Speciality Metals well placed in light of Chinese tungsten supply crunch

By Meagan Evans. Published at May 9, 2018, in Small Caps

Last week both the European spot and Chinese export ammonium paratungstate (APT) markets saw a rise in interest and associated price jump, amid persistent worries about tungsten supply disruptions in China.

These concerns have arisen in light of ongoing environmental inspections in the country’s Jiangxi province – a major production hub.

APT is produced by separating tungsten from its ore and is the main tungsten raw material traded in the market. Tungsten is an essential industrial metal primarily used in making hard metals and also used to manufacture steels and alloys, as well as electronics.

On May 2, Metal Bulletin assessed the fob China APT price at $326-$330 per metric tonne unit (mtu), with 1mtu equalling 10 kilograms. That price was up 1.2% from just a week earlier, when the price was $320-$328/mtu.

One commodities trader noted that interest was so great that there were several inquiries that couldn’t be met as the spot cargoes weren’t available. He added that a lot of the restocking shipment orders have now been pushed back to July, from May or June.

This all bodes well for ASX junior Speciality Metals International Limited (ASX:SEI) which is seeking to reawaken its world-class Mt Carbine Tungsten Project in far North Queensland.

Last month, SEI announced that it had agreed to acquire the Mt Carbine Quarry, including all plant and equipment, along with Mining Leases ML 4867 and ML 4919.

This Sale and Purchase Agreement (SPA) with Mt Carbine Quarries Pty Ltd was a significant milestone in the development of SEI’s world-class Mt Carbine Tungsten Project.

Of course, as with all minerals exploration, success is not guaranteed — consider your own personal circumstances before investing, and seek professional financial advice.

The company is now diligently working towards having its deal settled by late July. It will then take over the operation of the Mt Carbine Tungsten Project, along with all plant and equipment, and most importantly, its valuable revenue stream.

The acquisition lands SEI an invaluable revenue stream, which it will begin to see immediately upon settlement of the deal, as it looks to expand its exploration portfolio and become the Australia’s pre-eminent tungsten producer.

The recent Chinese supply crunch, and associated APT spot price rise, all bodes well for SEI. And it’s a trend that looks likely to continue for some time as there’s still limited supply in China due to the environmental inspections, combined with demand from the European Union and the United States for hard metal applications.

This is a significant milestone for SEI in its quest to reawaken its world-class Mt Carbine Tungsten Project. Over the coming months SEI will be working diligently to ensure the agreement is completed within the stipulated timeframes. It will also continue to negotiate with several interested offtake and debt funders in an attempt to limit the dilutionary impact upon SEI’s existing shareholders.

Once the transaction is complete, SEI plans to commence early production via the use of ore-sorting technology to high-grade the ore contained within the Low Grade Stockpile. Part of the funds received from quarrying and mineral processing activities will go towards undertaking further exploration within its highly prospective Iron Duke tenement. Previous mapping and sampling activities at the site have indicated an extensive strike length that may be equal to, or even greater than, the existing Mt Carbine open-pit tungsten deposit.

A detailed exploration program and budget is also in the process of being developed by the Board and its geological team for the Company’s entire exploration portfolio.

While recent movements in the APT market, have us focussed on SEI’s ambitions, we can’t forget the scope of the company’s assets and operations, which include its Chilean exploration concessions, which contain lithium and other valuable mineral resources such as potassium, iodine and boron contained in subsurface brines within; as well as its gold exploration licences (Panama Hat and Crow Mt) in NSW.

SEI lithium update

SEI is a diversified company, which is also making solid ground in relation to its lithium project in the Atacama region of Northern Chile.

SEI announced today that as a result of its sampling program undertaken in January, it has identified a new style of lithium target to pursue in addition to promising lithium brine targets in Salar de Pintados and Salar Bellavista, where it has a total of 20 exploration concessions covering 60km2. It is a configuration similar to that of the Salars elsewhere in South America, including Bolivia and Argentina, known to host lithium brines.

SEI’s targets are at a lower topographical level than producing salars in Chile and Argentina and in a more favourable position for year-round concentration of lithium by evaporation in ponds. SEI’s targets also traverse the Pan-American Highway and are close to ports.

SEI’s geological team is now travelling to Chile to approve these new concessions, interview drilling contractors and effectively extend its Northern Chile footprint.

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S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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