Ann: First Blast at Mt Carbine Restarts Open Cut Production, page-5

The researchers are updating their positive views on EQR.

Chris Brown from Morgans updated his research note.

• Mt Carbine (EQR 100%) open cut Ore Reserves tonnage increases from 3.54mt to 5.93mt.

• Contained WO₃ in open cut Ore Reservesincrease 43% to 1.66m mtu after the 64% increase in the Indicated Resource in April.

• Additional Ore Reserves extend the open cut life-of-mine (excl. low-grade stockpile) to a total of 7 years, with the west and north remaining open for potential further open pit extensions.

• Only 19% of the In-Situ Mt Carbine Mineral Resources are currently in open cut Ore Reserves with drilling to continue to bring Inferred to Indicated Resources for conversion to Reserves and further mine life or production rate expansion (or both).

• Labour his hard to get, and good labour even harder. Mt Carbine is a leisurely 60 minute drive from Port Douglas, and there are a number of regional towns like Mareeba and Mt Molloy which eliminates the need for FIFO or DIDO operation.

Our view and interpretation

Theexisting open pit is dewatered. The mining contractor is on site. EQR iscurrently running two TOMRA X-ray transmission ore sorters to process 1 Mtpy ofthe 10Mt low grade stockpile – 0.075% WO₃ – to optimise the processplant recovery in a JV with offtaker CRONIMET Group of Germany. There’s notmuch we don’t know about Mt Carbine – except probably the ultimate size.Current plans are to operate at 1Mtpy.

Witha ROM grade of 0.3% WO₃ - 4 times the grade currently beingprocessed - and mining 2million tonnes per year (Mtpy), that’s somewhere northof 450,000mtu saleable product per year. EQR is selling a tungsten concentrate,and likely paying a 30% penalty compared with the ammonium paratungstate (APT)price. Cash margin – US$224-US$140=US$84/mtu. You can do the maths on projectrevenue – before non-cash D & A, ongoing capex (not much), interest,corporate and other, and of course tax. So, (for those of you who can’t/won’t)mine cashflow is projected at US$84 X 450,000 = US$38M per year. Of course, ifEQR lifts recovery to where they reckon it can go they could be up around500,000mtu per year. And given that tungsten’s a strategic material, the pricecould rise.

Both MtCarbine and King Island Scheelite closed in 1987 when China, which dominatedthe tungsten market, collapsed the ammonium paratungstate (APT) price fromUS$150/metric tonne unit (mtu) to US$50/mtu. The strategic importance oftungsten is now recognised. Mt Carbine is the most advanced tungsten play inAustralia.

Ourexpectation is that the resource will be increased (further) by drilling, andthat there will be further additions to the Reserve base. My valuation andtarget price are currently A$0.10, and it’ll probably continue to go up as thehard rock mining re-starts and as the optimisation of extracting the resourceevolves.