As usual, enthusiasm is abundant but the facts suggest a much...

As usual, enthusiasm is abundant but the facts suggest a much more cautious approach.

First of all, the term "consignment" was used by CNQ with regard to the shipment of concentrate (see 05/07/2012 ann.) so I assume a 15 tonne consignment means 15 tonnes of concentrate with grades of ~70% WO3. Accordingly the shipment should have contained roughly 1050 MTU of WO3 which is slightly LESS than what had been shipped back in June.

Secondly, prices for APT as well as for concentrate have softened noticeably in recent weeks. The price for APT which is commonly used as a reference in off-take agreements, eased from $400/MTU when the fist shipment had been made to around $350/MTU now. The A$ has appreciated vs. the USD slightly (~2%).

What we do not know is when and how often the reference price is set. Other off-take agreements that I am aware of make use of quarterly adjusted prices where for example the average APT price of the first quarter is used in a formula to determine the second quarter off-take price.

Let's take the first shipment as an example: $288,845.60 for 1134 MTU of WO3 delivers $254,71/MTU, that was 0,636785x the price of APT (around $400 at that time).

And this is where current figures take us to: 1050 MTU of contained WO3 * 0,636785x the price of APT ($350) = $234,018 (worst case). Applying a 72% recovery rate delivers 1080 MTU or $240,705 and applying a reference APT price of $400 in addition takes us to $275,091 (best case) which still is 34,5% below your $420k estimate.

Nobody should be surprised to see the market's lukewarm reaction to yesterday's news. Despite all those nice projections, presentations and sweet announcements, the fact is this: CNQ so far delivered roughly 2200 MTU of product from 6,5 months production. That's an annual rate of ~4000 MTU or 6,7% of what the plant is able to accomplish. That's pretty bad in my book.

The potential has always been there. Nobody ever denied that. But it takes more than potential and projections. At some point you just have to deliver. This is where the rubber meets the road and where CNQ has failed.

Now they say they were approaching name plate capacity. Good. But the market after that many disappointments is in a show-me mode and so am I. Let's hope they finally got their act together and will be able to prove it with good December quarter numbers.

On a larger scale the whole situation is overshadowed by the question of how they can finance the huge expansion into production from hard rock. I would be very surprised to see them do it without significant shareholder dilution. Mind you, a placement with a strategic investor means dilution, too.

And BTW, did you notice Malaga, a smaller producer from South America, has halted production due to a power outage? It will take them 4 weeks to repair the power line. Read the announcement and you'll find the same old story all over the planet: Higher costs, lower tungsten prices, delays everywhere triggering unplanned cash raisings.