Major Chinese miner, China Molybdenum has approved the “establishment of special purpose fund for tungsten commercial reserve” which could see it further increase its global tungsten market domination.
China is the largest producer of tungsten in the world, accounts for approximately 85% of the world’s supply. Being the world’s largest single-mine producer and the second largest producer of tungsten concentrates (in terms of volume), the equity production of the company represented approximately 11.4% of the total production of China in 2014.
The board of directors is of the view that the building up of a commercial reserve is equivalent to acquiring tungsten resources at low cost by the company, which would help strengthen the pricing power of the Chinese tungsten industry in the global market and “enhance the company’s leading position in domestic and overseas tungsten industries.”
At present, the price of tungsten concentrates has fallen below the production costs for most of the domestic primary tungsten producers. The decision to establish RMB 3 billion (ZAR 6 million) in commercial reserves is based on the extended and continuous depletion of low-cost tungsten resources in China and overseas, the continuous increase in the production costs in the tungsten industry and the company’s confidence in the future development of the tungsten industry.
The fund will be financed by self-raised funds and will build up the commercial tungsten reserve by acquiring tungsten raw products, mainly comprising tungsten concentrates, at the prevailing price. It is estimated that the total volume of reserve will not exceed 46 000 t (equivalent to standardised tungsten concentrates), representing approximately one third of the total production volume (equivalent to standardised tungsten concentrates) of China in 2014. The building up of the reserve will be done through market purchases.