here we go... Tungsten a critical metal; Mt Carbine a critical...

here we go...

Tungsten a critical metal; Mt Carbine a critical supply

Carbine Tungsten is on the cusp of recommencing full scale tungsten production from its flagship Mt Carbine tungsten project in far North Queensland. The Mt Carbine project is located 130 kilometres northwest of Queensland’s port city of Cairns. Carbine Tungsten has identified two mineable deposits of tungsten at the old Mt Carbine mine workings, and is advancing plans to recommence mining from each. The company plans to expedite the mining of the old mine stockpiles first, and then move into fresh hard rock mining shortly after. The following figure shows the company’s Mt Carbine project site.

Source: Carbine Tungsten
The Mt Carbine tenements cover approximately 367 hectares and host the historic Mt Carbine tungsten mine. The Mt Carbine mine was, up until 1987, a fully operational tungsten mine producing approximately 1,100 tonnes of tungsten per annum over a 13 year mine life. The site is fully serviced with mining infrastructure including power, water and a sealed road to Cairns at the gate. The region also hosts the necessary mining services support, including a readily available workforce. Carbine Tungsten holds a 100% interest in the Mt Carbine project.
Mt Carbine is the company’s flagship project and is the most advanced of the projects in its stable. The following figure shows an aerial view of the Mt Carbine tenement with major existing mine infrastructure labelled:

Source: Carbine Tungsten
The company is advancing its Mt Carbine project through two stages to reach commercial production. The development plan will be to mine stockpiles of ore accumulated on site, and then move through to open pit mining soon after.
Mitsubishi Corporation RtM Japan Ltd (RtMJ) is partnering with the company in advancing the Mt Carbine project. RtMJ is a subsidiary of Japanese corporate giant in Mitsubishi Corporation. RtMJ has signed a Memorandum of Understanding (MOU) outlining the support it will provide in developing the project through the two stages. The MOU covers both the potential funding of the project and the technical collaboration to develop the open pit mining stage. The MOU includes an off-take consideration for 80% of the tungsten produced from the stockpiles and 50% from the open pit production. The company has been partnered with RtMJ since 2011.
Following the completion of its own technical due diligence on the project, RtMJ has confirmed its acceptance of the planned redevelopment of the Mt Carbine mine. With the due diligence completed, RtMJ has stated an intention to possibly fund the A$15 million stage one stockpile development. To this end, RtMJ has advanced a loan of US$1 million to progress the environmental and engineering works required to commence stockpile mining and ultimately open pit mining. The loan is secured against a 2.7% equity interest at the project level.
A definitive feasibility study (DFS) was completed in July 2012, and confirmed the technical and financial viability of the Mt Carbine project. The following figure shows a concept schematic of the proposed development (WO3 – is a chemical compound containing tungsten (W) and oxygen (O)):

Source: Carbine Tungsten
The findings of the DFS envisage a A$55 million plant capable of processing three million tonnes of ore per annum, to produce 261,550 metric tonne units (mtu) of tungsten per annum. For Members interest, a MTU measure is equal to ten kilograms of tungsten per metric tonne. Operating costs have been estimated at A$137 per mtu. Based on the DFS tungsten price of US$290 per mtu and a discount rate of 8%, the project generated a net present value (NPV) of A$161 million with a payback period of 1.5 years.
The company will use modern X-ray techniques to identify the tungsten in the extracted ore. This method of identification of mineralisation was not available to the old-timers.   
Based on the current tungsten price of circa US$370 per mtu, both the NPV and the payback period will have changed on the positive side; the NPV would be higher and the payback period shorter. At the current tungsten price, and based on the expected operating cost parameters, operating margins and free operating cash flow have the potential to be very healthy. Full scale open pit mining is expected to commence in late 2015.
To expedite revenue, the Stage 1 development of Mt Carbine will involve the company mining the ore stockpiles accumulated from the old mining activities conducted on site. The stage 1 development of Mt Carbine is expected to have a capital cost of A$15 million and initially process 1.5 million tonnes of ore per annum to produce approximately 78,500 mtu per annum initially ramping up to 157500 mtu at 3.0 Million tonnes of ore feed from the stockpile. Stockpile mining is anticipated to commence in early 2015. The A$15 million stage 1 capital cost is included in the A$55 million DFS estimate for the total projects’ capital costs.    
A critical step in the approvals process has been completed, with the granting of an Environmental Authority allowing mining at Mt Carbine. The Authority allows the company to mine up to 3.0 million tonnes of ore per annum at Mt Carbine. The approval covers both the onsite stockpiles and also the mining of hard rock ore. Receipt of the Environmental Authority is a critical event in the company’s move to seek project funding. RtMJ’s parent in Mitsubishi Corporation could play a key role in the company raising the required project funding, for both the stage 1 and 2 development phases of the project.
In support of mining, Mt Carbine has a total joint ore reserve code (JORC) compliant resource of 59.3 million tonnes of ore with a weighted grade of 0.12% tungsten. The following table shows the Mt Carbine JORC resource and its current classification:

