Minesite interview with Russell RC

Wolf Minerals Remains On Track For First Production From Hemerdon Next Year

Oct 13, 2014

“It’s going very well”, says Russell Clark of Wolf Minerals. “We raised £100 million in March. That was challenging. But we’ve just recently drawn down the project finance debt, so we’re now fully funded, and construction on the site’s going very well.”

Wolf is now some way into the construction phase at the Hemerdon tungsten project in the England’s West Country, having cleared all the relevant permitting hurdles, put £175 million worth of financing in place, and broken first ground on 17th March.

The plan now, says Russell is to undertake dry commissioning in March and April of 2015, and wet commissioning in April and May. “We should have first production in the middle of next year.”

That ought to fit in nicely with the pricing dynamic in the tungsten market which, as Russell concedes, at US$355 per metric tonne unit (mtu) is now “a little bit softer than it has been”.

He’s just back from a tungsten conference in Toronto, where he was able to gauge sentiment and outlook from a wide cross section of participants in the tungsten industry.

“The broadest sentiment was that demand was a bit flat”, he says. “That’s probably driven by de-stocking. But demand will probably pick up in six-to-twelve months, which would coincide nicely with us. The strategic stockpile in the US is slowly being depleted, with probably another one or two years to go. And in the meantime no other projects are getting financed.”

In a way, that’s hardly surprising. In the current market conditions very few projects of any kind are getting funded, so it’s a testament to the quality of Hemerdon that three very serious players in the commodities sector have stepped up to the plate to get it built.

The well-known Resource Capital Fund holds just under 42 per cent of Wolf’s shares, and has been instrumental in providing debt and bridging finance too. Then there’s Todd, the investment company controlled by New Zealand’s wealthiest family, which owns around 32 per cent of the shares alongside an extensive portfolio of oil and gas, electricity and other interests. Finally, Traxys, the commodity trader, owns nearly seven per cent of the shares, and will take all of the tin produced at Hemerdon.
Russell Clark
That’s a useful looking group of people to have in your camp. “They are all very sophisticated investors”, says Russell. And they all know that the margins on offer remain attractive, even allowing for the current softer price, given that cash costs are likely to run at around US$110 per metric tonne unit.

By the time Hemerdon is actually in production, it’s quite possible that the tungsten price could have recovered to closer to US$400 per mtu. Analysis put out by Roskill earlier this year puts the projected annual increase in the price at around six or seven per cent.

As far as Hemerdon goes, an increase in the price would be nice, but not crucial. Perhaps more to the point, the thinking is that Hemerdon will account for around three per cent of world tungsten production, with a projected output of around 5,000 tonnes of tungsten concentrate per year, plus 1,000 tonnes of tin concentrate. That’s not bad for a small company with a market capitalisation of less than £115 million.

But then again, who knows how long the valuation will remain that low? As far as UK investors are concerned, Wolf is a local story, able to gain quick traction in the media as one of the few new mines to be brought on stream in the country in a long, long while.

The immediate newsflow will necessarily be a little sparse, as Russell gets on with fine tuning the operation ahead of first production. But when the first tungsten concentrate does start coming out of the plant, it’s a good bet that there’ll be a big noise in the media and a re-rating of the shares.

http://minesite.com/2014/10/13/wolf...for-first-production-from-hemerdon-next-year/