Economics Assignment: Analysis of Carbine Tungsten Limited (SEI)

This economics assignment analyzes Carbine Tungsten Limited (formerly Speciality Metals International Limited), an Australian mineral exploration company specializing in tungsten and expanding into lithium, gold, and other materials. The report examines the company's market structure, production costs, and the broader business environment, including political and macroeconomic factors influencing its growth. It delves into the company's production scale, cost structure, and sustainability practices, considering both positive and negative externalities associated with its operations. The analysis also considers the impact of factors like competition, government policies, and global economic trends on Carbine Tungsten's performance. The report highlights the company's role in the Australian mineral industry and its strategies for production and expansion, including its Mt. Carbine tungsten mine. Finally, it assesses the sustainability practices, including the environmental and social impacts of its mining activities and the government's role in regulating the industry.

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Economics Assignment
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Executive Summary
This paper is about the market structure and growth prospectus of an Australian company named
Carbine Tungsten Limited. It deals in the production and sale of minerals especially gold,
copper, lithium and iron. Although, it has small market capitalization, the firm has been able to
grow successfully in the recent years. However, it has few drawbacks regarding the export and
production as it has negative impacts on the society.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................4
1. Introduction to the business and general business environment..............................................4
2. Production cost and scale.........................................................................................................6
3. Macro Business Environment..................................................................................................7
4. Sustainability Practice of the business.....................................................................................9
Conclusion.....................................................................................................................................10
Reference List................................................................................................................................12

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Introduction
One of the well-renowned Australian company Carbine Tungsten Limited (ASX: CNQ)
is listed in ASX companies (Weil & Schubert, 2013). The present name of the company is
Speciality Metals International Limited (ASX: SEI) and it specialized in the material industry.
Though, the main asset of the company is tungsten exploration but it expanded the portfolio of
exploration to lithium, iodine, potassium, gold and boron. The company continues expanding its
current portfolio and exploration capacity to be best in the materials industry (Dvořáček, et al.,
2017). The economic analysis of the company will help to prepare the business study report. It
will help to know the potential threats of the industry and how the product diversification
strategy of the company enhances its output. Despite, increasing prices of input factors and
increasing competition, the company supplies 40% of total Australia’s tungsten concentrate.
There are many big players in the domestic and international market of materials industry. The
cost structure of the company can be derived from the required of factors of production and the
nature of the factors.
Mining exploration affects the environment significantly. The production process have an
adverse effect on climate. Government took many policies and measures to mitigate the negative
externalities of production (Leal-Ayala et al., 2015). In addition, it also generate negative
externalities in the long run, where the produced goods are used. However, government of
Australia took several measures to enhance the performance of the sector. Although, the current
unemployment rate in Australia increased, but the overall growth of the economy is sustained.
Thus, the economic indicators of the nation such as GDP, interest rate or unemployment rate
may impact the growth of the mining industry.

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Discussion
1. Introduction to the business and general business environment
Carbine tungsten limited is an Australia based mineral exploration company, which
specialized in tungsten exploration. It is one of the minor metals and also known as strategic
metal. It is difficult to explore and process further. The position of the Australia is significant in
the critical mineral exploration (Weil & Schubert, 2013). CNQ plays an important role in
Australian minerals exploration. The flagship project of the company is Mt. Carbine tungsten
mine based in Far North Queensland. It produces tungsten concentrate from this project. 40% of
total Australia’s tungsten is produced by Mt. Carbine.
The company pushed the production from Mt. Carbine and it supplied 5% of total
world’s production. The main strategy of the company is to increases the production of tungsten.
There are many potential threats in the minerals industry other than the competitors. The volume
of tungsten production affected due to improvement in method of production and technological
advancement. The traditional materials industry is also affected by the climate change
(Dashwood, 2014). The country which dominates the industry is China. It produces more than
80% of global supply. The main competitors of the company in the domestic market includes
Metminco, Chase Mining, Breakers Resources, Corizon, Tungsten Mining and Lithium
Australia. These ASX listed companies created potential threat for the Carbine Tungsten limited.
It diversified the business from only tungsten concentrate producers to gold and lithium.

