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Woulfe Mining Corp (QX) (WFEMF) and TSX:WOF
Woulfe Mining sees sparkle of minor metal tungsten
Wed Aug 3, 2011 2:29pm EDT Print This Article | Single Page[-] Text [+] By Julie Gordon
TORONTO (Reuters) - Woulfe Mining WOF.V has fast-tracked plans to bring the Sangdong tungsten mine back into production, as it looks to capitalize on higher prices driven by a Chinese clampdown on exports of the minor metal.
The company is modernizing the South Korea mine, which was shut down in 1992 due to falling metal prices, and plans to start building a new process plant on site this year, chief executive Brian Wesson told Reuters.
The push to get the mine back online comes as China, which produces 80 percent of the world's tungsten, has cracked down on exports, sending prices up 90 percent in the last year.
"The issue at the moment is the grades are dropping -- they've taken all the good stuff," Wesson said of China's tungsten mines. "So the cost of production is increasing."
China's domestic demand for tungsten, used in auto manufacture and in hard metals for mining and drilling, is rising, and that has reduced the supply available for export.
This has sent the price of APT (ammonium paratungstate), a processed form of tungsten, up to $460 per unit, or $46,000 a tonne, from $240 per unit a year ago, leaving customers like Korea's TaeguTec Ltd and Japan's Mitsubishi Corporation (8058.T: Quote) scrambling for new suppliers.
Wesson said Woulfe plans to start up production by late 2012 at Sangdong, which is just up the road from a TaeguTec facility. The project will produce some 4,000 tonnes of APT annually, along with molybdenum.
Modernizing the mine and building the plant to process tungsten into APT will cost about $135 million, but annual revenues from APT alone could
"We're looking to get a very favorable off-take agreement with somebody," he said. "That's likely Korean, but you never know. Obviously it comes down to the best value for the company."
With the tungsten mine well on its way to development, Wesson said Woulfe will be able to focus more attention on its Muguk project, once Korea's largest producing gold mine.
The Muguk mine shut down in the late 90s, when the gold price slipped below $400 an ounce. With the spot gold near a record high over $1,660 an ounce, Woulfe has started drilling to better define the historical resource.
"We know gold is there," said Wesson. "We just need to understand it under modern terms."
Eventually Woulfe will likely spin off the gold project into a new company.
But a spin-off is still some time away, said Wesson, who is busy trying to get Sangdong online as soon as possible.
The company recently got permits to build a new adit for the mine, which will allow it to take bulk samples for the pilot plant, and to use larger modern mining equipment.
The next step will be a prefeasibility study next month, followed by a feasibility study before the end of the year.
mining fact sheet
Tungsten/Molybdenum•Most advanced of Woulfe's projects
•Provided WO3 to world markets for over 40 years, now reopening
•Historically one of the world's largest tungsten mines
•Korean passion for this project
•Significant increase in APT pricing over the last year due to high demand and unmined supply of WO3
•Fast tracked for early production due to high demand for WO3
•Examining the unmined hanging wall zone which the Company plans to mine first
•Resource estimate for Upper Section includes Indicated Resources of 5,968,000 tonnes with an average grade of 0.42% WO3 and 0.04% MoS2;and Inferred Resources of 18,572,000 tonnes with an average grade of 0.45% WO3 and 0.05% MoS2.
Gold•Korea's largest gold mine until 1990
•Formerly owned by Korea Zinc, the newest partner in Woulfe Mining Corp.
•Initial assays from the No. 7 vein have shown promising results
•A 3D digital model of the Muguk mine workings has been completed
•Woulfe is updating the extensive database comprising final survey of underground workings prior to closure, face grades, drill data, ore extraction data and process data
•Woulfe is preparing an NI 43-101-compliant resource estimate for the main mineralized structures
(Over 10%)•Colonial First State
Common Wealth Bank of Australia
•Korea Zinc Co. Ltd.
Woulfe Mining Philosophy
Woulfe Mining is a Canadian-based resource company. Woulfe's vision is to develop high quality projects that can be brought into production quickly and at low cost, creating value for its shareholders. To achieve this, we are focusing on properties with known mineralization, and established infrastructure located in mining-friendly nations. Woulfe Mining values the environment, the health and safety of our workers, and the cultural diversity and rights of our neighboring communities, enabling us to build strong relationships with governments and non-government organizations of the countries in which we operate.
•Currently drilling under former mine for the quickest way to become cash positive in production
•Mine plan is focused on extracting 1.2 million tonnes over 10 years which would recoup all capital expenses as per scoping study within 2 years
•Final permitting to be completed in July, 2011
•Full feasibility study by Wardrop underway
•Preparing definitive mine design
•Finalizing funding and construction design
Woulfe Mining Mitigating Your Risk
Financing•$11 million in the bank, $5 million options and warrants
•A2 credit rating scored by Moody's
•Suggested $40 million in equity into Woulfe subsidiaries by Korea Zinc
•Residual financing of approx $75 million by Korea Zinc upon completion of feasibility study
Technical•40 prior years of tungsten, molybdenum and bismuth production
•Installation of known technology by local experts
•Established infrastructure and access to energy source
•Tungsten, molybdenum, gold, bismuth, uranium, zinc and lead are all growth metals
Licensing•Mine development license approved June 2010
•Small mine footprint and old mine site is country owned
•Final mine and process development will be submitted to state and country authorities for construction approval
Country•Federal, Provincial and Community support of the project
•Strong rule of law
•20% tax, 10 years tax losses, 5 years tax exemptions, no royalties/export tax
video woulfe's sangdong project
Woulfe Fast-Tracks Tungsten and Gold in South Korea
By Greg Klein
He's not so much having it both ways as hedging it both ways-gold against a bear market and tungsten against a bull. That helps explain Woulfe Mining CEO/President Brian Wesson's excitement about his company's two South Korea properties, the Sangdong Tungsten-Molybdenum Project and the Muguk Gold-Silver Project.
