NEWCREST has put the wind up China's tungsten industry by revealing that its O'Callaghans tungsten discovery near the Telfer gold/copper mine in Western Australia is shaping up as a world-class find.

Managing director of Melbourne-based Newcrest Ian Smith said an initial resource estimate for O'Callaghans would be about 60 million tonnes. He did not give an indicative grade but said it was a deposit of "world significance".

China controls the world tungsten market through production dominance from mines in Jiangxi, Hunan and Yunnan. It may bid for O'Callaghans to maintain its hold.

Newcrest is open to exploiting the situation. Mr Smith said Newcrest had a team in China talking to "people who are very interested in O'Callaghans because China's companies control the tungsten market at the moment".

"But just as importantly, some of the companies to have shown intense interest have been from Japan and northern Europe," Mr Smith said.

While relishing the interest in the strategic discovery, Newcrest has yet to decide whether to hold on to O'Callaghans. "What we're confident of is that we're sitting on a pretty important and strategic resource. There is no shortage of people interested in what is … a world-class deposit outside of the control of the country that now dominates that whole industry," Mr Smith said.

He was speaking at the release of Newcrest's June-quarter/June-year production report. Gold production rose 9 per cent to 397,826 ounces in the June quarter compared with the preceding quarter. That took annual output to 1.63 million ounces for the June year, in line with previous company guidance that output would be 1.62 million ounces. Annual copper production was higher than guidance at 89,900 tonnes.

Newcrest shares closed down 57¢ at $30.39, in line with general share price weakness in the sector due to easing inflation concerns that have sent gold prices lower.

Trading Symbols - ASX : NCM  & NTSE - ADRs: NCMGY