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Figure 1: Prices of Ammonium Paratungsten (APT)
Source: (Asx.com.au, 2016)
Though, the production duration of the company is comparatively low, it continues
improving the cost efficiency of the projects. The company always takes the advantage of any
upturn in the market due to closure of high-cost mines. The operating cost is comparatively low
in the project of Mt Carbine Tungsten Project (Sarker, 2013). Despite the increasing prices of
tungsten concentrate and APT, the company maintained the growth rate and level of output.
However, the competition in domestic as well as international market effected the performance
of the company moderately. There are many close substitutes of the goods produced by the
company. Many large players of the industry produced tungsten, gold and lithium produced by
the company. The market type in which the company operates is perfect competition. Presence of
numerous sellers and buyers in the industry, abolished the monopoly power of both sellers and
buyers. Thus, the price of the goods produced are not controlled by any individual. It leads to
elastic demand curve for the goods produced (Tonts, Martinus & Plummer, 2013). The company

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cannot fixed the price above the marginal costs, as it will be not decided by the individual firm.
The price of the commodity produced will be decided by the market force.
2. Production cost and scale
The required factors of production of mining industry are money, materials,
mineralization, management and manpower, where mineralization is considered as the main
input of production. The profit and loss of the company largely depends on the mineral reserves
and mineral resources. The availability of mineral resources effects the overall production of the
company. There are many mineral reserves in Australia (Bice, 2014). The strong research and
development helps in improving mineral exploration of the country. When the changes in output
produced does not change the factors of production, then it is called fixed input. Whereas, when
the changes in output produced impacts the factors of production, then it is called variable input.
Factors of production used in Carbine Tungsten are fixed in nature, as it does not change with the
change in output produced.
The main input of the company depends on the availability of mineral resources and
mineral reserves. When the changes in output does not change the costs, then it is considered as
fixed costs. Whereas, in case of variable costs, the output produced affects the cost structure. The
fixed costs are related to time while the variable costs are related to volume. The fixed costs of
the Carbine Tungsten includes salary, tax, insurance and depreciation (Downes, Hanslow &
Tulip, 2014). Though, it was higher in the short run but in the long run it will be less than
variable costs. As variable costs of the company includes wages, material consumed, packing
expenses and commission on sales. Therefore, the fixed costs of the company will be less than
the variable costs. The size of the company is relatively small depending on the factors such as
quantity of raw materials it consumed, capacity of productivity, volume of output, number of

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people employed. The company started its Tailings Retreatment Project in 2012 to produce
tungsten concentrate on a large scale (Zheng & Bloch, 2014). However, many parts of the Mt
carbine tungsten mine has unexplored till date. It scheduled the production of the Hard Rock
open-cut mine in 2016, which will increase the output of the company. Therefore, the flagship
projects of the company may help it to be large scale in future.
3. Macro Business Environment
Political factors have a very important role in shaping the growth prospectus and long-
term profitability of businesses. A country with weak political stability hampers the growth of
business due to low growth opportunities. As Carbine tungsten Limited operates in multiple
countries, it is exposed to the risk of change in political systems and government regulations.
The central region of production of Carbine Tungsten is Australia (Rees, Smith & Hall, 2016).
Over the years, Australia had an accelerating rate of economic growth. Recently, the
growth rate is subjected to go down due to a downfall in the real estate investment and housing
market. These trends in economic growth is due to trade disputes between US and China which
led to reduction in global economic growth. As a result, consumer spending has weakened a bit.
The unemployment rate went up since the beginning of 2019 and the level of joblessness
increased (Lin, Li & Bu, 2015).
However, economic growth is expected to go up in the Australian economy which will be
reflected in consumer spending because of monetary and fiscal policies of the government. The
amount of output produced per person has decreased in the last three quarters of the year, yet the
aggregate output is still increasing at a steady pace. Strong population growth and migration has
contributed to the economic growth. Due to this, the economy has not faced any sort of recession
in this year (Trüby, 2013).

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Most of the minerals of the Carbon Tungsten Limited is exported to North America,
Canada and Africa, where the customers are located. Canada is one of the successful economies
with a high rate of GDP and political stability (Rimmer, Smith & Wende, 2014). The
unemployment rate is extremely low and the economy has multiple job opportunities. Carbine
Tungsten Benefits from the export of their minerals to Canada because they can send the good
and earn a high amount from the sale of the product. Africa’s macroeconomic condition is
comparatively weaker than Canada, yet the export of minerals is profitable because of demand
for minerals (Misan, 2015). Lithium deposits are significantly lowest in South Africa which
benefits Carbon Tungsten Limited. Minerals like lithium and copper are exported to the South
American country named Chile. Chile has a stable political system, governed by the democratic
institutions. It is one of the fastest growing republic countries in the world. Trade agreements are
generally free in Chile however, Australia has the benefit of double taxation from exportation in
Chile (Daley, McGannon & Savage, 2013).
The minerals produced by Carbine tungsten Limited are normal goods, such that an
increase in the income will affect positively on the demand for the good. When countries have a
good level of GDP, they can import more from other countries. Recessions lower the level of
aggregate demand. So during recessions, the aggregate demand goes down due to a reduction in
consumer expenditure (O'Donnell, 2014).
4. Sustainability Practice of the business
Mining creates a negative externality on the people who work on the mining cites. A
negative externality is the effect of usage of a good on other people who does not even use it.
Mining of mineral resources like that of lithium, gold, copper and iron is harmful as it pollutes
the economy. Mining cause water pollution, air pollution, toxic coal waste which damage the

