Dodd-Frank Act, Fracking Help Carbine Tungsten; Expect Higher Prices

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The most viable options for new tungsten metal supply – in a market dominated by Chinese producers – seem to be old proven workings that were closed back in the 1980s or 1990s, when Chinese tungsten supply began to flood the market and prices crashed (sound like rare earth metals again? We thought so). See what we mean by that; read Part One of this article here.

Tailings or stockpiles can sometimes provide a ready source of early cash flow while the financial case, approvals and funding for a return to hard rock mining is put in place.

Seeking out some examples of how such ventures are evolving in practice, we caught up with Jim Morgan, CEO of Carbine Tungsten (CT) in Queensland, Australia.

CT is not a lone resource in Australia – the country is estimated to hold some 11% of global tungsten reserves and has resources in Tasmania, in western and northern territories, as well as several sites in Queensland. Jim Morgan was understandably bullish about the prospects for CT and the few miners like them with access to proven resources with the infrastructure that comes from previous workings.

RELATED: What you need to know about tungsten and conflict minerals compliance.

Grades at Carbine Tungsten are, relatively speaking, on the lower side, averaging 0.1% WO3 in its tailings dam and 0.12-0.14% in its hard rock assets; but easy access, good infrastructure and existing assets allow a low cost of recovery, making the project viable even if prices fall well below current levels.

Jim Morgan sees considerable potential for tungsten demand growth, noting that fracking has had two beneficial effects on the market. Firstly, it has created increased demand for cutting tools, initially in the US, but with potential for growth worldwide now that the technology rolled out elsewhere. Secondly, lower US energy prices have accelerated the process of re-shoring; as firms bring engineering work back to the NAFTA and EU regions from Asia, demand will be stimulated for re-tooling and re-equipment.

Surprisingly, the ol’ Dodd–Frank Wall Street Reform and Consumer Protection Act has probably done firms like CT a favor. Not only has it made supply sources in mature, well-regulated markets like Australia relatively more attractive than some emerging markets, but it has also made funding more difficult for CT’s competitors trying to raise funds for new blue sky projects.

Tungsten Price Outlook

With so few new projects coming to market, the a) funding challenges junior miners are working against, b) Chinese restrictions (which are likely to get more stringent, rather than less so), and c) the growth prospects for the metal as the US, Europe and Japan increase growth, it would not be unreasonable to expect tungsten prices to continue the rises seen over the last six months during next year.

Read more from Stuart Burns.

MetalMiner’s Conflict Minerals Resource Center – check it out here!

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