Research note from MorgansEQ Resources (ASX:EQR) Market Cap. @...

Research note from Morgans


.13ps In production

The World’s largest Tungsten miner outside China

Monthly group tungsten production now at 20,271 metric tonne units (mtu – 10kg)

EQR has taken over 2 years to lift monthly tungsten production at its Mt Carbine, Queensland, mine from below 2,000mtus to above 10,000mtu. Our assessment is that Mt Carbine is marginally cashflow positive at this production rate. Our expectation for Mt Carbine remains 20,000mtu/month, achieved over the next 12 months, at essentially the same cost base. With the ammonium paratungstate (APT) price at US5/mtu, and the appropriate price discount for Mt Carbine’s 50% WO₃ concentrate, we’re looking for annual operational cashflow of +AM at that production rate, before underground mine development charges and exploration.

EQR acquired the producing Saloro operation, Spain, producing below 8,000mtu per month in the March 2024 quarter. Saloro also produced over 10,000mtu in September. As with Mt Carbine, our expectation for Saloro remains20,000mtu/month, achieved over the next 12 months. We’d expect Saloro to be at or close to cash flow breakeven at current concentrate production rates. As with Mt Carbine, we’d anticipate a minimal increase in operating costs, with the increase in concentrate output coming largely from improved process plant recovery.

The chart immediately below shows the monthly increase in group production. Daily production records need to be maintained for weekly records, and weekly for monthly. But at this level of production and rate of increase, we remain comfortable with our projections for Quarterly, and ultimately annual production.

Saloro will continue to need to optimise processing, with limited capital expenditure. Mt Carbine continues to fund mine development, in particular, underground development to evaluate the deeper mineralisation and the Iron Ridge veins to the north of the current operating open pit and at depth.

The ramp-up at both operations continues. Today’s announcement is copied below.

On 2 September, EQR announced a strategic collaboration involving a multi-year offtake agreement with leading US-owned and fully integrated tungsten manufacturer Elmet Technologies. As part of the Agreement, a basic framework has been agreed in which Elmet is to purchase from EQR tungsten concentrate with an estimated value of A million (at current market prices) over a 5-year period. Elmet is to secure the offtake allocation through an advance payment of A.0 million to EQR. This give EQR access into the US strategic minerals market.

1		EQ Resources (ASX:EQR) Market Cap. @ A5.2cps: A1.9M Valuation & TP: A
2	EQ Resources (ASX:EQR) Market Cap. @ A5.2cps: A$111.9M Valuation & TP: A$0.13ps In production The World’s largest Tungsten miner outside China Monthly group tungsten production now at 20,271 metric tonne units (mtu – 10kg) EQR has taken over 2 years to lift monthly tungsten production at its Mt Carbine, Queensland, mine from below 2,000mtus to above 10,000mtu. Our assessment is that Mt Carbine is marginally cashflow positive at this production rate. Our expectation for Mt Carbine remains 20,000mtu/month, achieved over the next 12 months, at essentially the same cost base. With the ammonium paratungstate (APT) price at US$335/mtu, and the appropriate price discount for Mt Carbine’s 50% WO3 concentrate, we’re looking for annual operational cashflow of +A$35M at that production rate, before underground mine development charges and exploration. EQR acquired the producing Saloro operation, Spain, producing below 8,000mtu per month in the March 2024 quarter. Saloro also produced over 10,000mtu in September. As with Mt Carbine, our expectation for Saloro remains20,000mtu/month, achieved over the next 12 months. We’d expect Saloro to be at or close to cash flow breakeven at current concentrate production rates. As with Mt Carbine, we’d anticipate a minimal increase in operating costs, with the increase in concentrate output coming largely from improved process plant recovery. The chart immediately below shows the monthly increase in group production. Daily production records need to be maintained for weekly records, and weekly for monthly. But at this level of production and rate of increase, we remain comfortable with our projections for Quarterly, and ultimately annual production. Saloro will continue to need to optimise processing, with limited capital expenditure. Mt Carbine continues to fund mine development, in particular, underground development to evaluate the deeper mineralisation and the Iron Ridge veins to the north of the current operating open pit and at depth. The ramp-up at both operations continues. Today’s announcement is copied below. On 2 September, EQR announced a strategic collaboration involving a multi-year offtake agreement with leading US-owned and fully integrated tungsten manufacturer Elmet Technologies. As part of the Agreement, a basic framework has been agreed in which Elmet is to purchase from EQR tungsten concentrate with an estimated value of A$30 million (at current market prices) over a 5-year period. Elmet is to secure the offtake allocation through an advance payment of A$2.0 million to EQR. This give EQR access into the US strategic minerals market.
3
4	Tungsten is NOT an easy mineral to produce. The ramp-up time for Mt Carbine – a projected 3 years to hit its straps – is informative. Group 6 Minerals (ASX:G6M) made its initial concentrate sale from its King Island, Tasmania, mine in July 2023. This mine, like Mt Carbine, operated over a couple of decades until closing in the late 1980s as Chinese producers cratered the tungsten price. In its release of 2 September 2024, after 12 months of operation, Group 6 Minerals reports: Disclosure: The analyst involved in the preparation of this Research Flash holds shares in EQ Resources (ASX:EQR).

Chris Brown
Analyst

Level29, Riverside Centre, 123 Eagle St Brisbane, QLD 4000
Email: [email protected]
Direct: 07 3334 4885 | Mobile: 0418 737 810

AuthorisedRepresentative: 000255960

morgans.com.au | Facebook | Twitter | Linkedin

MorgansFinancial Limited | ABN 49 010 669 726 | AFSL 235410