Informative interview about tungsten market, page-21

Treefeed

Thank you for your up to-date figures. There is another way of looking at your numbers as you left off another important tungsten player WLF. As you would know WLF has a high EV which could be interpreted as the market believing the project will actually start. So on that basis CNQ is looking good (being the 2nd highest).

If you were using EV as a decision tool then VML looks great value. However looking at the Breakaway sensitivity assessment you will note VML’s NPV based on a drop of 20% in tungsten price from $375 is only $36m. This week Roskill has forecast that the tungsten price is likely to drop from current levels. This will put pressure on some of the high capex, high opex projects.

CNQ NPV uses a sale price of tungsten of $290mtu, which is a 23% discount to VML assumption. If the CNQ price assumptions was used on VML, then it would have little value and unlikely anyone will invest $150m for capex, so you are right. EV represents the value of tungsten in the ground and some of the projects are likely to see the tungsten stay there. So I'm more than comfortable with CNQ's conservative assumptions.

We all agree that what has happened in the past hasn’t been ideal as management has tried to run the company on an oily rag. However there wouldn’t be many resource companies around that had delivered to timeframes, costs, production levels and profits in the last 3 years (if that’s your criteria).

What management haven’t done (so far) is sold out or heavily diluted existing shareholders.

What your assessment doesn’t include is;

Mitsubishi has completed “technical” due diligence which confirms they believe CNQ is a viable producer of tungsten. I’m sure you won’t be offended if I take their word for it and not yours.

They have the stockpile permissions. The hard rock permissions aren’t required until after funding for the stockpiles is in place. They don’t want to use cash unnecessarily as they have 5-7 years of stockpiles to process.

Revenues from tailings. Management has updates saying improvements are required but I think it’s safe to assume this will be done after stockpile funding is in place as they don’t want to use cash unnecessarily and the tailing production isn’t going to assist an off taker agreement.

So, I’m still comfortable to be a buyer of your sentiment.