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TheStreet Open House

Tungsten Outside Of China

By Michelle Smith — Exclusive to Tungsten Investing News

Tungsten Outside of ChinaChina's grip on the tungsten market makes many people uneasy and there is a healthy appetite for supply from other sources. Given the positive demand and pricing for the metal in recent years, a number of companies have stepped up to answer the call for supply diversity. As investors increasingly catch wind of interest there are some things they should remember when adding these equities to their portfolios.

Before the new millennium, tungsten prices were depressed for a long period of time. Many place blame largely on China's flooding of the market with metal that was so cheap it stamped out competition. However, after decades of a gloomy market environment, conditions began to look up. As prices have risen so has interest in the tungsten business.

Converting undeveloped tungsten projects into production sites is still a major challenge for reasons such as low grades and financing difficulties. Many miners have instead focused on redeveloping or expanding previous tungsten projects.

For example, EMC Metals (TSX: EMC) plans to restart operations at the Springer mine in the US. The company has said it spent over $20 million partially reconditioning the property between 2006 and 2008 and plans to do more work in Q2 2012, including developing detailed multi-year mining plans.

In Q1 2012, King Island Scheelite (ASX: KIScompleted the feasibility study and the purchase of key mine-related land for its Dolphin project in Australia.

Malaga (TSX: MLG,OTCQX:MLGAF), which successfully restarted the Pasto Bueno mine in Peru in 2006, has long said that demand substantially exceeds its ability to supply tungsten. As a source of additional production, the company recently  announced plans to construct a pilot plant to process its tailings.

Where should investors focus their investments?

Wolf Minerals (ASX: WLF,LSE:WLFE) has a high-grade tungsten project, Hemerdon, in the UK that was mined and explored during the 20th century. The company has an offtake agreement with Traxys for the tin produced from the project and has signed offtake agreements with Global Tungsten & Powders (GTP) and Wolfram Bergbau und Hutten (WBH) for 80 percent of its tungsten. GTP and WBH are also set to provide the company with a £20 million loan facility.

Offtake agreements and other significant investments in tungsten projects outside of China are expected to continue. As tungsten creeps further toward mainstream awareness and miners continue to display optimism about the prospects in this space, investors may also consider scaling up their positions in the metal.

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