April 4 (Bloomberg) -- An English mine last used to make armaments to defeat Hitler’s forces will be revived to challenge China’s grip on tungsten, among strategic metals at the heart of a deepening trade dispute with Europe and the U.S.
Wolf Minerals Ltd. is developing a tungsten mine in Devon, southwest England, 70 years after it was last extracted there. The Hemerdon site is the world’s fourth-largest deposit and can produce about 3.5% of global demand for the metal, used to harden steel in ballistic missiles and in drill bits. China provides about 85% of worldwide supplies.
Tungsten was one of the metals cited when U.S. President Barack Obama filed a complaint to the World Trade Organization on March 13 against Chinese supply curbs. Tungsten is a “critical” raw material, according to the European Union, and the British Geological Survey places it at the top of its supply-risk list of materials needed to maintain the U.K.’s economy and lifestyle.
“A big element of what we are doing is providing a strategic supply to companies outside of China,” Wolf Managing Director Humphrey Hale said in an interview in London. “We’re answering a requirement from the market, which is strategic supply, and prices are at a position where we can make money from that.”
Wolf is backed by Resource Capital Funds, which holds a 17% stake, and Traxys SA, with 9.6%, data compiled by Bloomberg show. Resource Capital is the largest shareholder in Molycorp Inc., owner of the biggest U.S. rare-earth deposit. Traxys, the Luxembourg-based metals trader, also owns a stake in Molycorp.
China has imposed export restraints on raw materials including rare earths, tungsten and molybdenum, causing worldwide supplies to plummet, sending prices higher and threatening strategic stockpiles. China is the largest supplier of 28 of the 52 elements on the Geological Survey’s risk list.
Rare earths became a political and legislative flashpoint in July 2010 when China moved to limit domestic output and slash export quotas by 40%, souring ties with the U.S. and Japan, where buyers cut usage after prices soared in the first half of 2011. China said on Dec. 28 it was leaving overseas sales caps for 2012 virtually unchanged.
Tungsten prices will probably stay at more than $40,000 a metric ton this year because of China’s curbs, Malaga Inc., a producer of the metal in Peru, said in January. The price of ammonium paratungstate, the traded form of the metal, increased 32% in 2011 to end the year at more than $440 a metric ton unit, according to European price data from Metal Bulletin. The material traded at less than $65 in 2003.
“Investors should really look at Tungsten,” John Meyer, an analyst at Fairfax IS Plc, said in an interview with Maryam Nemazee on Bloomberg Television’s “The Pulse” on March 28. “Demand is so far ahead of supply, I think it’s the key commodity, a strategic commodity.”
Wolf gained 7.2% in London today to 22.25 pence, the biggest advance in a month, with more than triple the three- month average daily volume of shares traded. The benchmark FTSE 350 Mining Index slumped 3.2% . Its Sydney-traded stock also rose the most since March 5, climbing 4.9% to 32 Australian cents.
Wolf’s mine will produce 3,500 tons of tungsten and 450 tons of tin a year, starting in 2015. It will cost about 120 million pounds ($190 million) to build. Wolf has raised some 55 million pounds and is in talks for an additional 15 million to 20 million pounds in a sales agreement. The balance will be sought through selling shares, Hale said.