Article by Investment U
A little-discussed metal called tungsten is set to become one of the most sought-after commodities on Wall Street.
At Investment U, we’re not in the business of showing people how to make a quick buck.
Actually, I’d say we’re on the opposite end of the spectrum, as we relentlessly advise growing and protecting your wealth at a steady and safe rate. (For more see here, here, here, here and here.)
But that doesn’t mean you shouldn’t take advantage of a hot opportunity when you see one.
In fact, a little-discussed metal called tungsten is set to become one of the most sought-after commodities on Wall Street.
And a handful of junior mining stocks are poised to skyrocket as a result. This is because, as demand for tungsten is ramping higher around the world, supplies are dwindling even faster.
Warren Buffet is Leading the Charge
Now before we go any further, you should fully understand that junior mining stocks are risky investments.
Legendary investor Doug Casey calls them “the most volatile stocks on earth.”
But where there’s risk, there’s also potential reward. And junior miners can return some of the biggest profits known to man.
For example, since 2009, Detour Gold Corporation (TSX: DGC) has soared as much as 1,025%. And some companies, like ATAC Resources (TSX: ATC), have exploded well over 10,000% in the past.
Junior miners that mine and process tungsten may very well find themselves in a similar situation today.
And Warren Buffett agrees.
In February, Woulfe Mining (TSX: WOF) inked a deal with International Metalworking Companies, a Berkshire Hathaway (NYSE: BRK-A) owned holding company for metalworking products.
For a total of about $80 million, IMC agreed to buy a 25% stake in Woulfe’s Sandong mining project in South Korea, which was once the biggest tungsten-producing mine worldwide. By early 2013, once again, the mine is set to become the biggest producer when it reopens.
It’s estimated Sandong will account for 7% to 10% of total tungsten production at that time.
Buffett is seeing an enormous opportunity here.
As Woulfe Mining’s Nick Smith told Tungsten Investing News, “Without tungsten, Western manufacturing comes to an end.”
Today the metal is used in anything from light bulbs, to drill bits for oil and gas exploration, to solar panels, to smartphones, tablets and much more.
And what makes it unique is that it’s practically immune from corrosion and can withstand unbelievably high temperatures.
Nick Smith adds, “You are not working with steel without tungsten. There’s no global mining unless you have tungsten-tipped drills.”
In other words, even though supply of tungsten is tightening worldwide, there’s no material that can currently replace demand for it no matter how high prices go.
China currently hoards 80% of the world’s tungsten supply and expects to use all of it to support its own manufacturing industry.
This leaves little options for any company that’s dependent on tungsten for their own goods and services.
How to Play the Trend
While there’s really no “safe” pure play on tungsten right now, there are a number of junior mining stocks that could skyrocket as supplies continue constricting.
Among the top five I’m interested in are Playfair Mining (TSX: PLV), Malaga Inc. (TSX: MLG), Woulfe Mining (TSX: WOF), Happy Creek Minerals (TSX: HPY), and Largo Resources (TSX: LGV).
Just keep in mind, these companies are very small and subject to big price swings. So be sure to give your trailing stops enough room to handle a bumpy, yet potentially lucrative, ride.
Good Investing,
Mike Kapsch
Article by Investment U
