Tungsten Is The Metal To Watch, According To Andy Haslam At Vital Metals
By Alastair Ford
minesite.com[tt_news]=44808&tx_ttnews[backPid]=741&cHash=3e139f20cc
“We’re miners and we want to go and dig holes in the ground.” So says Andy Haslam, chief executive of Vital Metals, which is perching nicely atop the Watershed tungsten project in Queensland. He’s quite clear that, in contrast to the many companies in Australia that look like they might now get left high and dry as money supply tightens, Vital will make it all the way through into production. Not for him the pattern of an equity raise in benign markets, followed by the addition of a few ounces or a bit of tonnage, followed thereafter by a quick fire sale. The key to that pattern is, of course, that markets are benign. That they are no longer so hardly needs stating, so it’s nice to see a company that ought to be in production by 2009, or 2010 on a more conservative scenario, which, if not fully funded all the way there, at least has options on the table. You wouldn’t want to be a grass roots uranium explorer in Australia right now, in company with around 400 others, unless you fancied yourself in with a serious chance of beating the odds. You might want to be in tungsten though, and especially if production isn’t too far away.
Vital is currently in the process of working up a bankable feasibility study on the Watershed property. At the moment, Watershed holds 21 million tonnes grading 0.26 per cent tungsten (WO3). That gives a contained tungstate content of 56,500 tonnes, or to put it in cash terms, an in-situ value of around A$1.25 billion, using a conservative price of US$200 per metric tonne unit (mtu). However, since those numbers were put together the company has drilled a further 19,000 metres across 159 holes, the results from which will be used to form the basis of a new resource update, due at the end of April. The tungsten price has gone a bit higher than US$200 per mtu, too. It’s not dropped below US$230 since late 2005.
At the moment the plan is to produce 4,000 tonnes of WO3 in concentrates per year, giving the property a life of just over 10 years. If the new drilling shows the resource to be significantly larger, and it may well, since Watershed is open along strike and at depth, then the simple plan would be to extend the mine life rather than to increase production. Apart from the practical matter of the parameters for the plant that’s already been planned, at 4,000 tonnes, Vital’s output will represent around five per cent of world production. Producing much more than that, reckons Mr Haslam, might well have a detrimental impact on prices, and would clearly be counterproductive.
It’s a nice position to be in, where adjusting your own output can have a significant impact on price, but the tungsten market is tight, and according to Mr Haslam, it’s only getting tighter. That’s due to a combination of factors. Firstly, the Chinese have, for the first time become net importers. And we all know that when the Chinese start buying big-style, stocks can diminish quite rapidly. Secondly, because the tungsten price has been creeping up, many manufacturers have been thinning their use out. But there’s only so much thinning you can get away with. Mr Haslam uses the example of an aircraft – would you really want a manufacturer to scrimp on the hardening qualities tungsten can bring to an aircraft alloy? If you were flying? Still, tungsten is not a widely understood commodity, partly because prices have been so weak over the last decade or so, and partly because very few people actually mine it. And there’s not much new supply due on stream any time soon, either.
Vital needs A$130 million to get into production. There aren’t any really big ticket items there, though. Major costs include a road up to the top of Watershed, and 14 X-ray ore sorters, which should bring the grade up to around 0.446 per cent. Finding the cash ought not to be too hard though. There’s the classic debt-equity split option for a start. But there’s also the possibility of obtaining funding as part of off-take agreements. The Chinese are a possibility here, but they aren’t the only players around. In the meantime, Vital might look for a deal or two of its own, and not necessarily specifically in the tungsten space. But that’s a story for another day. |
