for strengthening steel, has built itself up to record high prices with experts predicting continued tightening in the supply chain.

The supply story for tungsten is similar to that of rare earths. The Chinese have long supplied the world with all of the metals it could handle, but are now constraining their exports to ensure supplies for their domestic markets.

Concerns on the supply side were strong enough to have tungsten put on a list of critical strategic metals by the U.S. and the European Union.

Adding to supply pressures is the fact that China’s second largest tungsten producer, Jiangxi Tungsten, is set to shut down its main tungsten producing plant for three months for an overhaul.

Staying with the constricting supply theme, concerns have been raised over the conflict minerals bill passed by the U.S. Congress last summer. The bill intends to shut down the trade of minerals mined in the Democratic Republic of the Congo (DRC) that are funding the continued strife there. The key metals mentioned by the bill were tantalum, tin and, yes, tungsten.

And while finding the funds to trace the source of such metals is a challenge at a time when the U.S. is looking for ways to cut back on its massive deficit, officials still say they plan to eliminate the metals from the supply chain by April.

The DRC is estimated to produce roughly 2 to 4% of the world’s tungsten supply.

The supply and demand story has helped propel tungsten to a record price of US$335 per metric tonne unit or MTU. A startling rise considering it was sitting at just US$185 per MTU a little over a year ago.

Two Canadian-based miners have a jump on meeting the western world’s demand, as both Malaga (MLG-T) and North American Tungsten (NTC-V) have operating tungsten mines in the western hemisphere.

Malaga operates the Pasto Bueno mine in Peru, which produced 71,996 MTU of tungsten for 2010 – a 13.6% increase over 2009 totals.

As for North American Tungsten, the company put its Cantung mine in the Yukon into production last October. Cantung has reserves of 1.7 million tonnes grading 1.17% tungsten trioxide.

London-based Ormonde Mining (ORM-L) is also looking to enter the fray by getting the Barruecopardo tungsten mine in Spain up and running. The project has a JORC resource estimate of 6.5 million tonnes of 0.46% tungsten trioxide in the indicated category. Ormonde expects to be in production by late 2012.

Woulfe Mining (WOF-V) is also progressing well as the company recently closed a deal with Korea Zinc to help fund its Sangdong tungsten-molybdenum project in South Korea.

Korea Zinc will invest $38 million and take a 51% stake in the project. Enough money, Woulfe says, to fully fund development. Sangdong was historically one of the world’s largest tungsten-molybdenum mines.

Closer to home, Geodex Minerals (GXM-V) recently cut a deal with Northcliff Resources – a private mineral company that is part of the Hunter Dickinson group of companies – that allows Northcliff to take a 70% interest in the Sisson project by investing $17 million on exploration, feasibility and other project costs.

Sisson hosts a large, structurally controlled tungsten-molybdenum deposit that is amenable to open-pit mining. Mineralization occurs within two main zones and is characterized by veins, stringers and disseminations.

The deposit was drilled by Kidd Creek Mines in the early 1980s, and then again by Geodex from 2005-09. In all, 230 holes have been drilled and the deposit has measured and indicated resources of 177 million tonnes grading 0.094% tungsten trioxide and 0.031% molybdenum.

For investors looking for an earlier stage play, Happy Creek Minerals (HPY-V) recently finished a drill program at its Fox tungsten-molybdenum property in south central B.C. and returned some stellar results. Highlight intercepts from the program include 6.6 metres of 0.49% tungsten trioxide and 7 metres of 0.99% tungsten trioxide.