watershed tungsten

BY: BARRY FITZGERALD From: The Australian April 04, 2012 12:00AM

Vital Metals (VML)

THERE is some loose stock in tungsten/gold group Vital Metals on offer following the expected heavy shortfall in its $2.8m rights issue at 5c a share.

Final figures aren't in yet but it is assumed as much as $2m has gone begging, leaving the company to now place the stock at the same price with professional investors. No problem is expected there, notwithstanding the thin discount on Vital's 5.2c a share closing price yesterday.

The reason for that is simple enough -- London in particular is warming to the group's Watershed tungsten in Queensland as a key project in the Western world's moves to break China's grip on supplies of the strategic metal.

To that end, Japan Inc has now zeroed in on the project, with the group charged with ensuring the country's energy and raw material requirements are met, Japan Oil Gas and Metals National Corp (JOGMEC), funding a study in to Watershed's development in return for a 30 per cent interest.

Assuming it passes muster, JOGMEC would then look to assign the interest to a Japanese corporate, say someone like the trading house Mitsubishi, which would be able to call on cheap Japan funding to get Watershed in to production.

It could all move quickly for Vital too. A definitive feasibility study in to a project development is expected to be completed before Christmas, with first production of the metal hardener possible in 2014. Tungsten holding at levels well above $US430 a tonne in response to China squeezing supplies is not hurting Vital's cause.