Hallgarten has just posted their March portfolio review of companies and commodities.
Tungsten – Last to the Party
While the prices of Antimony and Tin have been the best performing metals over the last four months,
Tungsten has only started the long ascent from the shallows & miseries in which it has long been
becalmed. While drilling in oil & gas and mining have been off for a number of years now there was no
real reason for the metal (the main usage of which is in machine tools) to have been so beaten up,
unless one subscribes to nefarious reasons to the Chinese. Never let it be said that they would suppress
the price of a commodity that they wish to maintain dominance in. Sorry, Peking, that boat has sailed.
The rising tide of new producers (mainly in Iberia) and, in particular, Almonty’s Sangdong mine in South
Korea risk toppling Chinese dominance in this metal that they had hoped to use to clobber the West
German machine tool industry with.
The metal’s potential sources are quite geographically diversified with Tungsten (or Wolfram) resources
located in China, Canada, Russia and the United States, at least in the official versions. And yet the
largest sources of production outside China are Spain/Portugal, Australia and, shortly, South Korea.
Some would have us believe that Chinese restrictions on its Tungsten industry (concerning mining,
exports, foreign investment) brought changes to the global supply pattern, but instead we believe that
the change is driving by Western end –users having become wary of China-dependence and thus have
been paying over the odds to ensure that a non-Chinese source of supply survived to insulate them from
eventual predatory pricing.
As the chart below shows prices are quite a ways from even those levels of three years ago. They are still
half the levels of where they reached in 2013. The crash after that time cleaned out most of the
Canadian players and clipped the wings of the Australians. A few London-listed names with Iberian
targets soldiered on… and of course, Almonty, a long-term constituent of our Model Portfolio.
THE CHART IS THE ONE ABOVE.
So Almonty (TSX_v:AII) remains our favoured play and stands as leader of the non-Chinese pack with
two mines in Europe and the one in South Korea advancing rapidly. Out of the corner of our eye we also
watch EQ Resources (ASX:EQR) in Queensland with its Mt Carbine mine, JVed with the German
Cronimet group.
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