Hazelwood Resources Ltd has started ferrotungsten production from its facilities in Vietnam, a project which is expected to generate revenue of $140 million per annum at full capacity. Hazelwood, formed towards the end of 2006, acquired a majority interest in Asia Tungsten Products Company Ltd (ATC) in May 2010. ATC has since constructed the Vietnam plant and commenced hot commissioning in early April. The plant has a design capacity of 4,000 tpa of ferrotungsten (3,000 tpa contained tungsten). Wogen Resources has an existing sales agency and financing agreement with Hazelwood for all ferrotungsten metal produced. Quite a rarity in today’s economic climate, Hazelwood came in under its original capital budget forecasts for construction of the plant. Managing director Terry Butler-Blaxwell said while Hazelwood had been able to take advantage of favourable rates in Vietnam the company had built the project to a very high standard by international measures. “When we originally bought into the project we did thorough due diligence including the derivation of a capex estimate as a check against that provided by the vendor. Our capex estimate included Aussie rates which, as we found, only apply in Australia,” ButlerBlaxwell told Paydirt. “When we started construction we made certain assumptions about the cost of the first fill materials that are used to hot commission the furnace. We ended up with a favourable budget variance on those items too.” The Vietnam plant is based on a Chinese design, with Hazelwood having made some improvements to the model which included upgrades to the material handling systems, power management and emission control systems. “There is only one other significant ferrotungsten plant outside of China and our design is a generation ahead of that,” ButlerBlaxwell said. Hazelwood holds two advanced stage primary tungsten projects in Western Australia which are potential future sources of feedstock for the Vietnam smelter. The company’s Big Hill project in the east Pilbara is at the feasibility stage while its Mt Mulgine project, 350km north-east of Perth and 300km east-south-east of Geraldton is at the resource definition stage. Butler-Blaxwell said the company would wait until investment conditions were right to implement these projects. “In our minds we think it is more efficient to start with our downstream value-adding refinery, which does not depend on a mine to achieve a reasonable level of return. From our observations, mining projects in the western world are relatively high cost in terms of capex, delivery times and operating costs. This becomes less of an issue for Hazelwood which is now in the market with product, and any mine we build would be for the purpose of providing feedstock to help increase production at our downstream refinery.” Demand for ferrotungsten has staged a good recovery from GFC levels according to Butler-Blaxwell. “Pre-GFC, we estimate consumption outside of China in steelmaking applications was approximately 5,000t contained tungsten (equivalent to about 6,500t ferrotungsten consumption) and then ferrotungsten reached an all-time price high of around $US60/kg in 2011. “The overall tungsten market has since softened a bit and ferrotungsten was at a 28-month low just recently, but still way above historical price levels. The price has recently increased again as buying resumes and supply remains tight. The annual quantity of demand is trending back towards pre-GFC levels,” he said. Butler-Blaxwell said the stronger prices were being driven by supply side factors. “It follows a decision in 2008 by the Chinese Government to impose heavy export tariffs on the material and also a number of other restrictions such as production quotas. There is only limited production of ferrotungsten outside of China so if the production of high speed steels, tool steels and temperature resistant alloys remains at healthy levels, then so does demand for our niche product.” China has come to dominate the tungsten industry, providing 80% of supply globally. Although China has a high degree of vertical integration between mines and downstream processors, Butler-Blaxwell says the situation for the commodity in China is not as favourable as it once was. “The high-grade tungsten reserves are running out, and now their mining is switching to lower grades and higher costs. “The Chinese Government has also been taking steps to protect the environment, which they have enforced through the closure of illegal mining operations and setting of restrictive production quotas. Their restrictions on the exports of raw materials like tungsten concentrate, and the relatively limited mine supply outside of China has created a situation that has pushed up prices and many of the processors outside of China run their plants on recycled tungsten scrap, which can account for up to 90% of their production capacity.” Butler-Blaxwell said the priority for Hazelwood this year was to get traction in the market to become a leading supplier of the master alloy. “Once we achieve a satisfactory level of performance, we will consider the upstream mine option. There are many other specialty metal processing opportunities available to us, but I think it best to stick to our knitting for the immediate future.” – Bree Swift
