Tungsten, one of the hardest metals in the world and used for everything from drill bits to light bulbs to touch screens, is suddenly hot. Much of the increased demand is coming from China, which just happens to hold the world's biggest reserves. The country is hoarding mineral resources by reducing exports, according to mining strategist Christopher Ecclestone of Hallgarten & Company, as it produces more of its own precision tools using the metal. "China wants to keep more of the good stuff for itself," he says.

 

With the Chinese tightening their grip and a general uptick in demand, prices have soared to about $20 a pound, double from a few years ago. That has the relatively small number of tungsten miners, such as Malaga and Woulfe Mining, ramping up activity. Malaga is currently sending one container, which is about 28,000 pounds, of tungsten per week from its Pasto Bueno mine in Peru, according to CEO Pierre Monet. To meet the pressure for more material, he says the mine would have to up its production to five containers per day.

 

Other mining companies such as Woulfe are capitalizing upon mines that shut down in past years when prices were a lot lower. In 2009, Woulfe acquired a one-time leading tungsten producer, South Korea's Sangdong mine, years after it had closed in 1992. Now the company is in a race to bring Sangdong back online while prices stay high. Woulfe hopes to have the mine in production by the first quarter of next year, says CEO Brian Wesson. But the company, like the rest of its sector, has been in a fight to get the capital it needs to fund the project.

 

Though tungsten use is spread across a wide range of industries, the quantities involved are still relatively small. There's been little historical interest in the U.S., and few mining analysts cover the material. (Malaga and Woulfe are both based in Canada.) According to Ecclestone at Hallgarten, the long lag time with mines from investment to production has kept investment interest in them relatively muted and their valuations low.

 

But that could change if executives are right in predicting that tungsten prices stay at high levels for the long haul. The U.S. is paying more attention to strategic metals and recently sued the Chinese government for its export restrictions of "rare earth" minerals, And now Warren Buffett is getting in on the act.

 

IMC Group, a subsidiary of Buffett's Berkshire Hathaway (BRKA) that holds a diverse portfolio of metalworking companies, recently invested $70 million in Woulfe's South Korean tungsten operations. Half that money goes to the mine itself, with the rest helping to finance a nearby plant for processing the raw material, Woulfe CEO Wesson says. The processed tungsten will then be used by units within IMC.