Just as the market is showing renewed interest in tungsten, Vital has entered into an earn-in agreement with Japan Oil, Gas and Metals National Corporation (JOGMEC), which will commit $5.4 million to fund the completion of a bankable feasibility study at Watershed, located 150 kilometres northwest of Cairns.

"Our ability to attract JOGMEC as a strategic partner has the potential to be a defining moment for the Watershed project," said Vital's newly appointed chief executive officer Mark Strizek, who took over the hot seat in July.

"International funding from a third party reinforces our own confidence in the value of Watershed, particularly against a backdrop of reduced global supply and rising tungsten prices.

"It is a real positive to have a reliable and well-respected partner onboard to help develop this project."

Originally explored by Utah Development Company in the early 1980s with further limited work conducted by GeoPeko mid-decade, the Watershed project comprises exploration tenements over 600 square kilometres and seven mining lease applications over 19sq.km in Far North Queensland's hilly, open woodland country.

Acquired by Vital Metals in 2005 and used as a foundation asset when the company listed on the Australian Securities Exchange in 2007, the flagship project with its 15 million tonne resource is inching closer to economic viability as the price of tungsten continues its stellar rise on the back of increasing demand and decreasing exports from commodity-hungry China.

A global shortage resulting from that strong demand has seen the metal's price almost double in the last 12 months to more than $US450/t.

"China definitely dominates the tungsten market, with around 90 per cent of global production," Strizek said.

"The Chinese government has identified that tungsten is a strategic metal and that domestic usage is on the increase so they have restricted the supply of concentrate to global manufacturers, who would ordinarily use these raw materials to make things such as industrial tools and equipment.

"At the moment, it is near-impossible to buy tungsten concentrate out of China, yet the market is crying out for more."

With only a handful of companies currently producing tungsten outside of China, Strizek believes the scene is set for the start-up of a new mine to ease supply pressures.

"The project was at quite an advanced stage before the global financial crisis, but when tungsten prices crashed, the opportunities for a junior explorer to raise capital for a new project dried up," he said.

"In the last 18 months, we have raised about $7 million to fund our exploration activities overseas and now with the funding from JOGMEC for the Watershed bankable feasibility study, we are progressing towards a 2014 start-up.

"This will be a project that comes onstream fairly easily, because we will not have the metallurgical or infrastructure constraints that other juniors face.

"Our tungsten will be a clean concentrate that does not have a complex make-up or require expensive milling technology to process.

"And the 3000 tonnes per annum of concentrate that we plan to produce will be transported on semi-trailers to Brisbane for shipment through the port, so the capital expenditure on infrastructure will also be quite low."

Also creating a clear advantage is the project's size - with a JORC resource of 15.1Mt of scheelite (as opposed to wolframite) at 0.46% tungsten trioxide, Watershed is one of the larger undeveloped deposits in the region.

"There have been a number of smaller high-grade operations but Watershed stands out due its fairly sizeable tonnage component compared to the others," Strizek said.

"That tonnage has put it in the top 10 tungsten mines worldwide. It is a world-class project that we are bringing one step closer to reality with the help of JOGMEC, and not many juniors get a chance to have that under their belts."

JOGMEC's funding of the Watershed BFS is also allowing Vital to maintain progress on its Doulnia gold project in southern Burkina Faso, west Africa - currently the only international exploration asset in the junior's line-up and one which fits its strategy of targeting projects with strong potential for the low-cost extraction of commodities with an attractive short-term price-cycle profile.

Keen to join the west African gold rush, which has seen a doubling of gold production in recent years and the discovery of a number of one-million-tonne-plus gold deposits, Strizek said Doulnia (which Vital shares in a 60:40 joint venture with Ampella Mining) might be a key find if the latest "spectacular" drilling results were any indication.

Assay results from phase two drilling in August returned "very encouraging numbers", including a best intercept of 4 metres at 58.03 grams per tonne gold from 24m, confirming the project's gold prospectivity.

"That intersection was followed by a number of wider intersections, also of relatively good grade," Strizek said.

"When all these results are compiled together, it begins to look as if we may have discovered one section of a relatively good mineralised system.

"We need to do further drilling to test the extent of the gold mineralisation system. But we now know that it is not just hosted in quartz veins but also in a quartz feldspar porphyry unit, which provides potential for the area to host significant tonnages.

"We have identified the need for additional geological resources and further outcrop mapping, channel sampling and structural mapping which we will achieve with the help of [west African exploration and geophysics specialist consultant] SEMS Exploration.

"We believe their local experience will add real value to ensure that we enhance our understanding of the geology and keep the drilling on target.

"It is not unrealistic to think we could have a JORC resource at Doulnia by the end of 2012."

While work continues at a steady pace in west Africa, back in north Queensland progress is picking up a notch.

"We are very busy on all fronts," Strizek said.

"Our mining lease applications are contingent on environmental approvals, which we are well on the way towards attaining. Our environmental impact statement has been approved and we are finalising our environmental management plan, which should be completed next year.

"If Watershed gets the green light, we will be looking at an open pit over a six-year initial mine life, mining about 600,000 tonnes of ore per year to produce just under 3000 tonnes of concentrate.

"We have had some impressive results from diamond drilling that require further testing, including 20 metres at 1.27 per cent tungsten trioxide 300 metres below surface, which is a fairly spectacular intersection for a scheelite deposit of this type.

"We need to do some more drilling to test the geometry but an intersection of this grade and width has the potential to support an underground operation and add life to the project.

"As far as the processing goes, there has also been some innovative work done on the development of an X-ray ore sorter, which exploits scheelite's fluorescence and density and doubles the grade by removing up to 50 per cent of waste.

"Firming up that flowsheet and the associated recoveries and costs so we can move forward with this project is high on our list of priority activities.

"We are aiming to complete the BFS and deliver a report to the board by the end of 2012.

"Our goal would be to start construction in 2013, with first concentrate in 2014."

*A version of this report, first published in the October 2011 edition of RESOURCESTOCKS magazine, was commissioned by Vital Metals