Pac Partners updated their view on the tungsten industry. Very...

Pac Partners updated their view on the tungsten industry. Very comprehensive.
I've posted most of the front page.
KEY POINTS
• Australia is poised to emerge as a new critical minerals supplier with
two significant tungsten mines ramping up in 2023. Together Group
6 Metals (G6M) and EQ Resources (EQR) should see Australia go from
virtually zero, to supply 15-20% of the ex-China tungsten market in the
years ahead.
• This provides the opportunity to invest in a strategically supported
critical mineral that exhibits low volatility, double digit demand growth
and constrained supply.
• Australia’s re-emergence should then be followed by South Korea, as
Almonty (AII) ramps up the major Sandong Mine.

TUNGSTEN SECTOR CONTINUES TO FACE DEFICITS
• Significant deficits: We forecast tungsten market deficits for the
coming 3 years driven by growing demand (including defence 20%+
growth), and restricted supply (China, 80% market share, has seen
declining and depleting production while the western world struggles
to finance new mines). New mines… few and far between: The
current set of new mines remains only a fraction of the total supply
and unlikely to dampen world tungsten prices.

INVESTMENT VIEW
• Group 6 Metals (G6M) (BUY, target price $0.32, market cap $130m)
– The Dolphin Mine is the highest grade mine outside China. We
expect development to be complete by mid-year pathing the way for
significant cashflows from FY24 (refer: Tonnes at the right time).
• EQ Resources (EQR) (BUY, target price $0.12, market cap $95m) -
Already processing ore at Mt Carbine ahead of open pit operations.
Recent world class drill results indicate this modestly sized
enterprise can grow significantly (Refer: Small start, significant
potential).
• Almonty (AII) (not rated, market cap $181m) – we profile Almonty
throughout this report as the most significant western world tungsten
producer with operating mines in Europe, and the industry’s largest
mine development in South Korea. As the most successful western
operator of size in recent history, Almonty is also a prominent and
consistent proponent of the tungsten industry as a whole.




Other interesting statements in the document (my comments in brackets)

- tungsten - essential part of production but only a small portion of unit costs (meaning tungsten price can rise and demand will still be strong).
- Almonty announced they are delaying for another year.
- US stockpile of tungsten is expected to be depleted by 2025
- Chinese production falling. Has been controlled since 2002 as wolframite reserves are falling. They have scheelite but it's at a higher production cost.
- Many Western mines are still struggling to deliver. Therefore even with G6M and EQR coming on stream. There is a need for more producers.
- Defence usage nearly doubles from 2021 figures by 2024. (given recent announcements this might be conservative).