Fullmetal Alchemists: A new tungsten IPO has an almost impossible asset to replicate – engineers who can ‘see’ 2800C
According to the Observatory of Economic Complexity the ferrotungsten market is niche.
The product is the 3854th most traded globally, accounting for just 0.0000075% of world trade.
As much as 95% of production capacity outside the dominant Chinese and Russian markets is contained in just one plant in Vietnam, the Asia Tungsten Products Co. plant in Vinh Bao, about 80km east of the country’s capital Hanoi.
And that unique business is coming to the ASX through the planned IPO next month of Tungsten Metals Group, owners of 60% of the Hong Kong based ATC Vietnam.
With an electric arc furnace plant 25km south of the key port city of Haiphong, a city of 2.1 million, Tungsten Metals Group plans to produce around 1300t of ferrotungsten or FeW through the 16t/day factory in the first 12 months of operation after listing.
Previously owned by the delisted Hazelwood Resources, Tungsten Metals Group will take 100% equity in the plant on IPO, and market forces including the race to secure critical minerals supply chains in the West are feeding into a promising narrative as the project returns to the public investment market.
Around 96% of the market for tungsten products is supplied by China (over 80%) and Russia.
It’s not surprising some buyers would be keen on sources outside those supply chains given current circumstances.
“The American defense strategic stockpile has been benefiting from what we call the peace dividend and they were selling down the critical minerals that they had because the supply chain was so easy and so open,” Tungsten Metals Group CEO Martin McQuade told Stockhead.
“What they’ve learned since the unfortunate war in Ukraine with Russia is that those key supply chains can be easily disrupted, and you have to have supply at home.”
Most companies looking to break into the ex-China market are miners aiming to produce tungsten trioxide concentrate or WO3 from low grade deposits of minerals wolframite and scheelite.
But it’s not just raw materials supply that matters when talking about a metal regarded as a critical mineral in the USA, UK and European Union.
Indeed, tungsten is one of the metals classed in the REEShore Act in the USA as rare earth metals which will not be able to sourced from China for US armaments after 2026, unless it cannot be acquired elsewhere.
“It’s not a good idea to only have concentrate, because you need somebody to be able to process that further down the track into a usable object,” McQuade said.
“So they will need to stock up the next level up the processing chain to be able to make something.
“Ferrotungsten is the thing you need for high speed steels. If you don’t have that in your country, where are you going to get it from in a world where supply risk is really back to ‘can I move a boat from A to B?’
“There’s a refocusing on what is no longer so much what we call ‘just in time’ production; it’s now that focus into ‘just in case’, making sure you have good stockpile for those things, so we’re leading into that.”
While Chinese operations are highly integrated, running from mine to alloy, Tungsten Metals Group does not have a mine of its own, meaning it will have the flexibility to source both concentrate and recycled tungsten as feed stock.
All in all, it will make up around 95% of the processing capacity outside of China and Russia, making it an important if obscure asset to the Western world.
ATC has been operating for exactly a decade. And it would be difficult to replicate or replace.
Tungsten is one of the densest metals known to humankind and boasts the highest tensile strength of any metallic element, along with the highest melting point in excess of 3400 degrees Celsius.
Ferrotungsten is produced in a tilted electric arc furnace, where temperatures in excess of 2800C need to be generated to separate the slag from the alloy.
It is an intensity so extreme — 1300C beyond the heat EAFs need to produce steel — only ferrotungsten (around 120t of the stuff) can be used to line the furnace.
No thermometer can accurately measure the temperature.
That means experienced eyeballs — covered by special cobalt blue glasses to withstand the brightness — are the only instrument capable of managing the process successfully. It’s not just the infrastructure that makes the plant such a rarity, it’s the people.
“There is no thermometer that can work at that temperature. And so it works by the experience of the people knowing that at the last final temperature trim, you have to put something in the furnace that boosts the temperature above where you need to be,” McQuade said.
“And that isn’t supplied by the electric arc, that’s supplied by another addition that we add, that adds iron and silica into it.
“And that releases more power and that drives that final launch to get that final temperature. And if you don’t know how to do that, you’re in trouble.”
Tungsten Metals Group executive director George Chen, general director of ATC Vietnam, is an engineer with 35 years of experience in the tungsten industry.
The expertise of Chen and his team are a key asset to the float, one hard for a competitor to replicate.
“Because we are the only one of scale outside China, it’s incredibly difficult,” Tungsten Metals Group chairman Tony Adcock said.
“It would take somebody 2-3 years to build a plant, it would cost them about US$30 million to build. And even if they did it, they wouldn’t have the expertise at hand.
“George Chen has a team of about 15 people that work with him. All engineers and so on. And as you intimated there’s a degree of alchemy in this.
“They look at the flame, they look at when to turn it up or when to add things to it.
“So to replicate this … nothing’s impossible, but it would almost be impossible.”
Ferrotungsten has a multitude of uses from armour plating in the defence industry to the weapons needed to combat those armour plated tanks, to aerospace, to tools in the mining and construction industry, to mobile phones.
