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Wolf Minerals attractive as Drakelands production nears, reckons finnCap

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Wolf Minerals' Drakelands tin and tungsten mine in Devon is around 95% complete, with first production on schedule for this year’s third quarter.

Initial production from Britain's first new metal mine for more than 40 years will be transformational for its owner, Wolf Minerals (LON:WLFE), according to finnCap.

The house broker placed a 23p share price target on Wolf today - that's 27% above the present price - and listed a number of reasons why the miner deserves backing.

Construction of the company’s Drakelands tin and tungsten mine in Devon is around 95% complete, with first production on schedule for this year’s third quarter.

“The company offers exposure to a tungsten mining business with imminent first production and cash flow,” said finnCap analyst Martin Potts – who has a ‘buy’ rating on the stock.

“We forecast revenues to rise from zero in the present year to A$97.4mln (£49mln) in 2016 and A$182.7mln (£93mln) in 2017. 

“Profits will rise similarly, with 2017 being effectively steady state in terms of our model."

At full capacity, Drakelands, located 10km north of Plymouth, will produce more than 4,500 tonnes of WO3 (tungsten) in concentrate per year - around 3.5% of global demand.

The company is expected to be significantly profitable at current tungsten prices (US257/mtu) – although prices are expected to strengthen considerably in the second half of 2015 and beyond.

Prices will be driven upwards by rising global demand the analysts reckons, particularly within China, versus constrained supply.

Apart from Drakelands – there are no other tungsten mines currently under construction, although W Resources (LON:WRES) and Ormonde Mining (LON:ORM) hope to kick start projects in Spain by the end of this year.

The metal has a high melting temperature and is used to make steel alloys and cutting tools.

 

Quick facts: Wolf Minerals Limited

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ASX:WLF
Market: ASX
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