EDITOR: | December 13th, 2012

The Pulse: Tungsten’s critical appeal, Japan pushes geothermal, Phosphate in Congo

| December 13, 2012 | No Comments

the-pulse-300x25415There are rare earths – and then there are critical metals. While, in terms of composition and geology they are not alike, they exhibit some of the same supply-demand characteristics. In terms of supply to the world, China often holds the key and the rest of the world waits for the supply door to be unlocked, if and when Beijing regards itself as good and ready. However, as has been well charted here on ProEdgeWire, China’s options are increasingly limited due to, one, its own growing domestic demand and, two, the fact that it can no longer meet demand in many mineral commodities.

As with rare earths, so with tungsten. Japan gets 85% of its requirements of this metal from China and is looking for alternative supplies. The U.S., the European Union and Japan between them consume 55% of the world’s tungsten but produce less than 5%.

Hence- again, as with rare earths – a frantic effort in the West to get mines up and running. And often the projects are former tungsten mines closed when China flooded the market and drove the price down. So we have this week seen Blackheath Resources (TSX.V:BHR) move to acquire two old mines in Portugal. (Historical note: Portugal has long been a significant tungsten producer and, in World War II, was the key supplier of this vital metal for the Allied war effort.) The Borralha mine now of interest to Blackheath was Portugal’s second largest mine until its 1985 closure.

This need for tungsten is why, for example, the government-owned Japan Oil, Gas and Metals National Corp (or JOGMEC) is pouring money into a tungsten project in Queensland, Australia, controlled by Vital Metals (ASX:VML) and why another Australian company, Wolf Minerals (ASX:WLF) has been able to raise $82 million for its Hemerdon tungsten-tin project in Devon, England.

The world is playing catch-up with this critical metal which is essential in terms of strength for such as things as drill bits, machine tools and defence applications. It has a melting point of 3410C.

It is traded in metric tonne units (mtu) of ammonium paratungstate (APT). Back in the 1980s and early 1990s many Western mines closed after China dumped large quantities of tungsten on the world market at low prices. Prices fell to $45/mtu (against today’s price of around $450/mtu or a little higher).

Green energy: Geothermal has one big advantage over other forms of renewable energy – it can provide base load power. Solar, wind, tidal, wave or biomass generally cannot provide the assurance of continuity needed for base load supplies.

Japan is the sixth largest user of geothermal (after, in order, the U.S., the Philippines, Indonesia, Mexico, Italy, New Zealand and Iceland) but has not build any new generating capacity since 1999. But, following the closure of nuclear capacity, the reintroduction of government subsidies for renewable energy has encouraged several companies including JX Nippon Mining & Metals, Idenitsu Kosan and Tohoku Electric Power, to blow the dust off some geothermal plans. JX is planning a 40 megawatt plant, Tohoku a 50MW one, while Japan Petroleum Exploration is also look at a generating plant in Hokkaido prefecture. Some 20 billion yen ($240,000) will be provided by the government for drilling and site surveys, reports the Nikkei news service. Agreements will be needed with hot springs operators.

Phosphate: London analyst Roger Bade of financial advisers Whitman Howard was very impressed at the presentation by a London-based company Cominco Resources at the recent London Mines & Money conference. This company has what is believed to be the world’s 10th largest deposit. It is located in Congo-Brazzaville (the Republic of Congo). The Hinda deposit now contains 531 million tonnes grading 11.1% phosphorous pentoxide.

The company claims it is probably the largest undeveloped deposit in the world, and also the thickest. It has been defined over a strike length of 20km, is 700 metres wide and between 30m and 60m thick. Moreover, it is 37km from Ponte Noire, the country’s main port, and the deposit is crossed by an existing railway line. “This project has an awful lot going for it,” says Bade in a client note.

Disclaimer: The above is an opinion written by Robin Bromby, and he is not a licensed investment advisor.




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