Big Aussie tungsten project could finally get underway
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The rising price of tungsten may finally allow Vital Metals to get work underway on one of the world’s biggest undeveloped tungsten deposits outside of China, writes Barry FitzGerald in his Garimpeiro column.
China’s crackdown on illegal and environmentally damaging mining operations is boosting prices for a wide range of metals and minerals.
And where China itself dominates global production for a particular metal, the price impact of the crackdown has become amplified.
Tungsten, the toughest of metals, is a prime example, and is proving to be something of a godsend for ASX-listed junior Vital Metals (ASX:VML).
Vital has been waiting for more than 12 years for tungsten prices to rebound from depressed levels to give its development-ready Watershed project in far north Queensland a leg up.
China has long accounted for as much as 80 per cent of world tungsten production, mainly from small and under-capitalised Ma & Pa-type operations that swing in and out of production depending on tungsten prices.
Many are illegal, and nearly all are polluting. And when Beijing orders their closure, they tend to stay shut.
Tungsten’s price rise is good news for Vital which has been angling to get Watershed into production since it acquired the project from BHP in 2005.
BHP inherited the project with its early 1980s acquisition of Utah International from General Electric.
Watershed is one of the biggest undeveloped tungsten deposits outside of China and was the subject of a definitive feasibility study in to its development back in 2014.
But the reality is Watershed has had to sit tight pending tungsten price improvement.
That is reflected in Vital’s modest market capitalisation of $10.5m with its shares trading at 0.8c a share — remembering that the company also has promising gold and zinc exploration interests in West Africa which it prioritised while tungsten prices were in the dumps.
Still, the strength in tungsten prices has alerted investors to the upside potential of Watershed, enabling Vital to recently pull in $1.98m from a share placement at the princely price of 0.75c a share.
Apart from the crackdown by China on its producers, investors are also switching on to tungsten’s strategic metal status in a world of heightened tensions because of a dangerously recalcitrant North Korea.
Tungsten has the highest melting point of all metals and has major applications in machine tools (drill bits and cutting tools), as a toughener in steel alloys, in ammunition and armoury, and a range of other applications.
While China’s crackdown on illegal and environmentally damaging mines has been the biggest factor in tungsten’s price rise this year, there is a also some excitement about new emerging applications in batteries.
According to Vital, researchers at the University of Central Florida are working on developing a battery containing tungsten compounds that can be charged instantaneously over thousands of cycles.
“The properties of the tungsten compounds means the new battery would be flexible and a fraction of the size of a lithium-ion battery,” Vital said.
“While early days, this emerging use may lead to a strong increase in tungsten demand, as well as offer a superior battery technology.”
The design is based on a hybrid supercapacitor composed of a core with millions of highly conductive tungsten nanowires within a shell of another tungsten containing material.
An updated financial scenario by Vital on Watershed found a $100 million mining and processing operation would have breakeven costs of $US210 a mtu, comfortably below the current price.
The project, located 115 km north-west of Cairns near the Mulligan highway in hilly open woodlands, could pay back its capital cost in two years. Vital reckons Watershed would have a post-tax net present value of $150 million.
But first Vital will need to secure financing for a development.
Ahead of that happening, it plans to use funds from the recent share placement to optimise its development plans by updating the resource base, refining metallurgical testwork, and updating operating and capital costs.