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economic performance in the long-run and leads to global warming (Denniss & Richardson,
2013). The impacts can be seen as the rise in pollution levels, climate change and poor health
conditions of the people of the economy, mainly those of the labors working at the mining cite.
The government of Australia has responded by limiting the production and taxing on the profits
of agencies with a high rate on the output levels. Normally, 30 percent of taxation is made on the
profits earned from the mining of non-renewable resources, which can vary according to the
source and negative impacts on the economy as a whole.
The consumption of the minerals produced by Carbine Tungsten Limited has both
positive and negative externalities depending on the how it is seen (Langcake & Robinson,
2013). Lithium is a mineral which has a high demand because it is poor conductor of electricity
and can easily generate power. The positive externality is in the sector of manufacture for the
generation of power at low costs. Consumers get benefit from it. However, in the long run the
health conditions will go down leading the usage of the products as a negative externality.
The mineral industry is an essential component for raising the exports significantly.
Australia is the biggest exporter of coal and has comparative advantage in the production of
lithium (Porter, Franks & Everingham, 2013). Carbine Tungsten Limited provides a great deal of
exports to the percentage of overall export in Australia. Sustainability means the using the good
in such way so that current and future generation can use it efficiently. Demand for minerals
from other counties is continuously going up for which the minerals of Australia is reducing
(Bice, 2013). This is an unsustainable practice because current consumption is leads to low
availability of resources for the future generation. In the long-run Carbine Tungsten Limited and
other firms of the same industry would not be able to produce, export or earn profits.

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Conclusion
Carbine Tungsten Limited as a mineral producer has small market capitalization yet has
been successful in the delivery of minerals to other countries. The company has a huge amount
of earning from the rising revenues and interest-costs ratio. The political system in Australia is
stable with sound governance system and transparent regulatory framework to underpin the
economic resilience of the country. Australia is ranked five globally, in the Index of economic
Freedom.
The business environment in Australia is safe, secure with effective government policies
that helps multinationals to gather maximum surplus. However, the business is limited to only
exportation in few countries. There are other firms in the market both in the domestic and foreign
markets, who can produce the same minerals leading the market towards perfectly competitive.
The availability of substitutes refrains the firm from earning super normal profits as it faces an
inelastic demand curve. Carbine Tungsten Limited The lack of diversification in the revenues has
made investors to allocate only a negligible portion of portfolio investment and capital.
The production and consumption of the minerals provided by the company poses the
threat of negative externality on the producers as well as consumers. Firm will face loads of
problems in the long run when the resources will go down as a result of the effects of negative
externalities. Social cost is high for negative externality and government would not let firms to
produce maximum outputs due to negative impacts in terms of pollution, climate change and
health conditions. Thus, Carbine Tungsten Limited has been able to earn profits and there is
scope of further developments for sustainable production of minerals.

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Reference List
Bice, S. (2013). No more sun shades, please: Experiences of corporate social responsibility in
remote Australian mining communities. Rural Society, 22(2), 138-152.
Bice, S. (2014). What gives you a social licence? An exploration of the social licence to operate
in the Australian mining industry. Resources, 3(1), 62-80.
Daley, J., McGannon, C., & Savage, J. (2013). Budget pressures on Australian
governments (Vol. 3). Melbourne: Grattan Institute.
Dashwood, H. S. (2014). Sustainable development and industry self-regulation: developments in
the global mining sector. Business & Society, 53(4), 551-582.
Denniss, R., & Richardson, D. (2013). Corporate power in Australia.
Downes, P. M., Hanslow, K., & Tulip, P. (2014). The effect of the mining boom on the
Australian economy. Reserve Bank of Australia research discussion paper, (2014-08).
Dvořáček, J., Sousedíková, R., Vrátný, T., & Jureková, Z. (2017). Global tungsten demand and
supply forecast. Archives of Mining Sciences, 62(1), 3-12.
Langcake, S., & Robinson, T. J. (2013). An Empirical BVAR-DSGE Model of the Australian
Economy. Economic Analysis Department, Reserve Bank of Australia.
Leal-Ayala, D. R., Allwood, J. M., Petavratzi, E., Brown, T. J., & Gunn, G. (2015). Mapping the
global flow of tungsten to identify key material efficiency and supply security
opportunities. Resources, Conservation and Recycling, 103, 19-28.