Tungsten ranked second behind rare earths in the British Geological Survey's 2012 supply risk index based on a number of factors like location and concentration of production and reserves, but the report highlighted that tungsten (as well as rare earths) has lower recycling and low substitutability.

The supply risk for tungsten stems from China's role in the industry. China accounts for approximately 83% of global tungsten concentrate production and about 62% of global tungsten reserves. China became a significant player in tungsten production in the mid-1980s. By the late 1990s, it had flooded the global market with tungsten causing concentrate prices to plunge below most western producer's variable cost. As a result, the vast majority of western mines were closed.

Hemerdon Ball tungsten and tin project, conducted by ASX-listed Wolf Minerals, owns major tungsten and tin ores in Britain. JORC, developed by Hemedon project, is the world’s third largest tungsten ore and was associated with tin ore. The company has finished its pre-feasibility study in May, 2011, and the project is planned to be actually completed in 2015, for a capacity of 3,500 tons of tungsten concentrates and 450 tons of tin concentrates.

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Companies wanting strong tungsten projects in their portfolios are looking to Portugal as a jurisdiction to achieve that goal. Among the group of junior miners exploring Portugal’s mineral wealth is Colt Resources (TSXV:GTP,OTCQX:COLTF), which stated in a corporate presentation that Portugal remains largely overlooked and underexplored despite mining history dating back 2,000 years.

Echoing Colt’s sentiments is Jim Robertson, Director, President and CEO of Blackheath Resources (TSXV:BHR, FWB:04B) who told Tungsten Investing News (TIN) that Portugal’s tungsten mining history dates back to the end of the 19^th century.

Robertson points out that the nation’s Panasaqueira mine is one of the few continuously operating tungsten mines outside of China and it has produced high grade wolframite for over 100 years.  By 2008 when Primary Metals was acquired by the Japanese metal firm Sojitz, Panasaqueira was a turnaround story that was central in a deal worth roughly 20 times earnings and that resulted in a 30-fold return on investment in 3 years.

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Tungsten prices rose strongly throughout 2010 and most time of 2011, as most of the economies outside China recovered from the credit crisis-induced recession and demand for tungsten increased in parallel. At the end of September 2011, prices for Chinese APT had reached US$450-460/mtu, compared to US$330/mtu at the beginning of the year and US$200/mtu at the beginning of 2010.  APT prices are now well above the previous peak of US$300/mtu in June 2005.

Roskill expects to see a market fluctuating around an equilibrium level, but forecasts the market to be in deficit in both 2011 and 2012, before new supply enters the market.  Currently, Roskill expects 2013 to be the tipping point where supply overtakes demand in the tungsten market at some point during the year.  Assuming that the majority of planned projects reach production, then a surplus is expected to develop, although any further delays to new supply entering the market would quickly see a deficit forming and prices would remain higher than in the forecast (probably into 2014).

Given the current levels of APT prices, Roskill expects that the average for the whole of 2011 will rise to a forecast US$430mtu by the end of the year.  Very few of the significant new tungsten projects are expected to deliver any substantial tonnages of tungsten in 2012, so the market will be relying on existing producers to cope with any growth in demand.  As a result, Roskill predicts a further tightening in supplies of tungsten and, therefore, further price rises, with an average APT price of US$475/mtu.

Prices are expected to ease between 2013 and 2015 as the bulk of planned new tungsten production capacity is expected to enter the market.  Demand for tungsten is expected to continue to grow to 2016 and beyond, putting further pressure on the supply side and requiring more new capacity.

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