Everything you need to know about Tungsten before investing

By Lelde Smits. Published at Sep 18, 2019, in Podcasts

Rafaella Resources Limited’s (ASX:RFR) Managing Director Steven Turner introduces tungsten and its applications to The Capital Network's Executive Director Lelde Smits, outlining that it is a strategic mineral and that it's strategic because of its unique properties. With China controlling almost 80% of tungsten production globally, Steven highlights how Australia is trying to break China’s metal dominance and is looking for alternative sources. Detailing the supply and demand dynamic, Steven also discusses why there is significant upside for any tungsten miner that moves into production.

You can read the full transcript below.

Lelde Smits: I’m Lelde Smits for The Capital Network and joining me is Steven Turner, the Managing Director of Spanish-focused tungsten developer Rafaella Resources Limited (ASX:RFR).

Steven, welcome.

Steven Turner: Thank you.

Lelde Smits: On the cover of The Australian last week we saw the headline The push to break China’s metal dominance. The article claims that China controls almost 80 per cent of tungsten production globally. Can you outline the applications of tungsten?

Steven Turner: Tungsten is a strategic mineral and it’s strategic because of its unique properties. It has the highest melting point of any metal. It’s highly abrasive, resistant and as such has been used in some very important strategic industries such as mining and oil and gas where tungsten is used in the drill bits. It’s also used in the manufacturing of aircraft engines and military, particularly around armour piercing.

Lelde Smits: When it comes to market dynamics can you highlight to us how this metal, that is 80% controlled from China’s production, is going out there into the world?

Steven Turner: China actually has made a point of trying to cut back its global supply. Although it produces around 80 per cent, it only consumes about 50 per cent and the issue there is that the USA, India, Europe, UK and Australia have identified this is as a metal that has strategic importance and they need to find alternative sources.

There are very few producers of tungsten in the world outside of China. There is Russia, there’s also Rwanda, Bolivia. But if you want to start looking at OECD countries, there is really only Austria, Spain and Portugal and a little bit of production in Australia.

So, therefore, if you are an end-user of the product, it's very important you can lock into supplies from a Western producer, and this is what Rafaella Resources is looking to do. By moving quickly into production, you’ll be a supplier into Europe. Europe consumes around 16 thousand tons per annum of the metal, yet produces less than 50%. So being on the doorstep has significant strategic logistical advantages.

Lelde Smits: Looking ahead, can you give us an overview of supply and demand dynamic and also where investors can gain exposure to tungsten developers outside of China?.

Steven Turner: There are very few producers as I mentioned and most of the mines coming on stream are actually in Spain. There are two mines in particular: There is La Parrilla, which is owned by W Resources and there’s Barruecopardo, which is owned by Ormonde Mining. They are both going into commissioning at the moment.

Outside of that, most other mines are still going through feasibility studies - they are greenfield and therefore some way from production. So, by going into production in Spain, we’re actually in a market that is already producing tungsten and looking to expand its production.

If you look forward there is only one producer of Tungsten that’s listed, a pure producer, and it’s Almonty Industries (TSE:AII). It’s on the Toronto Stock Exchange and interestingly trades at about seven and half times EBITDA. So, there’s significant upside for any tungsten miner that moves into production.

Lelde Smits: Steven, thank you for your insights and we’ll certainly be following the tungsten market.

Steven Turner: Thank you for your time.

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