Not so long ago, we took the proverbial pen to paper and declared the rare earths market a bubble. MetalMiner readers know that we did that well in advance of the bubble actually popping, which it horrifically did over these past 18 months. (Just read our latest monthly metal price report to see.)
So when junior mining firms within any “hot space” contact us seeking media coverage, we tend to remove our rose-colored glasses.
To clarify, some of these junior mining firms will make it and bring much needed alternative supply to the Western world. But most will not. Unfortunately, reality bites.
The case of tungsten junior miners makes for an interesting story because of the supply risk involved with tungsten. First, China controls a great majority tungsten production. Second, we’ll say it here first – China cheats. And China will cheat and skirt US Dodd-Frank conflict minerals rules. (More on that story shortly.)
So the idea of having alternative sources of supply sounds like a good one.
The world’s production and known reserves currently stand at 3.2 million tons, of which China makes up 1.9 million tons. The US, on the other hand, has 140,000 tons of production and reserves while Canada has 120,000 tons. Prices for ferro-tungsten (as well as tungsten APT now in the $380+/metric ton range) have notched up in recent days:
But the economics don’t necessarily make a lot of sense.
Long-term APT prices have not averaged over $350/ton. In fact, the long-term average remains well below $350/ton. We find it hard to conclude in any metals market that growing demand necessarily implies higher prices. To boot, we could almost make the opposite case.
Just take the case of aluminum as an example. Like any market, when supply exceeds demand, prices fall, not rise. Any junior miner that makes an assumption that the price of the key product will increase because demand may rise has joined the game of “beat the market.”
Very few tungsten projects have actually received funding (same as in our rare earth metals world). Industry sources tell us that the only one that will likely receive any near-term funding involves the Nui Phao project in Vietnam owned by the Masan Group.
In a follow-up piece, we’ll explore some of the tungsten projects and examine their prospects.