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W Resources PLC: THE INVESTMENT CASE

W Resources readies for next level at La Parrilla

Commissioning of the second phase at Kiziltepe is expected by the second quarter of 2018
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INVESTMENT OVERVIEW: WRES The Big Picture
Tungsten prices have rallied a little recently

W Resources PLC (LON:WRES) is teeing up US$24mln in debt finance to fund the next stage of construction at its La Parrilla tungsten mine in Spain.

Commissioning is expected by the second quarter of 2018, with the expansion to take production up to 2mln tonnes per year for 2,500tpa of tungsten concentrate and 500tpa of tin concentrate.

 

Further expansion built in 

Design and engineering of the next stage (T2)  has also allowed for a further expansion of La Parrilla to mine at a rate of up to 3.5mln tpa.

Revised capital numbers have reduced estimates for the full expansion by US$7mln to US$45mln, which the next stage now to cost US$27mln.

BurnVoir Corporate Finance Limited, an Australia-based resources specialist, has been appointed to assist with the debt raise.

Term sheets are expected by mid-year with financial close in the third quarter of 2017.

W Resources wants straight debt with no convertible element and a 3-5 year repayment timeframe.

WATCH: Michael Masterman on expansion plans

The company has also applied for grants from the Extremadura Regional Government in Spain for the €19.5mln cost of the plant and equipment, of which up to 30% may be eligible. A further US$3mln will come from either equity or customer finance.

Michael Masterman, chairman, said: "The credit metrics for the debt component of the financing are strong and we are engaged in discussions with multiple debt financiers and the finance team, led by BurnVoir, is highly confident of completion of a debt financing of around US$24mln.

"Securing the right debt package has been a longer process than first anticipated, which has pushed the timeline to production back some months, however the board are confident of the revised timeline in respect of the completion of construction of the T2 phase in Q2 2018, with production restarting in Q3 2018."

 

Substantial resource upgrade

The financing plan follows a substantial upgrade to the grades and resources at La Parrilla in May.

The company told investors that the tungsten (tri-oxide) grade improved by 4% to 998 parts per million (ppm) while the tin grade improved 2% to 110 ppm.

La Parilla has some 49mln tonnes of measured, indicated and inferred resources, and the high confidence measured and indicated resource amounted to 36mln tonnes.

Significantly, according to W Resources, new thick high grade zones have been delineated in the La Parrilla Fast Track Mine (FTM) area. These upgrades will be included into the mine plans for 2018 and 2019, the company added and should improve cash flows through the early years of mine development.

 

Portugal spin-off

Elsewhere, WRES is mulling a listing of its copper and gold licences in Portugal a separate stock market vehicle after a strategic review.

The CAA/Portalegre gold prospect includes the São Martinho gold deposit and the Monforte-Tinoca copper exploration licence, home to the Tinoca and Azeiteiros copper mines.

São Martinho is already sitting on a JORC compliant resource – albeit at a modest one – at an ‘inferred and indicated’ 112,000 ounces, but recent drilling has indicated a lot more potential. 



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