Wolf Minerals: Low Costs And Large Resource Underpin Hemerdon

Management bolstered
Wolf Minerals Ltd, (WLF) strengthened its management team in August as development work moved ahead on its low cost, 3Mtpa Hemerdon tungsten-tin project in Devon, England. The appointments add operational expertise and include professionals with commercial, construction, mining, engineering, environmental and personnel management experience. In addition, Ronnie Beevor was recruited in September as a non-executive director. The board believes Wolf will benefit from Beevor’s financial and managerial experience specific to development companies.

Low costs and large resource underpin Hemerdon
The definitive feasibility study from May 2011 outlined a 3Mtpa operation with an initial 9.25 year life. Operating costs are low at A$105/mtu net of tin credits. Capex is £104m (A$175m). The project has a post-tax NPV of £74m (A$125m) and a post-tax IRR of 21%. The current mine reserve of 26.7Mt (0.19% WO3 and 0.03% Sn) is a fraction of the 401Mt total resource at Hemerdon, which may be unlocked by extending current permits. GR Engineering Services was awarded the £75m (A$126m) EPC contract in March and began work in June. The price and term (24 months) of that contract are fixed. The A$139m mining contract was awarded to CA Blackwell. Pre-strip and mine development should start in Q114, with first production in mid-2015.

Finance and off-take deals de-risk the project
Wolf has secured a A$212m funding package through a combination of equity, debt and a bridging finance facility. Binding off-take agreements with industry partners cover 80% of expected production for the first five years of operation and provide a partial guarantee for the £75m senior debt component of the financing.

Valuation: First out of the blocks
Wolf has stated that the price of ammonium paratungstate (APT), the primary tungsten product, has firmed this year and fetched more than US$400/mtu in late September. The 2011 DFS used an APT price of US$360/mtu. Meanwhile, a lack of ready funding is likely to continue to cause problems for other tungsten developers and push out production timelines. If demand is maintained, development delays have the potential to place further upwards pressure on the APT price. With permits and funding already in place, this puts Wolf in a strong position.

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