Sharp Tungsten Price Increase Analysis (II)

Tungsten Concentrate Cost Composition and Price Trend in Meso Economic Prospects

Tungsten concentrate metallurgy cost includes raw material price, hydroelectric power, labor cost, tax reveue and profit are the actual cost. Policy cost related to national politics, economic, labor are out of control, but they are also important factors. They are meso cost. In this article we will analysis it as macro cost. Below are the composition;

1) Tungsten Concentrate Exploration Cost

Exploration function of tungsten mine is not owned by tungsten mine exploration enterprise. According to our exist regulation, exploration right is acquired by related department, the explored resource is sold according to its exploration cost and reserve, including reserve condition, grade, recycle rate, market price and exploration and application condition. So the basic cost if tungsten ore resource price.

Take tungsten concentrate as example, average recycle rate is 80% in China, average beneficiation recycle rate is 82%. According to tungsten concentrate national standard, first grade tungsten concentrate contains WO3 content above 65%. So exploration cost of tungsten concentrate is calculated according to WO3 content instead of its reserve.

2)Tungsten Concentrate Resource Tax Cost

According to tungsten concentrate tax revenue regulation by national financial department and national tax bureau in 2015, tungsten concentrate resource tax accounts for 6.5% of sales volume. According to this notification, tungsten concentrate is produced by beneficiation, flotation, electric flotation and magnetic flotation process with certain WO3 content. Tungsten concentrate is sold by 65% content to clarify sales volume and then enterprises surrender resource tax.

3)Tungsten Mine Construction, Exploration and Beneficiation Cost

China Minmetal acquires tungsten mine construction cost is cost of depreciation in mining enterprises financial report. It is a reversible cost, so it has fixed and long term effect for tungsten concentrate. Tungsten concentrate exploration and beneficiation cost is technical cost for reflecting mining enterprises’ technical capability and administration capability, it also affects profits level of enterprises directly.

As rare and ingenerated tungsten mine resource, 20 thousand of tungsten mining right price can not make up with it. If under such price level, how many enterprises in tungsten industry or listed company earn profit due to technical capability or property of tungsten mine resource?

If mining right price of tungsten be raised greatly to compensate government and labor in poor mining area, what will be the price of tungsten concentrate?

4)Tungsten Concentrate Human Resource Welfare Cost

Human resource cost, apart from technical discrepancy, education, training and administration, area discrepancy, commodity price and house price are beyond control. For example, compared to Jiangxi and Henan province, Xiamen Tungsten Co.,Ltd faces housing price of 30 thousand ~50 thousand per square meter. It is an important factor when enterprises choose location and is also determined by tungsten resource distribution area. However, what really affects enterprise’s human resource cost is the regulated lowest salary and legal welfare expenditure. It is raised year by year and can not be neglected.

Did mining labors and workers in the producing line really obtain what they should earn? Can they really get well settled and feed when they are old? Image what will the cost of tungsten products if technicians who do the research of tungsten production get the same amount of salary with young people who do the house selling in the city?

5) Environmental Protection Cost

Environmental protection cost of tungsten mine exists in waste water, waster stone, tungsten ore tailings and recovery of natural ecosystem. Natural ecosystem recovery is a investment process after tungsten resource runs out and tungsten mine shut down. Jiangxi province has abundant tungsten resource. Its reserve and output accounts for over 50 percent of total in China. According to regulation published by Jiangxi financial department, territorial resources department and environmental protection agency, and integrating policies released in different provinces in recent years, average tungsten concentrate environmental cost is about RMB 5000/ton. It is fixed and sustaining growing cost. For some enterprises using tungsten waste to produce, its environmental protection cost will be much higher.

Did the current rising in price is resulted by environmental inspection? What will happen after they leave? If our industry have social moral and conscious, if our enterprises bears social responsibility, we all should make reflection that if thousand yuan of environmental tax will bring back green mountain and clear water to our tungsten mine? If environmental cost is completely added to tungsten concentrate, what the cost will be?

From above analysis from meso prospects, it is clear that all the factors are constantly increasing and is hard to be controlled by enterprises.

Apart from regular factors, we will analysis tungsten concentrate price from national macro strategic aspect and future price trend.

Sharp Tungsten Price Increase Analysis (I)

http://news.chinatungsten.com/en/tungsten-product-news/98488-tpn-2839

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