Oct. 29 (Bloomberg) -- Newcrest Mining Ltd., Australia’s largest gold producer, may sell a stake in its tungsten project to a partner next year after being contacted by potential buyers.

“I don’t see us as tungsten miners,” Ian Smith, chief executive officer of the Melbourne-based company, told reporters today after the company’s annual meeting. “I would be surprised if we didn’t share a percentage of that deposit with someone.”

The O’Callaghans deposit has the potential to be the world’s largest producer of tungsten with future output estimated at 7 percent of global supply, Newcrest said last month. The project is located near the company’s Telfer mine in Western Australia and also contains zinc, lead and copper.

“There is a lot of people around the world that are finding it hard to find long-term supply of tungsten,” Smith said, adding that company has received “lots of interest” from potential buyers. “China controls that market at the moment.”

Newcrest fell 4.3 percent to A$32.46 at the 4:10 p.m. Sydney time close on the Australian stock exchange.

Tungsten consumption grows in line with steel production because the metal is used to make specialty steel such as machine tools.

A drilling program at the project is expected to be completed by January, after which a new mineral reserve estimate will be released, Smith said. The deposit is estimated to contain 59 million tons or ore, including 170,000 tons of tungsten trioxide, 450,000 tons of zinc, 160,000 tons of copper and 230,000 tons of lead, Newcrest said last month.

Zinc Concentrate

A mine could produce as much as 4,800 tons of tungsten a year as well as 55,000 tons of zinc concentrate, 35,000 tons of copper concentrate and 20,000 tons of lead concentrate, it said. At that rate, it would be twice as big as any other tungsten mine in production in 2008, Newcrest said.

“This is just a value accretive opportunity, which is turning out a little better than what we first expected,” Smith said today.

O’Callaghans is located 9 kilometers (5.6 miles) from Newcrest’s $1.5 billion Telfer gold mine in Western Australia state. It’s 500 kilometers by road from Port Hedland where the company currently ships concentrate from Telfer.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net

Last Updated: October 29, 2009 02:04 EDT