It's been a long time coming but Ormonde Mining plc (LON:ORM) has pressed go on commissioning its Barruecopardo tungsten mine against the backdrop of rising tungsten prices.
The market cheered and Ormonde shares raced up over 20% in London to stand at 1.60p each.
Commissioning of the mine in Salamanca, Spain is now earmarked for the third quarter next year (2018).
The project, permitted and financed, was originally scheduled to start at the end of 2017, but was delayed in December 2016 due to the weakness of the metal. In fact, 2016 saw the construction schedule extended twice.
Tungsten prices gradually rising....
APT (Ammonium Para Tungstate) prices have gradually been moving north since touching a low of $162 per metric tonne unit in January 2016 and indicators are now pointing towards a sustained increase, Ormonde told investors on Friday.
Ormonde noted that the price is now between $220 and 225 per mtu (metric tonne unit) - that's around a 37% increase since the beginning of last year, with prices since July 2016 seeing a modest but consistent uptrend.
Factors behind the firming prices include a more than doubling of the US oil rig count, improvements in European and the US economic outlooks and supply shortages outside China.
Saloro SLU (Saloro), the name of the project company, has now put the site into an "accelerated construction and implementation phase".
Ormonde also noted that Steve Nicol, the current managing director, will depart that role to focus full time as MD of Saloro and the project manager for Barruecopardo.
Mike Donoghue, the current Ormonde chairman, will act as interim managing director after the upcoming AGM (annual general meeting).
In 2015, Ormonde agreed a US$100mln finance package with Oaktree for the project, split with equity of around US$44mln and debt of US$55mln.
Saloro became a 30/70 joint venture between Ormonde and Oaktree having been previously wholly owned.
Agreed amendments to debt facility...
Saloro has agreed to certain amendments to the as-yet-undrawn debt facility to align with the newly approved construction schedule.
Subject to the latest development schedule being implemented, the remaining part of the equity investment - around €16 million- will be drawn on a pro rata basis with the debt during the development period, with any left over equity amounts being drawn on commissioning.
A straightforward development plan
The plan is to produce around 260,000 metric tonne units of tungsten trioxide (WO3) a year over an initial nine year life.
It’s a fairly simple operation that will use experienced and local mine contractors under the day-to-day supervision of the Ormonde management team.
The ore is amenable to simple gravity processing, the firm has previously said, and the ore only needs to be crushed, not reduced to powder, which sets it apart.
The Barruecopardo product comes in right at the lowest end of the cost curve in tungsten, at US$113.90 per metric tonne unit.