Source: Carbine Tungsten
The indicated and inferred main zone hard rock resource is located beneath and along the north east flank of the existing open pit. The indicated Low grade stockpile resource is located adjacent to the open pit. The following figure highlights the locations of the in ground resource (green – stockpile, pink – Main Zone):   

Source: Carbine Tungsten
The exploration target for the Mt Carbine deposit is 12 to 16 million tonnes of ore graded in the range 0.08% to 0.16% tungsten. The known mineralisation remains open along strike and at depth. The following figure shows the schematic of the Mt Carbine deposit:

Source: Carbine Tungsten
We believe the characteristics of the Mt Carbine deposit, offers the potential with further exploration to deliver additional tungsten resource. The company will likely return to serious exploration of the Mt Carbine deposit following the commencement of production.
The company has identified two other prospects in proximity to the Mt Carbine mine, in Iron Duke and Petersen’s Lodes. The following figure shows the region around Mt Carbine showing both the Iron Duke (green) and Petersen’s Lodes (pink) prospects:

Source: Carbine Tungsten
Both the Iron Duke and Petersen’s Lodes prospects are not included in the current exploration target or resource numbers for the Mt Carbine project.
Mineralisation at the Iron Duke prospects has an average true width of eight metres with an average grade of 0.32% tungsten. Mapping of the iron Duke prospect indicates a strike length 2.2 kilometres. The company plans to drill out Iron Duke at a future date. Exploration is less advanced at the Petersen’s Lodes. The mineralisation is estimated to be 10 metres wide with a strike length of 1.3 kilometres. More detailed exploration is planned. We believe both prospects, and certainly Iron Duke, offers prospective blue sky to the potential already in the ground at Mt Carbine.    
The company has already been producing tungsten at Mt Carbine. A pilot plant designed to treat the old mine tailings commenced shipments of tungsten in June 2012. The company has used the facility as a research platform, to determine   optimum plant configuration and allow potential customers to sample the quality of the tungsten produced. From start-up to 31 December 2013, the pilot plant has generated A$2 million in revenue from concentrate sales. Revenue from sales for the first half 2014 to 31 December 2013 was reported at A$523,462. A total of circa A$2.6 million in Research & Development Tax Concession Rebates have also been received over the past four financial years. The company expects to receive a rebate amount for its 2014 year to 30 June 2914, when finalised; the 2013 rebate was A$1.3 million.
These cash injections have minimised the company’s call on its shareholders/market for funding, with cash at 31 March 2014 standing at A$2.9 million. Forecast cash expenditure for the current quarter is A$700,000, with A$450,000 earmarked for development activities and A$10,000 for exploration. At this time, the company’s priority is advancing the development of its Mt Carbine project, which already has a resource to support a robust mine life. We consider the cash resource to be more than sufficient for the company to complete all its current undertakings, and are comfortable with the allocation to exploration activities.
We note and are pleased with the fact that the company does offer its shareholders the opportunity to participate in funding through offering Share Purchase Plans.  
At 31 December 2014, the company carried no debt. Subsequent to that date, a loan of A$1 million (discussed above) has been entered into with RtMJ. This loan remains the company’s sole debt exposure.
The company’s key focus will be on its Mt Carbine project, it does however have other projects in its stable. Projects include the Tara tin/tungsten project in New South Wales and the Constance Range iron project in Queensland. The company also holds one million shares in listed gold explore Sovereign Gold (ASX SOC) with a current value of circa A$41,000. We look forward to reporting on these projects, but again, these are not the main game for the company.

