Ormonde well positioned to address tungsten shortage - Analyst

Analyst Caren Crowley at broker Davy reckons Spanish-focused Ormonde Mining (LON:ORM) is well positioned to address the expected shortage of tungsten in the western world.

She gives an upbeat review of the firm's results - released today - in which the company said that Barruecopardo, the flagship tungsten project, was poised to advance to production.

"The tungsten industry sees a 15,000 tonne deficit in western world markets for tungsten in a matter of years. To solve this, new tungsten supply is urgently required outside of China," she said.

"Ormonde's spanish mine, slated for start-up in late-2012 at an output of 0.5m tonnes per annum is capable of producing around 1,700 tonnes of tungsten per year. This makes the Barruecopardo project in Spain both strategic and very valuable," she said.

Ormonde reiterated the point in its own statement this morning, in which it said China produced 75 percent of the world's primary tungsten - increasingly reserving it for its own market.

"Industry forecasts are for a western world deficit in the order of 15,000 tonnes of tungsten metal per year by 2013."

Running through the highlights of the past year, the company said a resource estimate for Barruecopardo in May 2010 had shown a doubling of the resource to 11 million tonnes.

This, along with the open-ended resource, suggested further drilling would likely enlarge it significantly, opening the probability for a long life mining operation, it said.

Barruecopardo has now gone from exploration and is now in the definitive feasibility and permitting stages.

Ormonde said it was looking forward to developing the project and positioning itself to be able to fund the mine capital once the feasibility study is completed later this year.

Andrew McGeary, at Northland Capital Markets, also noted the good progress of the mine, adding that the fundamentals for a major european tungsten mine seemed sound.

"A feasibility study later in the year is key," he said.

"This should outline funding requirements and provide the potential to raise backing for mine development capital, either by debt/equity/off take or most probably a mixture of all three."

In its results, Ormonde said it spent €842,344 on its activities during 2010. It's loss for the year had narrowed to €1,088,451 for the year compared to a loss of €579,370 in 2009.

It also stated it was well-funded having recently raised £4 million in a placing.

The company hioghlighted what it called "significant" progress across its projects - including the La Zarza copper-gold project in southern Spain - which is a jont venture with Antofagasta.

The mining giant has agreed to fund further work at La Zarza. This will see a programme of airborne geophysics and drilling.

Ormonde also revealed that it signed a new JV with Aurum Mining on its gold ground in Zamore province. This came after the company separated its holdings into gold-tungsten and gold-only projects at Zamore and Salamanca.

Drilling has now begun on the first target - the Pino de Oro prospect in the Zamora province, announced Ormonde.

McGeary said: “Ormonde’s advanced plans to develop its brownfield assets (the site has a rich history of past production) near Salamanca in Spain coupled with the rapid tightening of that market which is predominantly controlled by China (around 75 percent) make this an attractive opportunity."

He went on: "Tungsten price has increased over 100 percent from just over a year ago up from $220/mtu in April 2010 of WO3 ($22,000 per tonne) to currently around $460/mtu.

He added: "With Barruecopardo looking like an attractive proposition at last year’s economic we optimistically await the results of the feasibility later this year."