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THE BIG PICTURE - Future is bright for tungsten as China curbs exports and demand grows

The future is bright for tungsten, appropriately enough given the metal’s use in light bulbs, as demand is growing at a time when top producer China is restricting exports.

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The future is bright for tungsten, appropriately enough given the metal’s use in light bulbs, as demand is growing at a time when top producer China is restricting exports.

A number of tungsten exploration companies operating outside China are set to start production in the next few years, including Ormonde Mining (LON:ORM), and are likely to benefit from the gap left by declining Chinese exports.

Ormonde has already grabbed the attention of Noble Group, according to an announcement this week.

The Singapore-listed commodities group has agreed to buy all of the tungsten concentrate from Ormonde’s Barruecopardo mine in Spain during the first five years of operation, which at current prices would equate to net revenues of more than US$350mln.

Tungsten’s versatility sees it appearing in mobile phones, nuclear reactors, television sets, golf bags and even ballpoint pens.

Yet the main uses of the metal are in cemented carbines, a tough composite engineering material that is resistant to wear and corrosion, and in specialist steels.

Indeed, tungsten’s many industrial applications have helped prices for the metal, also known as wolfram, soar from about US$50 per tonne in 2002 to about US$370/tonne as developing countries have beefed up their industrial sectors.

Global tungsten demand is expected to grow 5-8% annually until 2016 as supply is declining, while the US has classified it as a "strategic metal” and the European Commission has put it on its “critical” list.

It is no surprise therefore that exploration companies are attracted to the metal and keen to make the leap into production as seen by a flurry of tungsten-related statements this month alone.

UK-listed W Resources (LON:WRES) this month started commissioning a new concentration plant for the La Parrilla tailings project in Spain. The company hopes to use cash flow from the tailings to re-open its main project - the La Parilla tungsten mine.

On 18 March, Wolf Minerals (LON:WLFE  ASX:WLF) said it raised about A$183mln (£99mln). The funds will be used to complete construction of the Hemerdon tungsten and tin project near Plymouth, the UK’s first new metal mine in 45 years, the company said.

It is not just the UK and Spain that are seeing a resurgence in tungsten mining.

Vancouver-based Avrupa Minerals  (CVE:AVU), is a junior exploration company focusing on a number of projects including a tungsten deposit in Portugal and a tungsten joint venture in Germany.

Outside of Europe, Premier African Minerals (LON:PREM) is looking to develop the RHA tungsten project in an area of historic production in Zimbabwe.

Premier is targeting a compliant indicated resource of up to 10mln tonnes at a grade of 0.12-0.17% tungsten trioxide (WO3) and 86,000 tonnes at a grade of 2.25%.

Last month, Happy Creek Minerals (CVE:HPY) released drill results from the Fox tungsten property in Canada.

The best result showed 26.25 metres of 1.19% of W03.

Quick facts: Ormonde Mining plc

Price: 0.85 GBX

AIM:ORM
Market: AIM
Market Cap: £4.02 m
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