Wolf Minerals (ASX:WLF, LON:WLFE) has leapt to the head of the...

Wolf Minerals (ASX:WLF, LON:WLFE) has leapt to the head of the pack and is a ‘buy’, according to City broker finnCap, which has begun coverage of the British mine developer.

The group’s Hemerdon tungsten mine, located in Devon, is host to the world’s fourth largest resource in the world and when it comes online in the second half of next year it will be the UK’s first new mine opening for 33 years.

Crucially, in terms of its strategic significance, the project will be just one of a few large tungsten mines outside of China.

Hemerdon is predicted to be producing 345,000 tonnes of tungsten product per year, which would generate annual metal sales revenues of around US$100mln – based on an anticipated sales price of 284 per tonne.

Agreements are already in place to sell 80% of the mine’s output.

Having brought Hemerdon to the cusp of production, in the view of finnCap’s Mark Heyhoe Wolf now leads the pack of tungsten mine developers - though his valuation suggests the share price has some catching up to do.

FinnCap initiates its coverage of Wolf with a ‘buy’ recommendation and a 24p price target, which implies some 50% upside from the current price of 16.25p

“Having secured finance and started construction of the UK’s first new mine in 33 years, Wolf has leapt ahead of the pack of tungsten developers. It will be one of the very few tungsten mines outside China,” the analyst said.

“At Hemerdon the project itself is relatively straightforward, with good logistics and a forecast operating cost of US$109/mtu that is directly competitive with the Chinese production cost.

“The outlook for Tungsten is very positive, with demand forecast to outstrip supply and push APT prices to US$480/mtu in 2016 as Hemerdon enters production.

“There is also substantial upside to our base case valuation, with converting more of the current resource to reserve, steeping the pit walls and increasing the plant availability all being particularly low hanging fruit.”