China’s control of tungsten mining and refining has turned export licensing into a supply-denial mechanism. For defense manufacturers, the core risks are physical availability and regulatory compliance. Price-only offtake agreements provide little protection when upstream financing, political alignment, or export authorization changes.
The Elmet Group’s investment in Masan High-Tech Materials shows how equity can close this gap. The structure combines a minority stake, an eight-year offtake, and contractual governance rights. It extends a model the U.S. government has used since mid-2025 into private industrial procurement.
China’s Tungsten Licensing Weapon
China produced about 67,000 metric tonnes of an estimated 85,000 tonnes of global tungsten in 2025, representing 79% of mine supply. It also controls roughly 85% of refining capacity for intermediate products such as ammonium paratungstate, or APT. The United States has reported no commercial domestic mine output since 2015.
In early 2025, China imposed export controls on tungsten ores, concentrates, APT, and related alloys through its dual-use catalogue. By December, export authorization was limited to 15 designated Chinese companies. Chinese shipments to Western markets subsequently fell by an estimated 30% to 40%.
The result was a sustained separation between Chinese domestic prices and Western landed prices:
| Benchmark | Pre-control price | Post-control price | Magnitude |
|---|---|---|---|
| Tungsten concentrate, CIF Rotterdam | $750–850/mtu | $2,400–2,800/mtu | 3–4× |
| APT, CIF Rotterdam | $300–350/mtu | $2,800–3,300+/mtu | 8–10× |
Chinese domestic prices eased after their initial peaks, while Rotterdam prices remained elevated because export permits constrained ex-China supply. This price separation measures the scarcity premium created by licensing.
Tungsten’s melting point, density, and hardness make substitution difficult in armor-piercing ammunition, kinetic penetrators, rocket nozzles, counterweights, missile guidance systems, and other defense applications. Elmet supplies more than 100 U.S. defense programs, including the F-35, Patriot PAC-3, Precision Strike Missile, Trident D5, and Virginia- and Columbia-class submarines.
Why Price-Only Offtakes Fail
A conventional offtake establishes volume and price terms. Its value collapses if the supplier loses upstream access, cannot finance production, redirects output, or fails origin requirements.
U.S. procurement rules make provenance a binding constraint. Beginning January 1, 2027, DFARS 252.225-7052 prohibits defense contractors from sourcing tungsten originating in China, Russia, North Korea, or Iran. The restriction reaches the mining stage and closes earlier scrap and recycling origin resets.
The REEShore Act requires disclosure of supply-chain origins and supports national critical-mineral reserves. The Bureau of Industry and Security has also required domestic allocation of tungsten waste, scrap, and black mass under the Defense Priorities and Allocations System, with exports subject to licensing.
Compliance therefore depends on a verifiable chain of custody covering extraction, processing, transformation, and delivery. A buyer relying solely on an offtake has limited control over those stages.
What Equity Adds
Capital Alignment
Tungsten projects require large capital commitments and long development periods. Equity makes the buyer a participant in construction and operating risk, giving the miner stronger demand certainty and the buyer a stronger claim on future allocation.
This relationship becomes important when multiple customers compete for constrained output. A capital partner has greater strategic relevance than a contractual purchaser.
Provenance Control
Equity improves access to information about mine origin, processing routes, ownership, and capital allocation. Combined with contractual audit and delivery rights, it supports the records needed for defense qualification.
The buyer gains a direct interest in keeping production within an approved non-Chinese chain of custody.
Governance Rights
Elmet acquired 4.99% of Masan High-Tech Materials’ parent structure and received the right to nominate one director to the board of MSR.
The voting seat remains while Elmet holds at least 80% of the shares originally acquired. If ownership falls below 80% but remains at or above 50%, the voting seat converts into a non-voting observer right. Elmet also agreed to support MSR’s planned move from UPCoM to the Ho Chi Minh Stock Exchange and its evaluation of an international listing.
This creates a contractual governance ladder. Elmet obtains information access, influence, and supply alignment while retaining the ability to reduce its equity exposure without terminating the underlying offtake.
The Sovereign Precedent
The U.S. government has used similar structures to secure critical-mineral capacity:
| Buyer | Target | Structure | Purpose |
|---|---|---|---|
| Elmet Group | Masan High-Tech Materials | 4.99% equity for $124.75M, eight-year offtake, board seat | Tungsten supply and defense provenance |
| Department of War | Elmet Group | $450M preferred equity and warrants for up to 19.9% | Tungsten processing capacity |
| Department of War | MP Materials | About $400M for roughly 15% preferred equity and warrants | Rare-earth magnet supply |
| Department of War | Trilogy Metals | $35.6M for 10% equity plus 7.5% warrants | Copper, zinc, and cobalt access |
| Departments of War and Commerce | Korea Zinc | U.S. joint-venture stake, parent exposure, and Tennessee smelter financing | Critical-mineral smelting |
| Department of Energy | Lithium Americas | Stakes in the company and Thacker Pass joint venture, with a restructured $2.26B loan | Domestic lithium supply |
Elmet–Masan applies this sovereign model through a private company’s balance sheet and without direct government intermediation. Its significance lies in the migration of equity-linked supply security into ordinary corporate procurement.
Balance-Sheet Logic
Elmet’s $124.75 million investment supports roughly $1.5 billion of expected gross revenue over the offtake term. The equity outlay equals about 8% of the contract’s face value.
That investment protects Elmet’s access to qualifying material and its eligibility for defense contracts, including a $2 billion Defense Logistics Agency ceiling and a $450 million government commitment. Loss of supply qualification could place substantially more revenue at risk than the equity purchase itself.
Masan receives liquidity, balance-sheet flexibility, and an independent valuation benchmark of $2.5 billion for MSR. Elmet receives supply priority, provenance, and governance access. The transaction prices strategic attributes that a market-rate purchase agreement leaves unsecured.
Principal Exposures
- Valuation: The $2.5 billion valuation reflects elevated tungsten prices. Easier Chinese licensing or aggressive price competition could reduce the stake’s value.
- Concentration: Elmet’s capital, supply, and compliance exposure are tied to one Vietnamese producer, although other offtakes provide additional volume sources.
- Governance: The board seat creates influence and information access alongside fiduciary obligations and potential liability.
- Liquidity: Masan remains the controlling shareholder, and Elmet may have limited exit options or influence over dividend policy.
- Counterparty quality: The companies had worked together for more than 12 years. Similar structures involving pre-revenue miners would probably require government financing or guarantees.
Conclusion
The Elmet–Masan structure combines capital, supply rights, provenance, and governance in one transaction. Its purpose is to secure physical delivery and regulatory eligibility under conditions where export licensing can override ordinary commercial terms.
Deal flow across tungsten, antimony, and rare earths over the next six to twelve months will reveal whether equity-linked offtakes become a standard procurement tool or remain limited to large, established counterparties.