Wolf Minerals Should Have Completed Its Feasibility Study At The Hemerdon Tungsten And Tin Deposit In Devon By September.
By Charles Wyatt / www.minesite.com
The UK is not exactly famous for mining, but that is largely because of history, the fact that it is an overpopulated country, and because overseas projects always seem to sound bigger and better. In fact the Romans came here for gold, tin and copper, not to civilise the population as some people seem to think. We have had some big coal and lead mines over the years and our sand and gravel resources are huge. It is surprising how often it takes an Australian company to see through the false modesty with which our mineral assets are surrounded and cut to the quick. Scotgold Resources was funded Down Under, and now is about to embark on developing the Cononish gold mine in Scotland, and Wolf Minerals signed an option and lease agreement lasting 40 years for the Hemerdon Ball project in Devon back in 2007. There is some support in the market for the idea that this project may be one of the largest tungsten and tin deposits in the world. The Aussie financiers at Intersuisse certainly think so.
Hemerdon lies near some big china clay pits which are now owned by the French company Imerys. Tungsten was discovered there in 1867, which is about 100 years after Captain Cook discovered Australia. Mining operations started there in 1917, prompted no doubt by the need for tungsten in munitions, and about 16,000 tonnes of ore was mined before the operation fizzled out. In 1943, again in war years, Hemerdon restarted but it was not until 1976 that a major company got involved, when AMAX stepped in, and worked up a feasibility study which was completed in 1981. This study involved driving a 260 metre decline through the ore body to test continuity and metallurgical recovery. AMAX also constructed a pilot plant and processed over 6,000 tonnes of ore. So there was plenty of information available to Wolf Minerals when it carried out due diligence.
Humphrey Hale, the chief executive of the company is a Brit who has spent 15 years in Australia before deciding that he had to come back and unlock the Hemerdon conundrum. He's a proper Brit too, as he is a direct descendant of General Sir John Hale who formed the 17th Light Dragoons at the Kings Request after Wolfe's victory at Quebec in 1759. This famous regiment became the 17th Lancers in 1823 and was one of the five light cavalry regiments involved in the Charge of the Light Brigade about 30 years later.
On a more corporate theme, a non-executive director of Wolf (without an e), Don Newport, is well known in the UK mining sector for his time as head of Standard Banks Global Mining Business. He would not be involved unless he agreed with Humphrey that Hemerdon is a large scale, low risk, long life project with exploration upside.
Hemerdon has a total resource of 97.4 milion tonnes grading 0.22% tungsten trioxide (WO3) and 0.023% tin. It also boasts a probable reserve amounting to 34.53 million tonnes grading 0.18% WO3 and 0.03% tin. A scoping study undertaken in 2008 demonstrated that a mine producing three million tonnes per year at a low strip ratio of 1.46:1 would result in production of 3,500 tonnes per year of WO3 (wolframite) in concentrate, as well as 500 tonnes of tin, also in concentrate, as a credit. The capital cost was reckoned at GB64 million and the total cash operating cost at US$82 per metric tonne unit (mtu). The accepted form of tungsten in the market is ammonium paratungstate, but its price is very close to that of wolframite. At the moment the price is around US$250 per mtu so, based on this, the 65 per cent concentrate that Wolf intends to produce at Hemerdon would be worth US$16,250 per tonne. There will be a further charge for chemical processing in the hands of customers, depending on which tungsten end product is required, but the profit margin is still significant.
In the second half of 2009 Wolf brought in two new players, Resource Capital Funds and Traxys, thereby raising enough money to fund the definitive feasibility study which is underway at the moment, and which should be finished by September. At the same agreement was reached with Traxys Europe for it to market 100 per cent of all the wolframite concentrate produced, on commercial terms. The tin also features in this deal, and spot is now US$18,190 per tonne, some US$400 above the price that was used in the company's modelling. The other cost, of course, is that of transporting the concentrate to buyers. In Wolf's case, transportation is simple. Every other day or so, a 20 tonne container will be put on a lorry which will cross by ferry and drive to the European user. Cash should then be paid on receipt and the next lorry will be on its way.
All eyes will now be on the result of the feasibility, which will likely optimise the figures from the scoping study. That study showed Hemerdon to have a net present value of US$136 million and an internal rate of return of 33 per cent. The project has planning permission for mining until 2021, is in an active mining district with access to infrastructure. The company envisages that the construction and ramp up will take around two years. After the feasibility study is completed the development capital has to be raised, but this should not be a great problem with Don Newport on board. It is great to see such a project advancing to production in this country, and Minesite will be keeping a close watch. Doubtless Humphrey will present at one of our Mining Forums once the study is completed.
WLF Price at posting:
22.9¢ Sentiment: None Disclosure: Not Held
