research note from MorgansI’m trying to get across to you the...

research note from Morgans

1		I’m trying to get across to you the basics about tungsten and EQR Tungsten is THE critical mineral, and both price and demand are continuing to lift The ammonium paratungstate (APT) price is around US5/mtu – we model US0/mtu I’ll update the EQR Valuation & TP now the Quarterly is in and we can see the cash balance EQR’s cash position remains tight at A.9M (A.0M at 31 December) (My assessment is that they’ve escaped having to do an equity raising) Cashflow from Mt Carbine, Queensland, suffered from NQ’s very wet Wet Season The 24/25 West Season is behind Mt Carbine now, tonnage treated is lifting, as is the head grade The Saloro mine, Spain, is cashflow positive. Processplant upgrades will lift recovery and output EQR is the largest Western (ie. non-Chinese) tungsten producer The Value isn’t about this past year’s production. It’s about the potential at both centres EQ Resources (ASX:EQR) Market Cap. @ A4.8cps: A1.5M Valuation & TP: under review In production March 2025 Quarter production and cashflow Group production – from Saloro, Spain, and Mt Carbine, North Queensland – was 36,710 metric tonne units (mtu) of tungsten in concentrate, down 13% from the previous Quarter. Despite the severe effect of the Wet Season limiting production at Mt Carbine, net cashflow from operations, excluding interest costs of A2,000, was a small loss of A4,816. We model cashflow generation from both operations for the June 2025 Quarter. Cash at the end of the March Quarter was A.9M, down from A.0M previously. Mining at Saloro was limited, with stripping at the north end of the pit, and a small material collapse. The plant feed grade was lower than the previous record Quarter, treating lower grade ore stockpiled ahead of the anticipated production interruption. The tonnage of ore mined is scheduled to lift, as is the grade. Improvements in the processing plant – additional scavenger jigs, a Falcon concentrator, upgrades to the tables, and the installation of a third TOMRA X-ray Transmission (XRT) ore sorter – are designed to improve recoveries. We see continued low-cost growth in concentrate production. Production at Mt Carbine, North Queensland, was a low 6,717mtu, in the March 2025 Quarter, with the heavy Wet Season limiting the availability of consumables from Townsville, and shipping product for export through Townsville. Production in the previous December 2024 Quarter was a low 9,043mtu, limited by low process water availability. With the restraints on production expected to lift by May 2025, we anticipate a return to concentrate production of levels around 26,000mtu per Quarter (and back to cashlow generation) as delivered in the September 2024 Quarter. Our expectation is for increased output beyond that with a scheduled lift in run-of-mine (ROM) grade. EQR is also looking to double processing capacity at Mt Carbine. The tungsten market – a rising tide The tungsten market is dominated by production from China, responsible for 80-85% of supply. As with lithium and Rare Earth Elements, there is concern in Western countries about the security of supply. This concern about supply security is now being seen in product contract terms. Given the recent export controls of tungsten products from China, amid growing concern about security of supply of critical minerals, these offtake agreements with North American and European consumers are significant in terms of demand volume and price. In the immediate term these commitments provide certainty for sales and revenue generation. “The global demand for tungsten is growing and our side we are fully committed for the next two years at least. The recent price increases have been fuelled by the China export control, resulting in great uncertainty for downstream customers. This in turn has led to customers looking to lock in future supply via long-term offtake arrangements. There is currently no timeline announced by when exports from China will resume”,

Cashflow, debt and development The March 2025 Quarter cashflow report shows receipts from customers of A$17.5M (A$18.9M previously), with lower sales volumes in part offset by the higher tungsten price. Production, staff costs and administration totalled A$17.8M (previously A$23.9M) approximately A$6M per month. EQR finished the Quarter with A$1.9M in cash (previously A$2.0M). Drawn bank debt was A$42.4M (previously A$41.1M), with a further A$0.8M undrawn. Significant shareholder Cronimet (5.7% of EQR) has advanced an offtake facility of A$10.5M, and a Working Capital facility of A$2.1, totalling A$12.6M. EQR’s resource base is suitable to double output at both centres, but this will require development capital. Disclosure: The analyst involved in the preparation of this Research Flash holds shares in EQ Resources (ASX:EQR).

Chris Brown
Analyst