W Resources PLC (LON:WRES) is ready to hit the accelerator after securing a finance package last month for the fast-track development of its La Parrilla tungsten mine in Spain, potentially worth up to US$3.2mln.
The explorer agreed a US$1.2mnln forward sales contract facility with ICD Alloys and Metals, a speciality chemicals, metals and plastics firm based in the US, which has already paid up US$200,000.
Additionally, there is an outline deal that would see ICD provide US$2mln of equipment finance for a crusher that would take La Parrilla’s output up to 1.95mln tonnes per year, or 2,500 tonnes of tungsten concentrate.
"It's great to have secured these agreements for the initial start-up of the fast-track mine,” chief executive Michael Masterman added.
“The customer and equipment financing facilities enable us to move forward on this important phase of the project and allows us to start-up at low operating costs and with installed crushing capacity sized to the full 2,500 tungsten concentrate development."
Mining to begin at the end of the year
Initial mining is expected to get underway in the fourth quarter around the high-grade hole IRC1-40 using the existing facilities producing at 400 tonnes of concentrate a year.
A ramp-up to full production expected within six to twelve months from then, with no material increase in the first stage build cost of US$16mln expected.
House broker Northland Capital says the firm still needs another US$7mln or so in financing to get it to where it needs to be, and W has told investors the company remains in discussions with potential financiers of two other pieces of equipment.
The jig and mill and concentrator – core pieces of the plant – are expected to cost US$4.7mln and US$2.5mln respectively.
Back in July, W told investors that the mine would run at double the capacity previously indicated.
Following an optimisation study, the explorer said that the process plant will now be designed 1.95mln tonnes of ore annually, instead of 0.875mln tonnes which was previously estimated.
By increasing the capacity of the mine, W now expects the La Parilla mine to produce 2,500 tonnes per year of tungsten concentrate, well up on the 1,300tpa originally anticipated.
Explaining the increased capacity, Masterman told Proactive: “We found that if we start at 1.95mln, nearly 2mln tonnes … we get very good economics in terms of the mining, low strip ratios and low mining costs which is a great start in terms of the economics.”
At the beginning of September, the latest assay results reinforced belief there is a large ore body to the south.
Hole IRC1-44 shows continuity and very high grades of both tungsten and tin from surface in areas previously categorised in the mine plan as waste, the company said.
Hole IRC1-44 located 25 metres (m) to the south of high-grade Hole IRC1-40 has reported assay results of 40m at 0.496% WO3 (tungsten trioxide) and 0.112% Sn (tin) while Hole IRC1-41 has reported 11m at 0.126% WO3 and 0.02% Sn.
"It is clear from these initial results that there is a large lateral extension of the La Parrilla ore body to the south,” said Michael Masterman, chairman of W Resources.
“Hole IRC1-44 following on the heels of Hole IRC1-40 drilled in 2015 has exceptional grades of tungsten and tin from surface at over four times the grade of the ore body. We expect that incorporation of this new data in the mine plan will increase initial production grades, reduce stripping ratios, and reduce unit operating costs. We have a zone of significantly higher grade mineralisation accessible at surface, which should underpin a successful start-up of the La Parrilla mine," Masterman added.
Inside the industry
“Like nearly every other commodity with the possible exception of gold, [the price of tungsten] is down,” says Masterman.
And he’s right too. The benchmark ammonium paratungstate price declined more than 1% last week to US$185/200 per metric tonne.
Rather than seeing this as a negative, W actually thinks the subdued prices will help to drive the company forward.
Over recent months, many mines have been forced to close as pressure on margins becomes unsustainable, clearing the way for the next generation of companies, including W Resources, to make their mark on the industry.
As a result, Masterman believes this is a very exciting time for the company.
“We’re systematically getting the finance in place, getting the production in place and I think you’ll see us very quickly grow over the next 12 to 18 months.”
To compound the aura of positivity surrounding the firm, Northland Capital’s Ryan Long doesn’t expect tungsten prices to stay subdued for very long.
Long is predicting that prices will nearly double to around US$400 per metric tonne by 2020, which will make a material difference to W’s revenues.
Analysts are confident as well
House broker Northland Capital described the financing package as “positive news” for W Resources, although it did note that “the company will still require at least US$7.16mln for equipment and plant”, something the company assured investors it is taking care of.
W’s announcement last month that it was almost doubling the capacity at the mine was also met with positivity from the brokers.
SP Angel said that “there are, no doubt, economies of scale to be derived from the larger throughput and lower stripping ratio”, while Northland also has praised the accelerated expansion next year.