Mt Carbine quarry dispute, page-3

JamesExpat,

here is a summary of what happened (and did not happen) during the last few years at Mt. Carbine.

In 2011 a rights issue to raise $7.15M was carried out. The plan was to develop Mt. Carbine as follows:

"The three stage Strategy is:
ƒ
Stage 1 is to produce tungsten concentrates from the Mt Carbine Tailings for two years at a production rate of 50 tonnes (5,000 metric tonne units or mtu) per month of WO3 in the concentrate;
ƒ
Stage 2 is to produce tungsten concentrates from the low grade stockpiles for a further five to seven years at a production rate of 100 tonnes (10,000 mtu) per month of WO3 in the concentrate (to commence prior to end of year 2 in Stage 1); and
ƒ
Stage 3 is to commence production from the hard rock mine in time to increase market share before the low grade stockpile processing comes to an end. The hard rock mine will have a minimum production rate of 200 tonnes (20,000 mtu) per month of WO3 in the concentrate."

Neither schedule nor budget was met but in the end CNQ had built the plant. Cost overruns had forced the company to raise another $3.9M before the plant was completed. The stated goal was to produce 60.000 MTU WO3 per annum over a 2 year period -> 120.000 MTU WO3. During the following two years however, CNQ produced and shipped ~11.000 MTU WO3, that's less than 10% of what was intended. Right from the start the plant underperformed severely. Instead of ordering long lead time equipment items for the hard rock plant as promised, the company diverted funds obtained from Mota Engil to upgrade the tailings plant. After the upgrade had been installed, CNQ issued a press release stating "the Company is pleased to advise that record production rates approaching designed throughput capacity are now being achieved at its operation, following the successful installation of new direct feed and scrubbing equipment at the front-end materials handling section of the plant." Everybody was cheering, the share price appreciated and shareholders expected the plant to produce in the vicinity of 5000 MTU per month as planned. However, when actual production figures were published we found out it took them 41 days to ship 1100 MTU instead of 30 days to ship 5000. I deem their statement massively misleading, just as you said it was the case with their recent "AGREEMENT to appoint lawyers" comment. I do see a "pattern of behaviour" and found my opinion reassured numerous times over the years. Anyway, the last container was shipped on 18 December 2013 and no tungsten has been commercially produced at Mt. Carbine ever since. The company didn't care to publish a press release or otherwise informing shareholders about production being shut down.

Regarding Phase 2 and Phase 3, the company issued a press release on 11/04/2012 stating "In order to take advantage of the strong market for tungsten concentrates, together with the encouraging results from the exploration drilling, the Company’s new management proposes to bring forward the above two stages of the project and will treat them as one “hard rock” project phase in future." In the same press release you can find "Planned production capability remains at 30,000 metric tonne units of tungsten concentrate per annum, commencing in 2014." As we all know, it never happened.
It all hinges on the missing environmental approval. In a press release dated  8 February 2013, the company said "The Company expects that the approvals and permitting process will be complete for the hard rock stockpiles by the end of the thrid quarter of calendar 2013, followed by the hard rock open pit by the end of the fourth quarter 2013." The latter has never been obtained up to the present day!
I am sure Mitsubishi required all approvals obtained as a prerequisite for the finance package being paid and that's why the whole thing got stuck in the mud right there. That was 3,5 years ago. Since then the situation went from bad to worse. Tungsten prices were slashed, credibility completely destroyed, the lease issues as icing on the cake.

Long story short: When they started out, they had it all: The resource, the money, a high profile off-taker, record tungsten prices. But somehow they dropped the ball and messed up.