I have to confess we have been confronted with more delays. The July quarterly report stated "mechanical commissioning is expected to be concluded during August". Now, on 15th of September, we learn cold commissioning was "essentially complete", but "awaiting final inspection" and "the construction contractor is expected to de-mobilise from site by October".
So what are the missing pieces before production can start?
First of all they still have to purchase and install the furnace inner refractory liner. Last thing we heard about it was HAZ was in discussions with its partner regarding the TIMING of that purchase due to seasonally varying prices. Yesterday's press release did not mention a decision, let alone a purchase of this thing so we can safely assume there was no significant progress on this front.
Secondly the chinese experts have to return from their vacation before production can be started.
Thirdly feedstock has to be purchased and delivered. Unfortunately there was no update regarding the purchase of feedstock.
The sad thing about it is record tungsten prices triggered a race of several wannabe producers (Woulfe, Largo, Icon, Geodex, Ormonde, Wolf, King Island, Vital Metals, Playfair just to name a few publicly owned ones) and with every new player going on-line the upward pressure on tungsten prices will ease. So every month of delay means a later entry point, missing a month of record prices leading to less profit for shareholders. Largo has already started producing from its tailings project and Icon is about to join them towards the end of this year. Largo was one or two months late and Icon is on track to meet its target.
Hazelwood's track record is very different from that. They miss deadlines on a regular basis (ATC Ferrotungsten production was originally scheduled for Q1) by what I consider a wide margin and I strongly doubt they will be able to get Big Hill into production by 2013 as they say. In July they were unable to correctly predict cold commissioning which was supposed to be concluded in August, just one month into the future. How on earth could anybody expect them to correctly predit an event that is two years away? I am afraid Big Hill won't go into production before the second half of 2014.
Once again I appeal to management: Please provide shareholders with a realistic schedule and stick to it.
HAZ Price at posting:
8.3¢ Sentiment: LT Buy Disclosure: Held
