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The Market Online’s Lyndsay Malchuk sat down with Lewis Black, President and CEO of Almonty Industries, a company who specializes in acquiring and optimizing distressed and underperforming tungsten operations and assets.
Through this Capital Compass conversation, Canada’s Lydnsay spoke to Mr Black about the global tungsten market, geopolitical struggles and more.
TMO: Welcome, Lewis. It’s great to have you join me today. So, I tuned in and watched you on the IIF recently. You gave such an insightful presentation. Job well done for sure.
Lewis Black: Well, it’s a relatively easy story to replicate each time. So, when you have something that works, it’s very easy to talk about it.
TMO: Well, when there’s passion behind the words, that makes it easy too. Let’s dive a little bit more into all of that and begin with the global tungsten market overview. How would you describe the global tungsten market currently? And also, what key trends do you foresee shaping its future?
Black: Well, tungsten right now in the West, it’s down because demand is down because the car sector and the aerospace sector are a little bit in the doldrums. There’s sort of a legacy of Covid and a global economy of higher interest rates. But what we have seen is a significant increase in defense consumption and in electronic technology consumption. And I know EV batteries are all the watch word, but predominantly semiconductors and the tungsten copper wire that’s now used for all electronics, including these semiconductors because it’s a nano size fraction. So, I think what we’re going to see is as demand picks up in the West, in the more traditional sectors like cars and aerospace there’s going to be a significant supply deficit.
TMO: And so, with all of that, there are always the geopolitical challenges. So, we know that China has dominated tungsten production for decades and now has limited sales direct or indirect to the US. How significant is this disruption to the tungsten supply chain for the US economy?
Black: Well, it’s unclear at the moment because it’s never happened before. So, I suppose what people are going to have to try and see is what does it all really mean? I think the issue is that the supply chain for transparent tungsten hasn’t gone away. And you’re quite correct between China, Russia and North Korea, they account for over 90% of production worldwide. So given that those three countries are not right now terribly aligned with the rest of us, and that you use tungsten in such sensitive areas such as defense and in technology, it’s certainly an area that has raised eyebrows. But the full impact we don’t know right now.
TMO: So, what about Almonty’s role in that supply security then? What would you say Almonty is doing to provide a reliable alternative to China for tungsten?
Black: Well, we’ve always sort of kept ourselves out of harm’s way. We’ve never aligned ourselves with any particular fund or group so that we had to pick sides. We could naturally, organically drift into areas where we felt comfortable. And our customers have always been traditionally the EU, Japan and the United States, and now about to be Korea as well. And we could sell three times what we actually produce. But I think from our point of view our strategy of servicing those markets has been well-founded given these new geopolitical sort of occurrences.
TMO: So, let’s flip to the strategic importance of the Sangdong Mine. What makes this mine in South Korea such a critical asset for ensuring a stable tungsten supply for industries in the West? And tell us more about that.
Black: Well, despite all the kind of proclamations of my peer group, Sangdong’s previous iteration was the world’s largest tungsten mine. It closed in 1993 because of the low-price environment when China crashed the market. And it is a quite exceptional deposit within our sector in terms of our industry, it’s a very well-known entity. Its sheer size can provide a vast amount of tungsten, if so called upon. It’s a horizontal deposit. So it’s a question of multiple portals. It has a grade of close to three times the average that you would find in a tungsten mine globally. And it’s sitting in a democracy. And I think these factors give it total transparency, give it longevity and give you a grade so that you can be very cost competitive in terms of your production cost. And that’s why it’s transformational.
TMO: I mean, that sounds innovative just on its own.
Black: Well, it’s one of one of the reasons why groups like KfW IPEX, which is the premier project finance lender in the world actually gave us 75% of the project cost as debt because, and they’ve never financed any tungsten mine previously. So, this is a statement that governments recognize the importance of this project.
TMO: That’s a huge statement indeed. Absolutely.
Black: Even if sometimes it feels our stock price is probably not reflective of the size and scale of this project. I think that’s more to do with the fact of market dynamics in that we haven’t aligned ourselves with any one particular Angel PE Fund, you know, we’ve kept our independence and that’s why we’ve been able to survive and thrive in our sector.
TMO: Can we talk about technological dependence? So which technologies and industries are particularly dependent on tungsten sourced from safe and conflict-free regions?
Black: Well, people don’t have the choice whether they source it from non-conflict or transparent jurisdictions, because basically you don’t have that option. You have to get your tungsten. If 90% comes from North Korea, China and Russia, then you are pretty much beholden to the fact that your material is not transparent. And in answer to your question, it’s one of those obscure metals that is in absolutely everything in a global economy, every sector, you only use a little bit of it, but without it, that sector can’t function. So, whether it be cars, planes, defense, semiconductors, batteries, solar panels, screens even the vibrator in your phones, guidance systems and satellites. I mean the wind turbines; it’s in every part of a global economy.
And I think one of the reasons why we’ve not made a big hububaloo, as it were, about availability of supply or from alternate sources is because you don’t know how North Korea, China and Russia will react to a large capital move to replace them. And you don’t have the time it takes. To start a mine in a democracy is eight to 10 years conservatively. You don’t have the luxury of time to make lots of noise whilst the hand that feeds you may also bite you. So, it’s always been a metal that I’ve always described as having tungsten diplomacy. Where there are no questions you know, everyone knows there’s a problem, but what do we do to fix it discreetly?
TMO: Absolutely. If we take a look at the future of geopolitical strategies then, given the increasing focus on securing critical minerals, how do you see Almonty’s role evolving in the geopolitical landscape of raw material supply?
Black: Well, we’ve got obviously the world’s biggest tungsten mine, and it’s going to open shortly, it’s going to commission shortly. We have also, as part of that, one of Asia’s largest and highest-grade moly deposits, which has no value on our books currently, but we have a huge amount of inferred data from Korea Tungsten that previously owned it and from the Korean government. So that’s something we’re working on now. And so, these two metals are right up there in the strategic metals list and it’s fully permitted, which is most important. I don’t think we are going to have this role of looking at other critical metals. We know how to mine tungsten and we know how to mine moly. We’ve done it for 136 years.
So, we are rather good at it at this point. And our mine in Portugal, which is 136 years old, is a low grade, very old, you know, she creeks on at the edges. It struggles to get out of bed sometimes in the morning, but it still produces the highest-grade material in the world with the highest recoveries of any gravity plant in tungsten and still makes money. So, one can only imagine what we’re going to be able to do with a brand-new shiny mine in Korea, which has got a grade of more than four and a half times the level of in Portugal.
TMO: Wow. I cannot wait to hear what comes down the pipeline going forward. And, you know, this has been such a great conversation. Thank you again for joining me.
Black: Thanks, Lyndsay. Thanks for having me.
That was Lewis Black President and CEO of Almonty Industries. If you’d like to learn more about, their website is Almonty.com. You can find them on the TSX under ticker symbol AII.
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