King Island Scheelite raises $5.6m as tungsten prices post strong gains

For most of 2020, end users of tungsten largely stayed out of the spot market due to the weakness of the market.

Now, the tight supply of tungsten concentrate and tungsten scrap has seen prices for tungsten ammonium paratungstate (APT) climb from about US$260 per metric tonne unit (A$335/mtu) in January to as high as US$460/mtu (A$593/mtu) in China during the first week of March.

It is reported that demand from customers in the United States and Europe is largely behind the price increases.

European end users are having problems locating available APT, with reports from there indicating no shipments will be coming out of China until April.

Money now coming into tungsten plays

The Australian tungsten juniors are seeing growing interest as this revival of tungsten takes place.

This week King Island Scheelite (ASX: KIS), with its Dolphin tungsten project on the Tasmanian island of the same name, raised $5.6 million through a placement of 28 million shares at $0.20 each.

Swiss investment company DACHS Capital Ag was the cornerstone supporter of the issue, taking 20 million of the new shares on offer. The Swiss company had become a King Island shareholder in January.

On Monday EQ Resources (ASX: EQR) raised $6.5 million for underground development of its historic Mt Carbine tungsten project in Queensland.

The successes by King Island and EQ Resources demonstrate the tungsten story is fast gaining traction with investors.

Strong growth in APT demand has been forecast, with the global tungsten market worth US$3.46 billion (A$4.46 billion) in 2017 now expected to reach US$6.71 billion (A$8.66 billion) by 2026.

Strategic and critical metal

Tungsten is ranked as a critical metal by the US Defence Department, the European Commission and by the United Kingdom, Japan and Australia.

It has a hardness second only to diamonds and has the highest melting point (3,422 degrees Celsius) of any metallic element.

It has wide applications in defence equipment and armaments, as well as being used in steel hardening, aircraft manufacturing, rail tracks, semiconductors and chemicals.

Here’s the rub, though: some 82% of the market is supplied by China, with the second largest source being Vietnam (7% of global supply) and third being Russia (3%).

Australia has the second largest tungsten resource in the world, accounting for 12% of global reserves but at present produces a miniscule amount.

King Island: much stronger negotiating position

King Island will use the newly raised money to pay off term debt of $4.7 million.

“With a significantly strengthened balance sheet post-placement, the company looks forward to negotiating from a much better position the debt component required to fund the recommencement of operations at the Dolphin tungsten mine,” it said.

“Following these transactions, the company will be debt-free with all assets unencumbered.”

Last year, King Island signed a multi-year tungsten offtake agreement with Kalon Resources, part of the giant Hong Kong-based trading conglomerate Noble Group.

The deal involves 50% of the company’s planned production — the supply of 1,500 tonnes per year of tungsten concentrate for an initial three-year period from the revival of the historic Dolphin mine.

Kalon Resources specialises in trading specialised industrial metals including tin, tantalite, columbite, chrome and manganese as well as tungsten.

That deal came on top of the offtake agreement signed in April 2019 with the Austria-based supplier of tungsten powders, Wolfram Bergbau und Hutten which involved about 20% of the planned annual production at Dolphin. 

Tungsten discovered at Dolphin more than a century ago

It was in 1911 when a prospector, searching for tin, discovered what is now the Dolphin deposit.

Mining began in 1917 but was short-lived, closing down in the mid-1920s.

It was later revived, and then production boomed during World War II as the Federal government provided equipment to extract the strategic metal.

Prices soared again during the Korean War by which time the mine was operated by a listed company, King Island Scheelite (1947) Ltd, which was taken over by the former Peko-Wallsend in 1969.

The mine, along with many other Western tungsten producers, was hit in the 1980s by large tungsten quantities being dumped by China into the market and in 1990, was forced to close.