Thread by @METhompson72

Investing in #Tungsten
I start off each series on investing in a different metal talking about mineralogy – this will be no different! There are 2 commercially valuable mineral types in tungsten – scheelite (calcium tungstate) and the wolframite series (iron-manganese tungstate.)

Scheelite is generally speaking easier and cheaper to recover than wolframite, mainly because it is recoverable via gravity and flotation means whereas wolframite only by gravity. Scheelite fluoresces which can make a trip to an underground #tungsten mine very interesting!

Both scheelite and wolframite are brittle meaning that they are liable to produce unrecoverable slimes during processing. These #tungsten minerals have a very high specific gravity though, of 6 g/cm3 and 7 g/cm3 respectively, making gravity separation relatively simple.

80% of mine supply comes from China – putting #tungsten up there with Rare Earths in terms of criticality of supply and political leverage. Western World sources are strategically very important, but tungsten is not found in many places around the world in economic quantities.

Scheelite is found in NW Canada and the Western US. Wolframite in Bolivia, Peru, Spain and Portugal, along the African Rift Valleys and in Australia. The largest concentration of #tungsten deposits though is found in SE Asia.

Korea, Japan, Vietnam, Myanmar and Thailand all contain #tungsten deposits, but the giant mines are to be found in Jiangxi and Hunan in China. Deposits are either vein style, skarn hosted or bulk (greisen, porphyry or stockwork.)

Vein deposits are typical quite small, rarely topping 1Mt of ore, but grades are usually good and range from 0.5% to 5% WO3. Note: the #tungsten industry uses tungstate grades (WO3), and not tungsten grades (W).

Skarn deposits mainly host scheelite, and are often polymetallic, with #Molybdenum, #lead, #zinc, #copper, #gold, #fluorpsar and #magnetite commonly found. Tonnages are typically a few million to tens of millions of tonnes of 0.1% - 1% grade WO3.

Bulk deposits are usually either #Tungsten-#tin or tungsten-molybdenum and can run to hundreds of millions of tonnes. Tungsten is usually present as both scheelite and wolframite making processing more complex. Typical grades are 0.1% - 0.3% WO3.

Most #tungsten deposits are relatively coarse grained so mineralogy is less important than with #tin. Grade, tonnes and metallurgical recovery are the three key numbers for a deposit. A “nugget effect” in resource estimation often makes mined grade higher than resource grade.

Thereafter I look at the other usual mining questions such as ESG, jurisdiction, open pit vs underground, capital cost, operating cost, water, power, workforce, permitting etc etc etc. (Anyone of these can render a #tungsten deposit uninvestible.)

Crustal abundance of #tungsten is 1.5 parts per million (#tin = 2ppm) and they both typically trade at similar prices of around $15k - $25k per tonne of contained metal in concentrates. Tungsten concentrates are sold to APT plants – Ammonium Para-Tungstate

APT is the intermediate product from which #tungsten end use items are then made – whether this be tungsten powders for moulding, tungsten carbide, and tungsten chemicals. Tungsten metal has the highest melting point are is strongest of all metals.

The overall #tungsten market is about 100kt per annum ($2bn). This is a tiny number for a metal that is crucial to so many industries: O&G, mining, aerospace, and automotive. Like #tin, tungsten is consumed in billions of individual items with a very low elasticity of demand.

Now for the interesting part, and why I am so bullish #tungsten! In the mid 2010’s there was a ponzi scheme in China called the “Fanya Metal Excahnge”. They sold $6bn of 10% interest bonds to retail punters and used some of the proceeds to buy minor metals to back these bonds.

A lot of this money ended up in #tungsten concentrates and in APT – over 4 years FME built a stock of 29kt – about 4 months of world supply! This drove APT prices to a high of $450 per MTU. (1 MTU = 10kg.)

#Tungsten mine supply expanded greatly to meet this investment demand at this very high price. When the FME collapsed in 2015 the market was suddenly MASSIVELY oversupplied, and APT dropped to $170. About 75% of the world’s mines were losing money at that level.

Roll on 4 years and the 29kt of #tungsten bearing APT was all sold to China Moly for $450m. I thought that this would sit there for years as a strategic stockpile for China. However mine production cratered in the low price environment post 2015 and CM started to sell in 2020

My understanding is that CM’s #tungsten stockpile is down to 7kt. 22kt of APT sold in 18 months. At the same time the APT market has rallied from $170 to $275. This implies a truely massive market deficit of between mine supply and end market demand, even in the middle of COVID

This is only possible if a very large amount of high-cost Chinese #tungsten mine capacity has been shuttered in. A lot of the Chinese mines are very old and suffering from grade depletion and from legacy environmental costs. Will they re-open, and at what APT price?

My view is we will see APT in the $350 - $400 range in the next 18 months as post pandemic restocking and increased consumption will necessitate new #tungsten mine supply. #TungstenWest is perfectly set to supply 4,000 t per annum of this required demand from mid 2022.