Almonty Industries closes-in on plans to become world’s largest tungsten producer outside of China

With governments across the world scrambling to shore-up domestic critical mineral supplies, Almonty Industries (ASX: AII) is cornering the tungsten space with plans to become the largest producer outside of China.

Almonty, which is also listed on the Toronto Stock Exchange, already has the Panasqueira mine in Portugal in operation, which was acquired in 2016 and produces about 78,100 metric tonne units (MTU) of tungsten trioxide per annum.

Panasqueira has reserves of 3 million tonnes at 0.21% tungsten trioxide. Combined reserves and resources currently amount to about 22.5 million tonnes.

Production at Panasqueira is expected to last at least 20 years, and Almonty is investigating the potential of recovering several other metals as by-products from the operation including tin, and copper.

The mine is expected to bring in more than US$20 million (A$29.6 million) a year until the end of the decade. In the nine months to the end of September 2022, Almonty generated gross revenue of C$18 million (A$19.6 million).

World’s largest tungsten deposit

Over in South Korea, Almonty is constructing the Sangdong mine, which has reserves of almost 7.9Mt at 0.45% tungsten trioxide, measured and indicated resources of 8.3Mt at 0.49% tungsten trioxide, and a further 52.76Mt at 0.44% tungsten trioxide in inferred resources.

All-up, contained metal at Sangdong amounts to about 264,000t of tungsten trioxide.

Almonty noted that Sangdong is the largest tungsten deposit in the world (based on the inferred resources), and also one of the highest-grade.

In its first year of operation, about 450,000t of ore will be processed grading 0.44% tungsten trioxide.

The processing plant’s actual capacity will be up to 1.2Mtpa.

Once in operation, Sangdong will be the world’s largest tungsten mine outside of China.

Processing is expected to generate “world class” recoveries of 85% and concentrate of 65%.

Based on the 1.2Mtpa processing scenario and achieving U$300/MTU of ammonium para tungstate (APT), annual EBITDA is estimated at US$72 million.

Almonty owns a Molybdenum deposit which is also adjacent to the proposed Sangdong mine and provides further upside.

Funded to production

Sangdong has existing infrastructure and a US$75 million start-up capital expenditure estimate and Almonty says it will be one of the lowest cost tungsten producing operations worldwide.

Project development is funded to first production, with mining and commissioning targeted for the September quarter of 2023, followed by a 12-month ramp up period.

Additionally, Almonty has locked-in a 15-year floor price offtake guarantee for ore sold from Sangdong.

The guarantee means Almonty will fetch at least US$235/MTU of ATP produced from the operation.

Average production costs are forecast at US$110/MTU of APT.

Commenting on the Sangdong’s potential, Almonty chairman, president and chief executive officer Lewis Black says it could generate “truly spectacular returns” for shareholders once commissioning has begun.

“The Sangdong mine build is now well advanced and we would expect to see surface work commence shortly which will mark the final run in toward commissioning.”

“All long lead time equipment is now in country expect for three items that are currently on the water and due to arrive into Korea prior to the lunar new year holidays.”

Mr Black also noted the company had finished a scoping study ofr a tungsten oxide downstream plant, with this work to continue advancing in 2023.

Spanish tungsten projects

In Spain, Almonty owns the Valtreixal and Los Santos projects.

Valtreixal is in the pre-feasibility study stage and has reserves of 2.58Mt at 0.35% tungsten trioxide equivalent.

Almonty made a decision in 2020 to place Los Santos on care and maintenance. It has reserves of 3.58Mt at 0.23% tungsten trioxide.

Once modifications have been made to plant infrastructure, Almonty plans to re-open Los Santos mid-next year. This is expected to generate “significantly higher” recovery rates from processing of tailings.

Tungsten market

About 90% of the world’s tungsten comes from China, Russia and Vietnam.

China and Russia’s dominance in tungsten production has led to many nations and regions, including the US, Australia and EU, classifying it as a critical mineral of high economic importance and of supply risk.

Almonty plans to produce about 30% of the world’s tungsten outside of China  – equating to about 7% of global supply by 2024.

The Sangdong project is strategically located in South Korea, which is the world’s largest tungsten consuming nation.

South Korea currently imports 94.7% of all its tungsten requirements from China.

In the past year alone, the price for tungsten has risen almost 50% to US$343/MTU of APT and tight market fundamentals underpin a continuing positive outlook for the metal’s price.

“With multiple new technology applications for tungsten now entering commercial production or existing ones considerably expanding we have seen pricing remain close to multi year highs,” Mr Black said.

“As demand increases in the EU in 2023 we would expect to see higher price levels which will benefit Sangdong as it commissions,” he added.

End-uses

Tungsten is as the highest tensile strength of any metal and is also highly conductive and dense (heavy).

The metal has a variety of end-uses and is critical to key industries including military and defence, semiconductors and microchips, mining, oil and gas drilling, and tungsten oxide battery applications.

Tungsten is generally used as an industrial metal, with its high melting point and strength making is especially useful as a tool material such as metal cutting and drill bits.

It is also used in gas turbines, engines, generators, nuclear power reactors, and to make cutting tools for manufacturing wind and hydro power components in the renewable energy sector.

The metal is used in battery anode and cathode manufacturing, and to produce hexafluoride gas for producing semiconductors, which are other rapidly growing sectors.