An English mine last used when the nation was making armaments to defeat Hitler’s forces will be revived to challenge China’s grip on tungsten, one of the strategic metals at the heart of a deepening trade dispute with Europe and the United States. Wolf Minerals Ltd. is developing a tungsten mine in Devon, in 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 President Obama filed a complaint with 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 United Kingdom’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. Resource Capital is the largest shareholder in Molycorp, owner of the biggest U.S. rare-earth deposit. Traxys, the Luxembourg metals trader, also owns a stake in Molycorp. 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 flash point in July 2010 when China moved to limit domestic output and slash export quotas by 40 percent, souring ties with the United States and Japan, where buyers cut use 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 per metric ton this year because of China’s curbs, Malaga, 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 per metric ton, according to European price data from Metal Bulletin. The material traded at less than $65 in 2003.
“Investors should really look at Tungsten,” John Meyer, an analyst at Fairfax IS PLC, said in an interview on Bloomberg Television March 28. “Demand is so far ahead of supply, I think it’s the key commodity, a strategic commodity.” Wolf’s mine will produce 3,500 tons of tungsten and 450 tons of tin a year, starting in 2015. It will cost about $190 million to build.
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. Amax started efforts to develop the mine in the 1970s and was granted approval for the project by Devon’s local government in 1986. Amax withdrew from the project in 1993 because of falling commodity prices.
Article by Thomas Biesheuvel - Sunday, April 8, 2012