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W Resources PLC: THE INVESTMENT CASE

W Resources on track for first tungsten production at La Parrilla within a year

W Resources is building a strong position in tungsten
W Resources on track for first tungsten production at La Parrilla within a year
INVESTMENT OVERVIEW: WRES The Big Picture
Pouring concrete at La Parrilla

“We’ve been on a roll,” says Michael Masterman of W Resources PLC (LON:WRES).

Construction is now underway at the company’s La Parrilla tungsten mine in Spain, after access to US$42mln in funding was secured earlier this year.

WATCH: W Resources begins new resource drilling at São Martinho in Portugal

Of the total, US$35mln was in the form of a term loan from one of the biggest institutions in the business, BlackRock.

A further €5.3mln will come from development grants from the provincial government of Extremadura, while W Resources has also recently topped up its own treasury with a £1.5mln placing.

The customers are already in place too.

Back in February, it was announced that offtake agreements accounting for around 80% of planned production have been secured with two major end users.

The name of one of the buyers remains confidential, but the other has been revealed as Wolfram Bergbau und Hütten, the largest tungsten processing company in Europe.

These are all major ticks in the box for W Resources, and all that remains now is for the construction process to complete, and for production to commence.

And it won’t be long now.

First production and ramp up is scheduled for the first quarter of next year.

“That,” says Masterman, “should deliver US$20mln in earnings per year in the first phase of production.”

La Parrilla project main priority

And with that sort of cashflow, it’s hardly surprising that he says that the successful execution of the La Parrilla project is the company’s “main priority.”

“We have mobilised and have a good engineering team on site,” he says. “The concrete and steel installation will take place in May and key earthworks are underway and will be completed by June.”

That US$20mln earnings figure is slightly higher than the one Masterman was marketing last year, when he was out to get the debt finance in place. But there’s a very good reason for that: the tungsten price has moved markedly higher.

In its 2017 modelling, W Resources was assuming that the ammonium paratungstate price would be set at around US$230 per metric tonne unit (mtu) this year, rising to US$245 in 2019 and US$288 in 2020.

In fact, the price has already shot up to well over US$300 mtu this year, bringing new optimism into a tungsten mining industry that had been lacking in confidence in recent years, as a result of lower prices.

Not that Masterman himself was downcast back then. La Parrilla’s low capital requirement and high quality mineralisation have always meant that W Resources has been able to make progress when others had to hold back.

In fact, even though the capex is low, La Parrilla is set to become Europe’s largest tungsten mine and, when an expansion phase to take production to 4,000 mtu is completed, it will be one of the few mines outside of China capable of producing more than 3,000 mtu per year.

To be sure, others are on the way. But in terms of the resurgent tungsten price, it seems that W’s timing could hardly be better.

In the immediate term, while construction at La Parrilla is ongoing, work will continue on the company’s other projects, the Regua and Tarouca tungsten projects, and the São Martinho, Monforte-Tinoca and Portalegre gold projects.

2018 set to be very exciting year

A 29-hole programme at Tarouca has just completed, while a new 2,000 metre programme at São Martinho is now underway.

And at Regua, development of a trial mine is planned, likely to produce around 1,300 tonnes of concentrate per year.

It’s an intriguing mix of second line assets and one that’s likely to generate considerable interest as results start to come back, not to mention when cashflow from La Parrilla allows for the funding of even larger scale exploration programmes.

“2018 is set to be a very exciting year for W with significant development work across our portfolio of tungsten, gold and copper projects,” says Masterman.

“With great progress being made at La Parrilla we are delighted to also progress our tungsten, copper and gold assets and build further value for shareholders."

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