Kristie Batten: Critical months ahead for ASX tungsten sector

• Tungsten prices have been creeping higher after China initiated export controls on the key military metal
• ASX producers see demand lift from European and North American suppliers
• Export controls breathe new life into developers and explorers like Tungsten Mining and Rumble Resources

Market-watchers are keeping a close eye on the tungsten market as it continues to digest China’s latest export controls.

In a recent note, Hallgarten & Co analyst Christopher Ecclestone described tungsten as the prime military metal.

“Long known for its role in lighting filaments, drill bits and cutting and machining tools, the military side of tungsten´s usage has been seldom trumpeted… that is, until now,” he said.

“If we had to choose a metal to crown as the military metal par excellence it would undoubtedly be tungsten for its usage in shells and in armour-plating to resist said shells.”

Ecclestone noted that like many other minor metals, China dominated production and therefore distorted prices.

“Now we have a situation where military and industrial demand is recovering, making it harder for China to maintain low prices (to maintain its dominance),” he said.

“Moreover, China’s attempts to overrun the machine tool sector through its tungsten dominance put Western manufacturers of this equipment on notice that they need guaranteed non-Chinese supplies to evade predatory Chinese manoeuvres.

“Paradoxically, aggressive Chinese waving of the ‘big stick’ of export controls shall probably backfire in heightening Western awareness that it needs to proactively counteract these malign actions.”

Awaiting price action

The price of tungsten has been depressed for the past decade, decimating the ranks of Western hopefuls.

The tungsten price ticked up in February following the news of China’s export restrictions to around US$335 per metric tonne unit of ammonium paratungstate (APT) and further to US$355/mtu in March.

Acknowledging the lack of a dramatic price move, Ecclestone said the price had the potential to rise to above US$400/mtu over the next 12 months.

Project Blue analyst Luke Adriaans said the slight increase in the price of tungsten outside of China since export restrictions were announced could suggest a more sustained upward trajectory.

However, he warned the next few months would be a critical time for the tungsten market.

“The future of the tungsten market remains uncertain in the short term as key tungsten producers await export licenses,” Adriaans said.

“The outcome of this development will undoubtedly shape market dynamics for potential shifts in supply and demand.

“The industry will need to closely monitor changes as they could significantly impact pricing as well as trade flows.”

Two weeks ago, Australian producer EQ Resources (ASX:EQR) said the Fastmarkets APT mid price (CIF Rotterdam/Baltimore) was up 13% over the past 12 months, with consistent week-by-week improvements since the announcement of China’s export controls.

Producers gaining momentum

Shares in the ASX’s largest producer, dual-listed Almonty Industries (ASX:AII) , have more than doubled so far this year.

The company is producing tungsten concentrate from the Panasqueira mine in Portugal and building the Sangdong tungsten mine in South Korea.

Last month, the company reported that it had entered into a partnership with Washington D.C.-based American Defense International Inc to enhance engagement in the US market.

The company believes the partnership will help position it as a leading allied supplier of tungsten and molybdenum for American interests.

EQ, which operates the Mt Carbine mine in Queensland and Saloro mine in Spain, last month entered into five long-term offtake agreements covering the next two years of production.

Based on current tungsten pricing, the total value of the agreements is estimated to be US$124 million.

Half of the product will be sold into Europe and North America.

The next generation

Last month, Tungsten Mining (ASX:TGN) reported it was advancing its Hatches Creek project in the Northern Territory towards production.

The company submitted its mining management plan and mining license application.

It is considering a two-stage approach to early production, starting with the processing of stockpiles left from historical mining, followed by the mining and processing of tungsten-copper ore.

An initial resource estimate is due this month and will provide the basis for studies, along with engineering and testwork.

TGN also holds the Mt Mulgine project in Western Australia, where it has owned the tungsten and molybdenum rights for the past decade and acquired 100% of the project in December.

Mt Mulgine has a resource of 259Mt at 0.11% tungsten oxide, 270 parts per million molybdenum, 0.12 grams per tonne gold, 5g/t silver and 0.03% copper.

TGN is advancing permitting, test work and engineering studies.

Meanwhile, Rumble Resources (ASX:RTR) is firmly focused on producing gold in the near-term from its Western Queen project in WA, but the company discovered a potential tungsten sweetener last year.

Drilling results have included 4m at 4.58% tungsten oxide, 2m at 8.71% tungsten oxide and 0.65m at 18.35% tungsten oxide, all from a depth of around 175m.

Rumble managing director Peter Harold described the grades as “incredible”.

“I mean, when you think that the world resources of tungsten mines and operating plants is between 0.2% and 0.3% – I’ll say that again, 0.2-0.3% – we’re finding 5%, 7%, 8%, so this is potentially a really interesting development story,” he told the recent RIU Explorers Conference.

“The tungsten, or the scheelite, is not associated with the gold, so we could actually mine it as part of the operation, stockpile it separately, and then process it differently.”

Rumble is now assaying all gold holes for tungsten and re-assaying historical drilling.

Harold said the aim was to get a tungsten resource out by the end of the year.