We believe the Carbine Tungsten Board and senior management have the appropriate resource experience, especially local to deliver on a busy development programme. The Mt Carbine region has the necessary infrastructure in place to allow a speedy delivery of the project. Support for the project by the corporate giant Mitsubishi Corp is also a positive factor.   
Carbine Tungsten is a highly speculative junior tungsten explorer/developer, holding tenements over what was Australia’s pedigree tungsten resource. Results from exploration and tailings processing have to date been highly encouraging. We believe further successes as the company advances toward production will likely see a greater de-risking of the project and a rerating of the share price.
Consequently, we recommend Carbine Tungsten as a buy for all Members with an appetite that can accommodate the risk.
DISCLAIMER

As at the date at the top of this page, Directors and/or associates of the Fat Prophets Group of Companies currently hold positions in: ASX-listed Australian stocks: AGO, AJA, AMM, AMP, ANZ, APA, BHP, BKN, BOQ, BRL, BRU, BTR, BWP, CBA, CFE, CKF, CRZ, CWN, DLS, DNX, DUE, ENV, EVN, FMG, FXJ, GMG, GNS, GOR, GPT, GXL, HUB, IFL, ILU, IMF, JHX, MFG, MGR, MML, MMS, MND, MNF, MTU, NAB, NCM, NMG, OBS, ORE, OSH, POS, PPS, PRG, QBE, RIO, RXL, SDG, SFR, SGP, SIV, SLR, SUN, SYD, TAM, TEL, TEN, TLS, TME, TTN, WBC, WDC, WES, WHC, WOW, WPL, and International stocks 3i Group, African Barrick Gold, AMEC Plc, Anglo American, Apple, Archipelago Resources, Arian Silver Corp, Aviva, Avocet Mining, Barratt Developments, BMW, Berkeley Resources, BG Group, Bovis Homes, BP, Braemar Shipping Group, British American Tobacco, BT Group, Cairn Energy, Centamin Egypt, China Life Insurance, China Mobile, Coeur Mining, Daejan Holdings, Diligent Board Member Services, Dragon Oil, EMED, Enquest, Esure, FedEx, Fresnillo, Giant Interactive, Glaxosmithkline, Glencore International, Goldbridges Global Resources, Google, Gulf Keystone Petroleum, Hitachi, Highland Gold Mining, HSBC, Ironveld, iShares Physical Metals, J Sainsbury, JKX Oil & Gas, John Wood Group, Kazakhmys, Legal & General, Low and Bonar, Majestic Wine, Marstons, Medusa Mining, Mitchells & Butlers, Mitsubishi Tokyo Financial, National Grid, Newmont Mining, Nomura Securities, Norcros, Orix Corporation, Panasonic, Paragon Group of Companies, Petra Diamonds, Petrofac, Petropavlovsk, PICC Property & Casualty, Randgold Resources, Reckitt Benckiser, Rexam, Royal Dutch Shell, Solgold, Sony Corporation, Standard Chartered, Sumitomo Mitsui Financial, Suncor Energy, Sylvania Platinum, Tertiary Minerals, Tesco, Toyota Motor, Tullow Oil, Unilever, Vedanta Resources, Vodafone, Zillow.
Snapshot CNQ

Carbine Tungsten

Carbine Tungsten Ltd is set to become one of Australia’s major tungsten producers. The company is gearing up to recommence production of tungsten concentrate from its Mt Carbine tungsten mine, in far North Queensland. Historically, Mt Carbine accounted for approximately 40% of Australia’s production of tungsten prior to the mine closing in 1987. Since acquiring the Mt Carbine project, Carbine Tungsten has been fully focussed on returning the mine to commercial tungsten production. Carbine Tungsten’s approach to redeveloping the Mt Carbine mine involves a two stage plan. Initial operations will involve mining the on site stockpiles accumulated from historic mining. Stage two of the plan will commence soon after initial mining gets underway and will involve the mining of new hard rock resources. By staging the development of the Mt Carbine deposit, revenues will be generated sooner and the project will carry a lower initial capital outlay.

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0	Market Capitalisation:	$26.7m