Tungsten Market Update (March 1, 2012)

By Michelle Smith–Exclusive to Tungsten Investing News

On February 28, Woulfe Mining (TSXV:WOF,OTCQX:WFEMF, FWB:OZ4) and its 100 percent owned subsidiary, Sangdong Mining Corporation, reached an agreement with International Metalworking Companies (IMC), part of Warren Buffet’s Berkshire Hathaway family, for a tungsten deal that will create a supply pipeline in South Korea.

IMC will pay C$35 million for a 25 percent stake in Sangdong Mining, and will advance Sangdong C$5 million in loans towards the development of its South Korean tungsten-molybdenum project.

Woulfe and IMC also plan to construct a tungsten processing facility in South Korea with 90 to 100 percent of Sangdong’s tungsten concentrate to be purchased by the joint venture. IMC will then buy 90 to 100 percent of the APT that the facility processes.

Tungsten Investing News asked Brian Wesson, CEO of Woulfe, what the implications of the IMC/Woulfe deal will be for the tungsten market and for the tungsten investor. Wesson said “the market is getting very tight and prices lifting,” then “softening to the current level or slightly lower” when Woulfe comes online. The company has scaled back its production “to fit the gap that exists in the market.”

Wesson cautioned that with Sandvick and IMC, two of the world’s largest tungsten end users, having now secured a tungsten supply outside of China, it may be difficult in the long-term for producers with lower grades or high capital development costs to secure financing “unless the return on capital is around three years.”

Prices for APT tungsten as of February 28 are trading at a range of $400-405/mtu.