Rafaella Resources (ASX:RFR) has decided to make its foray into tungsten after being introduced to a mine in Spain that could potentially give it early cash flow.

Now some might be hesitant to go down the tungsten path, particularly after the failings of previous players like Wolf Minerals, which is now in administration.

But perhaps the key is to buy an already established and past producing mine that won’t take much money or effort to get up and running.

Rafaella’s investors seem to think it’s on the money – shares have more than doubled to 15c since the company announced it was planning to acquire Galicia Tin & Tungsten and its Santa Comba mine.

And funnily enough, the mine Rafaella is acquiring was bought by the current owners in a fire sale.

Though the company that owned it previously didn’t go bankrupt because it owned a tungsten mine – it went under because it was a construction company operating at a time when the industry in Spain took a dive.

Rafaella was originally focused on copper and cobalt in Canada and gold in WA, but now its main goal is to finalise the acquisition of Galicia Tin & Tungsten and accelerate itself to producer status by restarting the Santa Comba mine.

So why tungsten?

Tungsten’s appeal comes from it being a strategic metal. The US, Europe and China have all declared it as such. That’s because it has some fairly unique properties that mean there is no substitute for it.

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.

It’s also likely been declared strategic because it’s “armour piercing”, so governments want to know exactly where their tungsten supplies are going.

It’s a lot like rare earths, in that China dominates the market, accounting for 80 per cent of tungsten supply and consuming about 50 per cent.

And there isn’t a whole lot of production – only around 85,000 to 90,000 tonnes produced each year.

Other big consumers are the US and Europe. Europe consumes around 16,000 tonnes each year but produces less than half that.

“What’s particularly interesting is the big manufacturers, like for example some of the heavy industrial users — HC Stark, Sandvik out of Europe — they are very, very keen to secure strategic supplies from OECD countries,” Steven Turner, a representative of Galicia Tin & Tungsten, told Stockhead.

Turner is responsible for bringing the Santa Comba acquisition to Rafaella. He had been working with Galicia Tin and Tungsten for two years assessing its options for financing and moving the project forward.

On completion of the acquisition Turner will join Rafaella as its managing director.

Now it looks as if Rafaella has landed itself a pretty sweet tungsten mine.

The Santa Comba open pit and underground mine is fully permitted out to 2068, sits just 60km from a deep water port, has established infrastructure in place, doesn’t need any pre-stripping to get to the valuable tungsten ore, has produced clean concentrate in the past and has an inferred near-surface resource of nearly 5 million tonnes.

We want it all…

And even better, the tungsten production is already spoken for.

Geneva-based Transamine trading – the oldest private independent commodities trading house globally – wants it all.

Transamine has agreed to buy all of the tungsten from the mine gate and on-sell it to customers, including HC Stark, which has made its interest in the Santa Comba tungsten known to Galicia Tin & Tungsten.

“The project in Spain has been courted particularly by HC Stark for some time,” Turner explained.

HC Stark had a good long look at it. They had a look at a lot of projects globally and engaged an external engineering consultancy to have a look at Santa Comba, and on the back of that report they’ve made offers for the offtake.”

HC Stark also went to export credit agency Euler Hermes Aktiengesellschaft, which provides government-backed guarantees for projects that supply raw materials into Germany, and secured pre-approval for up to €11m ($17.6m) in development funding for the project.

“So that shows you how keen they are to lock in this offtake and see this project up and running,” Turner noted.

Transamine has also agreed to cornerstone a $2.6m equity raising by contributing $1m. The company will also chip in an extra $500,000 once Rafaella and Galicia Tin & Tungsten execute the German government-backed financing package.

Turner said Transamine has also expressed its interest in potentially working with Galicia Tin & Tungsten on other deals as well.

“They get exposure to mines and opportunities all around the world and, like a lot of commodity traders, if they have trust and faith in a management team there’s the ability there to do further deals and they could bring capital to those projects as well,” he said.

“So there’s a strategic alliance that’s been developed with Transamine that could extend beyond Santa Comba.”