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Wolf Minerals Limited: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Turnaround plan at Wolf Minerals proceeding apace

The turnaround plan at the Drakelands mine is beginning to take effect
worker on a hill
INVESTMENT OVERVIEW: WLF The Big Picture
The turnaround plan at Drakelands continues to deliver production improvements

Wolf Minerals Ltd (LON:WLFE) operates one of the world’s major tungsten mines at Drakelands in the southwest of England.

Drakelands has one of the Western world's largest tungsten and tin resources, a total of 145.2mln tonnes of ore grading 0.15% tungsten trioxide (WO3) and 0.02% tin at the last count.

The tungsten produced by Wolf is critical to a range of industrial, mining and agricultural applications. Key uses are in cemented carbides, steel alloys, metal products, lighting, drill bits and jewellery.

Production now increasing

Production in the three months to December 2017 rose by 23% against the previous quarter, to 43,498 metric tonne units of tungsten. That represented the third successive quarterly increase in production, and took place against the background of a steadily improving tungsten price. Sales increased by an even more impressive 36%. Meanwhile, tin production has also been rising over the past couple of quarters.

New managing director

The turnaround has taken place under the watch of new managing director Richard Lucas, who was confirmed in the role in March 2018, after a successful stint as interim chief executive. Under his watch, a comprehensive operating turnaround plan has been implemented.

In addition, Lucas has been effective in securing funding for ongoing operations and organic growth.

He has also developed strong local partnerships to support long-term sustainability and enjoys the support of the board of directors.

Wolf’s chairman, John Hopkins said that “the Board is delighted with the progress of Richard and his team over the last 12 months. We have the upmost confidence in Richard’s leadership and look forward to his future contribution to the growth and the advancement of the Company.”

New financing arrangements in place

Wolf’s finances have long been underpinned by the support of cornerstone investor RCF, a major source of funds to the mining sector.

Early in 2018, Wolf extended its existing bridge facility from £55mln to £65mln. The company also negotiated an extension to the standstill period, and a cut to senior debt principal repayments for the next three quarters.

The idea is that the extended terms will support Wolf in achieving long term self-sustaining cash flows, supported by the already demonstrable improvements in the operating performance at Drakelands.

Resource Capital Fund VI (RCF VI) is providing the additional £10mln as a secured subordinated loan under the existing bridge loan facility, with the potential for this to be increased to £15mln.

Chief executive upbeat about future after a difficult few years

“We anticipate 2018 being a transformative year for Wolf, where it reaches design performance and pursues further opportunities to build shareholder value,” said chief executive Richard Lucas.

“These financing arrangements provide a platform to achieve those goals. The operational ramp up at Drakelands is progressing towards completion and, with strong tungsten market conditions, should deliver long term self-sustaining cash flows. We recognise the significant contribution from each of our key project stakeholders to date in supporting these achievements and sharing Wolf’s vision of a world class tungsten and tin operation in the UK.”

Broker calls progress hard-won, but cites improving tungsten price as supportive

SP Angel agrees with Lucas’s assessment. “The improvements at Drakelands are being hard won and the company is fortunate to have both the supports of its principal investor,  RCF and an improving tungsten price as it works through the necessary improvements, though we believe there is still some way to go to get the operation onto a sustainable operational and financial footing,” the broker said.

 

 

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Wolf Minerals Limited Timeline

Newswire
August 14 2018

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