Tungsten guide: why this tough metal is in demand and which stocks are benefiting
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China is further scaling back its tungsten production and that’s good news for Australian stocks with exposure to the tough metal.
The Asian powerhouse is not only the largest producer of tungsten, but it is also the largest consumer and it is cutting its production to 70 per cent of 2017 levels.
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.
>> Scroll down for a list of ASX stocks with tungsten exposure, courtesy of leading ASX data provider Mak Corp
Mark Strizek, boss of tungsten player Vital Metals (ASX:VML), recently returned from a trip to China and he says the country is committed to its environmental crackdown.
“It all comes down to this environmental push because China definitely are the gorilla in the room when it comes to tungsten,” he told Stockhead.
“The push for the environment is real and it’s going to be long term and it’s going to impact not just tungsten but all metals.
“It’s going to be positive because it does create the potential for almost an ‘ice to eskimos’ kind of deal because you never ever would have thought you’d be able to sell tungsten concentrates into China.”
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.
In March, an independent capital cost review of the project returned a lower capital expenditure estimate of $105.8 million, down from the $172 million flagged in a 2014 study.
New demand from battery makers
While China’s crackdown on illegal and environmentally damaging mines has been the biggest factor in tungsten’s price rise, there is also some excitement about new emerging applications in cars and batteries.
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.
And German engineer Bosch has developed a new brake disc that generates up to 90 per cent less brake dust using a tungsten carbide coating.
Porsche will be the first to incorporate the new ‘iDisc’ in its 2019 Porsche Cayenne.
US-based market research firm Freedonia predicts global demand for tungsten to rise by 4.2 per cent to 146,400 tonnes in 2019.
According to Freedonia, China’s historically lower mining and labour costs contributed to it becoming a dominant player in the market.
Processed tungsten more attractive
But labour costs are now on the rise and the increased use of scrap globally is making processed tungsten sourced from outside of China more attractive.
“The current cost of Chinese production is around about $180 to $200 [per metric tonne unit],” Mr Strizek said. “So that puts Australian players in a very good light.”
The tungsten price has surged to around $413 per metric tonne unit (MTU) this year from a low point of around $210 MTU in 2016.
This has translated into share price hikes for a handful of ASX-listed tungsten players since the start of this year.
Here’s a list of ASX stocks with exposure to tungsten courtesy of leading ASX data provider Mak Corp. (Scroll or swipe for full table)
|ASX Code||Name||Price change this year (Jan-May)||12-month price change||Price May 1||Market Cap|
|NAE||NEW AGE EXPLORATION||0||-0.470588235294||0.009||4.1M|
Tungsten Mining (ASX:TGN) has witnessed the biggest share price increase of 404 per cent to 63c.
The Perth-based explorer recently raised $20 million to fast-track development of its Mt Mulgine tungsten project in Western Australia.
Meanwhile, GWR Group (ASX:GWR), which has a 13.2 per cent stake in Tungsten Mining and owns the Hatches Creek tungsten project in the Northern Territory, has climbed around 150 per cent since the start of 2018 to trade at 20c.
Topaz and tungsten junior TopTung (ASX:TTW) has added about 63 per cent to trade at 4.4c despite facing issues with its Torrington project in New South Wales.
In March, the company revealed recent drilling at its only project had “severely reduced the tungsten resource”, which will affect its future strategy.
TopTung is now on the hunt for a new advanced vanadium or cobalt project in Africa or North America, with around $3.7 million in the bank at the end of the March quarter.
Stockhead is proud to use Mak Corp as a provider of great value, accurate and reliable data on ASX-listed mining stocks. For more information head to Mak Corp’s website.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.