"If you look at tungsten and gold, they're based on totally different fundamentals," he says. "If the world tanks, our company's got gold. If the world keeps going as it is, we've got both. If the world comes right, tungsten will climb because it runs the GDP."
It lacks gold's illustrious image, but tungsten is employed to render other metals tougher and more resistant to heat, such as the drill bits used in mining. It's also used to create hard-metal alloys, lamp filaments, electrical and electronic contacts and in chemical applications such as pigments, paints and lubricants.
"I think it's about to have its day because without tungsten you can't make anything," Wesson says. "It's very strategic, and it was outperforming gold until America was downgraded. I think gold is just ticking past tungsten at the moment." Sangdong had been in production until 1992, when it was shuttered by falling prices.
About 85% of world tungsten supply comes from China, which has slashed exports and now imports the stuff itself. Meanwhile, demand increases elsewhere. It's usually traded in the form of ammonium paratungstate (APT), whose spot price shot from $261 per metric ton unit in October 2010 to a high of $465 last July, Wesson says. He expects the price to hit $475 next year.
Yet Sangdong's April 2010 PEA based its numbers on a price of $250 per mtu. The study projected a 3.4-year payback on a CAPEX of $289.3 million, a 26.4% internal rate of return, a $462 million net present value (at an 8% discount rate) and a 40-year mine life.
Not only has APT's spot price risen dramatically since then, but so has Sangdong's resource. Its July 2011 43-101 estimated 5.97 million tonnes grading 0.42% WO3 (tungsten oxide powder) and 0.4% MoS2 (molybdenum disulfide) indicated and 18.57 million tonnes grading 0.45% WO3 and 0.05% MoS2 inferred. Drilling continues.
"Grades have gone up 30% on the new resource," Wesson points out. "The average Chinese grade is 0.2. Our grade is twice the average Chinese grade and four times some of the little projects around the world."
The company has skipped the prefeasibility stage. "Feasibility is what we really need because that's what the market wants," Wesson says. "Prefeasibility is a bit like scoping-it's another nice document, isn't it?"
In July the company announced a radically reduced CAPEX, dropping from $289.3 million to $135 million for a bulk underground drift and fill mining operation. The saving means reducing plant capacity from 2.4 million tonnes to 1.2 million tonnes a year.
And with construction beginning before feasibility's finished, patience isn't obviously a Woulfe virtue. "The document will hit the market in probably January," Wesson says. "But we'll start putting concrete on the ground before the end of the year. We bought the crusher; it's actually on a ship on the way to the site." Production's slated for late 2012.
Why the hurry? Wesson explains, "Now that the price of tungsten has almost doubled, there's a lot of interest in getting this thing going."
Feasibility is what we really need because that's what the market wants. Prefeasibility is a bit like scoping-it's another nice document, isn't it? -Brian Wesson
Which should, in turn, help finance Woulfe's Muguk Gold-Silver Project. Another past-producing mine, Muguk has a 1994 non-43-101 resource of 620,000 gold ounces and 3.3 million silver ounces.
Again, things are moving quickly. "What's very significant about Muguk is it was mined all those years at an average cutoff grade of 10 grams," Wesson says. "At today's price you can run that mine at about two grams. It closed in 1997, but the law in Korea requires you to do a full survey of the mine before you close. So we've got a detailed survey that allowed us to do this very accurate 3D model, and we've just appointed [AMC Consultants] to do our 43-101 resource," which is due in about six weeks.
Production, he says, could be as little as a year away. "We know we got gold in the ground; we know its free milling; we know there's no metallurgical risk. We have no doubt that the project would be economic. I would say with Muguk our next step is to get underground. It all depends on the market. If the markets are very good, and we could list off part of it and get equity, we would probably just open Muguk.
"Everybody's looking at risk-country risk, commodity risk and timing," Wesson continues. "In Korea we have security of title, a good legal system, stable country, the world's eleventh-biggest economy. Both our commodities are very strong and both of them at different sides of the market. Our tungsten grades are twice as high as China's. Our gold grade is substantially higher. That puts us in the low-production cutoff. We went around and found these projects mostly to find something that could give a return to shareholders."
Woulfe also has three early-stage projects in South Korea: the Ogchon Uranium Project, the Yeonwha Lead-Zinc Property and the Chongyang Mine, a former tungsten producer.
Woulfe has no debt, $5 million in cash and another $5 million in warrants due in December, Wesson says. At press time the company had 268.5 million shares trading at $0.215 for a market cap of $57.7 million. As of July, major shareholders included Colonial Bank of Australia with 13.8% and Korea Zinc Co Ltd with 12.5%