Ormonde Mining (LON:ORM) said this morning that drilling results from its Barruecopardo tungsten project in Spain are in line with expectations.
All three holes of the latest phase of a 15-hole infill programme found tungsten. The results included six metres grading 0.5 per cent tungsten trioxide, three metres at 0.8 per cent and two metres at two per cent.
Further assay results will be released in four to five weeks, the company said this morning.
At the same time preparation of further documentation in the permitting for the process for Barruecopardo, in the Salamanca Province of Spain, is progressing “in close liaison with our Spanish consultants”.
Managing director Kerr Anderson said: "The drilling is progressing well with these initial results from the narrow southern extent of the deposit in line with our expectations.
“Following submission in January of initial permitting documentation and the application for a mining concession, our focus at Barruecopardo in the coming months is on advancing the required technical works and the permitting process for a mining concession. I look forward to reporting on-going progress on both fronts.
“Tungsten prices have continued to rise due to on-going supply shortages, with the European tungsten price now quoted as US$368-372 per metric tonne unit, a rise of almost 50 per cent in the past six months."
Ormonde has flown under the radar as it has gone quietly about the business of developing its Barruecopardo tungsten project in Spain.
But in the next two years as it moves into production, the news-flow should come thick and fast, which will undoubtedly raise the company’s profile.
What is bound to help is the story unfolding around tungsten itself, a strategic metal used in construction and manufacturing, and whose supply is in the hands of the Chinese.
The People’s Republic is responsible for 77 per cent of the world’s supply of primary tungsten, but is cutting exports in order to satisfy booming domestic demand.
This has delivered a double blow to the West as the price of tungsten trioxide has shot up from US$200 per metric tonne unit (the standard 10 kilogramme measure) to the current price, while a gap in supply has opened up.
Ormonde’s plan is to have Barruecopardo up and running by the end of 2012, initially mining 500,000 tonnes of ore per year after a steady ramp-up.
The capital cost of that will be around €30 million with an additional €10 million needed to increase capacity to 800,000 tonnes, according to the consultants Scottt Wilson Mining.
This latter scenario would require converting Ormonde’s inferred resource to the indicated category, which in turn would necessitate more drilling
The Scott Wilson study showed there is enough ore near the surface to maintain an open pit production for ten years, before the operation heads underground.
The project is based around a former mine, which closed back in 1984 when tungsten prices plummeted.
The fact there has already been mining production on the site has two potential benefits. It sets a persuasive precedent which should be helpful during the permitting process.
It also means that the product is well known among potential buyers. And in fact it is a reasonably high grade.
Concentrates normally have to be at least 65 per cent tungsten trioxide. However, Barreucopardo has the capacity to produce concentrates of up to 78 per cent, which would make its output particularly sought after.
The fact that it requires nothing more than a gravity processing plant to get it to this stage explains why the cash costs of the operation are likely to be so very low at €80 per MTU, and it also makes the project far simpler to execute.