“What will move it is increasing need from places like the US to rebuild stockpiles of tungsten for their armaments industry, it will come from the aerospace industry, the clean technology industry for things like windmill vanes, and so on to basically strengthen steel,” Adcock said.
“It will come from the tools industry. The leading industries at the moment are mining and construction, but I see consumables as well.
“There’s two to five grams of tungsten in your mobile phone, that’s what makes it vibrate. So I see more and more in the military or defence and consumables over time to build on the construction industry.
“Now, if China underwent a massive construction program again, they’d have to strengthen their steel. So they will use their own stockpiles to do that, which means the supply to the rest of the world won’t be there. So we think we’re in a really good place for the IPO.”
The US is a market McQuade is keen to see Tungsten Metals Group break into with a post-IPO trip to gauge market interest planned for August. Meanwhile customers from Japan, one of the world’s biggest ferrotungsten importers, are also keen on an alternative source of supply.
“Our long term customers from the past have been in contact. Certainly the Japanese customers have said, please, can you get back in the market?” McQuade said.
“Because they only source from China, which is not a problem, China’s a very good manufacturer, and good supplier. But everybody needs an alternate source, you need two sources.
“We won’t replace China, it’s not going to happen,” McQuade said.
“But we will get a good percentage of that supply to that region and that’s happening through Europe as well.”
The ferrotungsten market is in the order of around 10,000tpa currently, meaning at around 10% of the global market TMG would not be a threat to China’s dominance. The market is expected to expand over the next 4-5 years, Adcock said.
The ATC plant can be scaled up to as much as 4000tpa at full capacity, while TMG will also be investigating a chemical processing route to produce sodium tungstate.
Finding tungsten on the ASX is a rarity.
And investors may have bitter memories of Wolf Minerals, a reminder that critical mineral status isn’t a one for one conversion for success.
The company spent over 130 million pounds getting the Hemerdon tin and tungsten operation in South Devon in the UK into production only to go into administration in 2018.
The world’s second largest tungsten resource, it was taken over by London AIM market listed Tungsten West PLC, which in January issued a feasibility study anticipating production of 2900t of tungsten oxide in concentrate and 310t of tin in concentrate annually over a 27 year mine life.
Eyeing a fourth quarter 2023 restart, Tungsten West expects to spend around £31.1m bringing Hemerdon back into production with £12m of restart capex already spent, making it the western world’s largest primary tungsten producer.
But its shares cratered earlier this month after announcing a recapitalisation and interim funding plan amid volatile energy pricing, “conservative lending” and inflation. In other words, it’s having a hard time finding a bank to put the dosh in.
Over in the land of Oz, where can you go if you’re howling for wolfram?
EQ Resources lays claim to the title of Australia’s only primary tungsten producer, the Mt Carbine tungsten mine near Cairns in North Queensland.
It received environmental authority to restart open pit mining last month, providing access to material far above the 0.075% WO3 grade of stockpiles currently processed on site.
Once mining can resume, the $92 million company says it will become a major tungsten producer, filling a gap in production from the West in a market mostly controlled by Chinese and Russian output.
It plans to begin the ramp up of mining at the Andy White pit in June, and employ or contract over 150 people from nearby Mt Molloy and communities like Mareeba.
This month EQR announced a 64% increase in in-situ indicated resources to 18.1Mt at 0.3% WO3, representing a big lift in mineable resources over a promising BFS update last year that laid out plans to produce over 30,000t of tungsten trioxide in concentrate over a 14 year mine life at a cheap start up capex of $21.4 million.
A potential third phase, not included in the Mt Carbine BFS, could see EQR expand into underground production.
Group 6 is one of the most advanced tungsten developers on the ASX, with plans to return the Dolphin tungsten mine on King Island, located in the Bass Strait between Victoria and Tasmania, to production this year.
Containing a JORC 2012 compliant mineral reserve of 4.43Mt at 0.92% WO3 from a mineral resource of 9.6Mt at 0.9% WO3, the project is one of the highest grade on the market.
Opened as King Island Scheelite in 1917 and shut in the early 90s after four decades under the direction of Peko-Wallsend, G6M plans to produce a 63% WO3 concentrate to supply the ammonium paratungstate tungsten market via an eight year open cut and six year underground.
First concentrate was expected this quarter.
“Australia is poised to emerge as a new critical minerals supplier with two significant tungsten mines ramping up in 2023,” PAC Partners analyst James Gurry said in a note in March.
“Together Group 6 Metals (G6M) and EQ Resources (EQR) should see Australia go from virtually zero, to supply 15-20% of the ex-China tungsten market in the years ahead.”
Tungsten Mining has become a bit of a ghost in recent years with little news to speak of and a list of ASX announcements that boil down to quarterly reports and housekeeping.
Chaired by GWR Group’s Gary Lyons, Tungsten boasts a total inventory of 41m MTUs (~10kg per unit) of tungsten trioxide or WO3, 71,000t of molybdenum, 1Moz of gold, 44Moz of silver and 92,000t of copper.
Its main game is the Mt Mulgine project in the Murchison region of WA, which contains a JORC reserve of 140Mt at 0.1% WO3, 288ppm Mo, 0.12g/t Au, 5.9g/t Ag and 0.03% Cu.
