China V.S. The World, the Reason is Tungsten and Rare Earth

China V.S. The World, the Reason is Tungsten and Rare Earth
---England Challenges China by Reviving Strategic Mine: Commodities

An English mine last used to make armaments to defeat Hitler’s forces will be revived to challenge China’s grip on tungsten, among strategic metals at the heart of a deepening trade dispute with Europe and the U.S.

Wolf Minerals Ltd. (WLF) is developing a tungsten mine in Devon, southwest England, 70 years after it was last extracted there. The Hemerdon site is the world’s fourth-largest deposit and can produce about 3.5 percent of global demand for the metal, used to harden steel in ballistic missiles and in drill bits. China provides about 85 percent of worldwide supplies.

Tungsten was one of the metals cited when U.S. President Barack Obama filed a complaint to the World Trade Organization on March 13 against Chinese supply curbs. Tungsten is a “critical” raw material, according to the European Union, and the British Geological Survey places it at the top of its supply-risk list of materials needed to maintain the U.K.’s economy and lifestyle.

“A big element of what we are doing is providing a strategic supply to companies outside of China,” Wolf Managing Director Humphrey Hale said in an interview in London. “We’re answering a requirement from the market, which is strategic supply, and prices are at a position where we can make money from that.”

Wolf is backed by Resource Capital Funds, which holds a 17 percent stake, and Traxys SA, with 9.6 percent, data compiled by Bloomberg show. Resource Capital is the largest shareholder in Molycorp Inc. (MCP), owner of the biggest U.S. rare-earth deposit. Traxys, the Luxembourg-based metals trader, also owns a stake in Molycorp.
Tungsten Prices

China has imposed export restraints on raw materials including rare earths, tungsten and molybdenum, causing worldwide supplies to plummet, sending prices higher and threatening strategic stockpiles. China is the largest supplier of 28 of the 52 elements on the Geological Survey’s risk list.

Rare earths became a political and legislative flashpoint in July 2010 when China moved to limit domestic output and slash export quotas by 40 percent, souring ties with the U.S. and Japan, where buyers cut usage after prices soared in the first half of 2011. China said on Dec. 28 it was leaving overseas sales caps for 2012 virtually unchanged.

Tungsten prices will probably stay at more than $40,000 a metric ton this year because of China’s curbs, Malaga Inc. (MLG), a producer of the metal in Peru, said in January. The price of ammonium paratungstate, the traded form of the metal, increased 32 percent in 2011 to end the year at more than $440 a metric ton, according to European price data from Metal Bulletin (MBWOEUFM). The material traded at less than $65 a ton in 2003.
Key Commodity

“Investors should really look at Tungsten,” John Meyer, an analyst at Fairfax IS Plc, said in an interview with Maryam Nemazee on Bloomberg Television’s “The Pulse” on March 28. “Demand is so far ahead of supply, I think it’s the key commodity, a strategic commodity.”

Wolf shares have fallen 21 percent in the past year, compared with the 25 percent drop in the 25-member FTSE 350 Mining Index.

Wolf’s mine will produce 3,500 tons of tungsten and 450 tons of tin a year, starting in 2015. It will cost about 120 million pounds ($190 million) to build. Wolf has raised some 55 million pounds and is in talks for an additional 15 million to 20 million pounds in a sales agreement. The balance will be sought through selling shares, Hale said.

The Devon mine, which provided material used in both World Wars, was closed in 1944 as access to overseas supplies resumed. Wolf isn’t the first company to attempt to revive it.
North American Tungsten

Amax Inc. started efforts to develop the mine in the 1970s and was granted approval for the project from Devon’s local government in 1986. Amax withdrew from the project in 1993 after falling commodity prices made progressing uneconomic.

North American Tungsten Corp. (NTC) bought Hemerdon in 1997, before disposing of the asset in 2003, discouraged by persistently low prices.

Cornwall and West Devon have been mined for more than 3,500 years, supplying the Roman Empire and materials for the U.K.’s industrial revolution, according to Unesco. By the early 19th century, the region provided two-thirds of the world’s copper and was home to about 2,000 tin mines.

Competition from Chile and Australia in the 1860s closed many of the copper mines, while the tin sites struggled to survive as increased production in Malaysia and Australia drove down prices. The region’s last tin mine, South Crofty, closed in 1998.
Francis Drake

Wolf’s mine is about 10 miles from the maritime city of Plymouth. Sir Francis Drake masterminded the defeat of the Spanish Armada in 1588 from the city and in 1620 the Pilgrims set sail for the New World from Plymouth aboard the Mayflower.

Against the backdrop of 2012 market constraints and higher prices, the mine is now an example of how Britain can provide its own security of supply, Hale said.

“The U.K. does have stuff that’s been overlooked for years,” he said. “The perception round the world is that the planning permissions will be hard, the opportunities will be small and you’ll be up against an army of green protesters. The reality is the other way round.

‘‘It’s a big resource, it’s not bijou, hobby, clotted cream and jam,” he said. “This is world class.”

To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net

Collected by Hanns CEO/Chinatungten.com