Finance
U.S. researchers visit Korean tungsten mine amid critical minerals race with China
Workers in July 2019 expand a mine in Germany intended to increase supplies of tungsten and fluorspar.
Picture Alliance | Picture Alliance | Getty Images
BEIJING — U.S. government researchers recently visited a South Korean mine to assess progress towards boosting supply of a critical metal called tungsten from areas outside China, the mine operator said Wednesday.
The Sangdong Mine, owned by a subsidiary of Canada-based Almonty Industries, is set to resume operations this year. Tungsten is an extremely hard metal used for making weapons, semiconductors and industrial cutting machines.
With China dominating over 80% of the metal’s supply chain, Almonty claims the mine could potentially produce 50% of the rest of the world’s tungsten supply.
The U.S. has not commercially mined tungsten since 2015, according to the latest annual report from the U.S. Geological Survey, a government agency that analyzes the availability of natural resources.
Four mineral resource scholars visited the Sangdong Mine in a trip led by Sean Xun, assistant chief at the agency’s National Minerals Information Center, the report said.
The U.S. Geological Survey would make a “significant update” on its assessment of the mine in its 2025 report due out in the first three months of next year, it added.
The agency did not immediately respond to a request for comment made outside of U.S. business hours.
The Biden administration has identified critical minerals and announced tariffs on tungsten and others as part of a broader effort to bolster national security.
“Of the 35 mineral commodities deemed critical by the Department of the Interior, the United States was 100 percent reliant on foreign sources for 13 in 2019,” according to the U.S. Geological Survey.
Almonty has said it’s spending at least $125 million to reopen the Sangdong Mine, which closed in the 1990s.
China, in the past year and a half, has started to use its leverage in parts of the global critical mineral supply chain to control exports.
Beijing has so far avoided any restrictions on tungsten. But forthcoming rules to limit exports of a similar metal called antimony have raised expectations that tungsten will soon be subject to more Chinese export restrictions.
“If Donald Trump wins the US presidency and follows through on his threat to dramatically hike tariffs on China, Beijing might respond with new export controls on critical minerals or deploy existing controls more forcefully,” Gabriel Wildau, managing director at consulting firm Teneo, said in a note Tuesday.
“Chinese regulators may also apply controls selectively, denying minerals to specific foreign companies that are viewed as supporting Washington’s technological containment agenda.”
He added that the U.S. Energy Department has already awarded $151 million in grants to encourage domestic mining and processing of critical minerals, and western nations are expected to respond to Beijing’s “calibrated weaponization of critical minerals by accelerating efforts to reduce dependence on China.
Israel Sebastian | Moment | Getty Images
Investors who hold exchange-traded funds can often escape a tax bill incurred by those with mutual funds, which are generally less tax efficient, according to investment experts.
ETFs and mutual funds are baskets of stocks, bonds and other financial assets overseen by professional money managers. But they have a different legal structure that bestows ETFs with a “tax magic that’s unrivaled by mutual funds,” Bryan Armour, the director of passive strategies research for North America and editor of the ETFInvestor newsletter at Morningstar, wrote this year.
That tax savings relates to annual capital gains distributions within the funds.
Capital gains taxes are owed on investment profits.
Fund managers can generate such taxes within a fund when they buy and sell securities. The taxes then get passed along to all the fund shareholders, who owe a tax bill even if they reinvest those distributions.
The ETF tax advantage is by virtue of “in-kind creations and redemptions,” which essentially provides for tax-free trades for many ETFs, experts explain. (The ETF’s in-kind transaction mechanism is somewhat complex. At a high level, it involves large institutional investors called “authorized participants,” which create or redeem ETF shares directly with the ETF provider.)
The tax advantage is generally most apparent for stock funds, they said.
For example, more than 60% of stock mutual funds distributed capital gains in 2023, according to Morningstar. That was true for just 4% of ETFs.
Less than 4% of ETFs are expected to distribute capital gains in 2024, Morningstar estimates. Such data isn’t yet available for mutual funds.
Importantly, this tax advantage is only relevant for investors holding funds in taxable accounts, experts said.
It’s a moot point for retirement account investors like those with a 401(k) plan or individual retirement account, which already come with tax benefits, experts said.
The tax advantage “really helps the non-IRA account more than anything,” said Charlie Fitzgerald III, a certified financial planner based in Orlando, Florida, and a founding member of Moisand Fitzgerald Tamayo.
“You’ll have tax efficiency that a standard mutual fund is not going to be able to achieve, hands down,” he said.
However, ETFs don’t always have a tax advantage, experts said.
For example, certain ETF holdings may not be able to benefit from in-kind transactions, Armour said.
Examples include physical commodities, as well as derivatives like swaps, futures contracts, currency forwards and certain options contracts, he said.
Additionally, certain nations like Brazil, China, India, South Korea and Taiwan may treat in-kind redemptions of securities domiciled in those countries as taxable events, he said.
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