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Wolf Minerals digs in for tungsten revival

Prices have picked up recently says the Devon-based miner

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Hemerdon is just a few miles from Plymouth

Wolf Minerals (LON:WLFE ASX:WLFE) is the owner and operator of the Hemerdon mine in Devon producing tungsten and tin.

On the edge of Dartmoor and six miles from Plymouth, it was the first new major mine in the UK for 45 years when it opened in 2015.

Other than some some teething problems, equipment took longer than expected to bed down for instance, operational progress has been smooth and the mine is now ramping up to nameplate capacity of 3,500 tonnes of tungsten per year.

Tungsten very weak

The major headache, though, has been something Wolf has very little control over – the price of the metal itself.

When it prepared its feasibility study for the mine, tungsten was selling for US$35,000 per tonne, but like many other commodities the price has been battered recently and was as low as US$15,000 per tonne by the start of 2016.

The upshot is that the miner has to raise more money to tide it over.

Major backer

Wolf though has a loyal and supportive backer in the shape of Resource Capital Funds and the US private equity group has agreed to put up a further £25mln through an equity stand-by facility at 9p per share that runs for six months.

That will most likely take its existing 40% holding to over 50% and other shareholders will vote on the proposed facility at a meeting this Friday (22 April).

“RCF is a big shareholder. The fact they go over 50% is neither here nor there,” says Wolf's managing director Russell Clark.

“We (and they) reached a view that the balance sheet would need strengthening and the way to do that was to put in some equity.”

Clark believes it is the long term potential for tungsten that has underpinned RCF’s involvement almost from the start.

“There are sophisticated investors. They know commodity prices go up and down, have looked at the at supply/demand curve and believe Wolf will be in the box seat when it turns up again.”

Prices on the turn

While few in any mining sector would call a definite upturn just yet, tungsten prices have picked up recently.

The price is around US$19,000 tonne while tin, another product produced at Hemerdon, has also recovered.

Clark expects the trend to continue as one ‘silver lining’ of the low price has been to put high cost producers out of the market.

Major producer China, for example, has tried to cut back its production by 25%.

Whole market is adjusting

“Demand will continue and the market will need supplies of ethical, non-conflict western production.”

He adds that even though the mine is still ramping up it too has taken a knife to costs so when tungsten prices do recover “We will be running efficiently.”

The mine plan was set up for originally for up to 3,500 tonnes per year on a 5 and a half working day week.

But work has now been extended to seven days, which will boost production to 4,500 tonnes for no additional capital outlay, staff or environmental permits.

Other opportunities

There are also other opportunities in the surrounding area for mines that cannot support their own infrastructure to use Hemerdon’s facilities, though Clark says it has only just started to explore this possibility and there’s no immediate rush.

“It will probably take us another year to get Hemerdon ticking over properly, to lock in seven day working, get finance and see what the tungsten price does."

 

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Demise of Wolf Minerals Ltd 'a blow for UK mining' - Alastair Ford

Mining Capital's Alastair Ford discusses the collapse this week of Wolf Minerals Limited (LON:WLFE) (ASX:WLF). Ford says what really did it for Wolf was simply that the economics of production at Hemerdon never really stacked up. He adds that its major investor RCF will now be staring...

on 12/10/18

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