A PFS in 2021 suggested Mt Mulgine would produce 460,000mtu of WO3 in concentrate annually over its 23.5 year life of mine, along with 1070t of molybdenum, 1265t of copper, 9400oz of gold and 525,000oz of silver with by-product credits helping limit operating costs to US$92 per mtu and all in sustaining costs to US$111/mtu.
As of its December quarter report the company said discussions with potential partners were ongoing including sending concentrate samples to potential offtakers, with a healthy $12.62m still in the company’s bank account.
Primarily listed on the TSX in Canada, Almonty’s ASX-listed chess depositary interests allow investors to trade the stock in Australia after a $15.25m IPO in 2021.
Almonty has operated the Los Santos mine near Salamanca in Spain since 2011 where it plans to restart production from mine tailings in mid-2023 after entering care and maintenance early in 2020, as well as the 127 year-old Panasqueira tin and tungsten mine in Covilha in Portugal.
It is planning to redevelop the Sangdong mine in South Korea, historically one of the largest tungsten mines in the world and one of the few deposits with a long mine life and high grades anywhere outside of China.
Eyeing commissioning in late 2023, Almonty is also assessing potential participation in the battery anode, cathode and semi-conductor industry after the mine is restarted with the proposed development of a downstream facility in South Korea to produce 3000tpa of vertical nano tungsten oxide.
Not a primary tungsten stock, but the small cap iron ore and tin explorer expects to produce the hard metal as a by-product of its Mount Lindsay tin mine in Tasmania.
Set between two world class mines in the Renison Bell Tin Mine and Savage River magnetite iron ore mine owned by Metals X and Grange Resources respectively, Mount Lindsay contains 81,000t of tin and 3.2 million metric tonne units of tungsten trioxide.
An underground feasibility study at Mount Lindsay is ongoing, but Venture has found other potential credits that could boost the economics there, including rare earths and boron.
GWR Group has its fingers in plenty of pies, from iron ore to gold and magnesium.
But the dilettante jack of all trades, also has an 8.9% equity stake in Tungsten Mining and an 80% stake in the Hatches Creek JV alongside TGN.
Located 375km north east of Alice Springs, the historic Hatches Creek mining centre produced a reported 2840t of 65% WO3 between 1915 and 1957.
TGN is farming into the project, where previous RC drilling by GWR struck hits like 6m at 0.42% WO3 from 35m, including 1m at 1.88% WO3 from 40m, along with some notes of high grade copper.
Tungsten Mining can increase its 20% interest to 51% by spending $3m on exploration, development and mining activities in five years and can acquire the whole thing with an option in the sole fund stage to pay $6.96m indexed for CPI.
Investigator Resources is earning in to acquire 80% of the Molyhil tungsten project in the Northern Territory, where uranium explorer Thor Energy posted a JORC 2012 resource in 2021 of 4.38Mt at 0.27% WO3 and 0.1% of molybdenum for 11,800t of WO3 and 4400t of Mo.
IVR needs to spend $1m over 18 months to earn a 25% interest along with Thor’s 40% interest in the Bonya copper and tungsten JV next door with Arafura Rare Earths (ASX:ARU), which is plenty occupied right now bringing it Nolans rare earths project into production.
Another two stages involving a total $7m of extra exploration expenditure over six years after the completion of the first stage could earn Investigator an 80% stake.
Unique about Molyhil is its major project status with the NT Government and potential access to the Northern Australia Infrastructure Fund and Federal Critical Minerals and High-Tech Metals Activation Fund.
Investigator is largely focused on developing the high grade Paris silver project, but MD Andrew McIlwain once ran the Los Santos Tungsten Mine in Spain, now part of Almonty, and was a founding director of the TSX listed firm.
Pan Asia Metals is best known as a lithium play, eyeing off Thailand for its low costs and status as South East Asia’s largest car manufacturing market, with plans to turn the Reung Kiet lepidolite deposit into a long term lithium chemical business.
But it also owns the Khao Soon tungsten project around 600km south of Bangkok in Nakhon Si Thammarat Province in Southern Thailand, comprising two contiguous special prospecting licences and a licence application over 33km2.
A major underground tungsten mine which operated for around a decade until the end of the 70s, its early history bears the hallmarks of the decade’s tempestuousness.
Before a concession could be granted the area was rushed by illegal miners with as many as 30,000 informal diggers operating in the field.
Historic information is, consequently, spotty but promising.
Khao Soon may have provided half of all tungsten and 75% of wolframite production in Thailand from 1971 to 1980, which official figures had pegged at 44,000t across the country.
Somewhere between 10,000-20,000t of that probably underreported figure came from Khao Soon, where illegal miners would only have been able to dig out the easy, high grade stuff, possibly between 2-4% WO3.
Pan Asia Metals has an exploration target of 15-29Mt at 0.2-0.4% WO3 — not uncommon in western deposits once waste rock is taken into account — based on diamond drilling which hit “robust widths and grades” with strong surface anomalies.
At Stockhead, we tell it like it is. While Venture Minerals is a Stockhead advertiser, it did not sponsor this article.