Almonty to position as China tungsten output plateaus
It seems that the tungsten market is getting tighter. Prices for ammonium paratungstate (APT) have been firming, and that is also the case with ferro-tungsten. Buyers have apparently become concerned that Chinese supply of both mined tungsten concentrate and ferro-tungsten are stalling at present levels and the chance of lower price quotes disappearing.
But it is not before time, given the poor prices that prevailed in late 2015. A report last month by Brisbane-based broker Morgans noted that “driven by economic growth in China, the concentrate price rose to above $300/mtu (metric tonne unit) in mid-2011, before weakening below $170/mtu in late 2015, to $200-225/mtu now”.
When considering the planned combining of tungsten miner Almonty Industries Inc. (TSXV: AII) and ATC Alloys (ASX: ATA), this is important to remember. Almonty will offer one share for every 10.38 ATC shares held.
The new tungsten company will hold an interesting line-up of projects. These include Almonty properties that comprise:
- The Los Santos mine in Spain, acquired in 2011 and which produces tungsten concentrate.
- The Wolfram Camp mine in Queensland, Australia, acquired by Almonty in 2014 which produces tungsten and molybdenum concentrate.
- The Panasqueira mine in Portugal, in production since 1896, and producing tungsten concentrate.
- The Sangdong mine in South Korea, which was historically one of the largest tungsten mines in the world and one of the few long-life, high-grade tungsten deposits outside of China.
- The Valtreixal tin-tungsten project in North Western Spain (now holding 51% with an irrevocable option to acquire a 100% ownership.)
These assets will now be joined by
- ATC’s 60% joint venture interest in the Vinh Bao ferro-tungsten plant in Vietnam, one of the largest and most advanced ferro-tungsten plants outside of China.
Here we should note a comment by my colleague Christopher Ecclestone, of Hallgarten & Co. of London; he was writing in a recent report on the subject of rare earths processing in Vietnam, but it is equally true of other metals including tungsten. As he noted, Vietnam has shown itself to be aggressive in courting industries where, while it cannot offer raw materials, it can offer conversion of metals and minerals at competitive prices. Moreover, it has a geographical advantage: it is centrally located, close to end users and not too great a distance from the sources of raw materials.
The move by Almonty and ATC should be seen as part of the (very slow) recovery by Western producers in the tungsten space. China flooded the world with tungsten in the 1980s — more than 60 mines in other countries were forced to close, an extraordinary figure even at this distance of time. According to the recent note from Morgans, in 1986 the APT price was one sixth of the 1977 price, and one-third of the 1973 price. For more than 15 years, the concentrate price was stuck at U$50-60/mtu.
But now the tables are turning — although only slightly at this stage (but enough to give Western producers heart). In its most recent presentation, Almonty says the supply-demand situation is in balance in the near-term but is expected to tighten over the next five years. While pointing out that China remains the dominant producer with, in 2013, control of 82% of the world supply (with 95% of China’s output controlled by one company, Minmetals), it adds that “some Chinese tungsten mines are reaching the end of their life and new projects in the country are expected to only replace existing production or allow for a small amount of growth in Chinese domestic supply.” This, with global tungsten consumption expected to grow at a compound annual growth rate of 3.5% through 2018.
“With minimal growth in domestic supply, China is likely to further reduce exports and increase imports of tungsten products to ensure domestic demand is satisfied,” says Almonty.
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