Short on cash, Wolf Minerals stops tungsten mining

Wolf Minerals went into “voluntary administration” on Oct. 10 after talks with its financial backers broke down. The company said that it was unable to meet short-term working capital requirements necessary to continue operations at the Drakelands (formerly Hemerdon) open pit tungsten/tin mine in Devon, England. Mine workers reportedly were sent home.

Locals are hopeful that a white knight buyer will take the mine out of administration and restart production, but it is difficult to imagine a company with big enough pockets to take on the mining project.

Noting that the writing has been on the wall for a long time, one analyst said that investors undoubtedly have been looking at the numbers to see if, minus the debt accumulation, the operating costs at Draeklands are sufficiently lower than tungsten market prices. Lewis Black of Almonty was mentioned as a possible buyer.

Wolf Minerals pumped more than £130-million into just starting up the mine, which was supposed to produce 3,000 mtpy of tungsten in concentrates and 1,000 mtpy of tin.  Wolf said the mine was one of only two mines outside of China capable of producing more than 3,000 mtpy of tungsten in concentrate (the other most likely Nui Phao in Vietnam).  Production capacity for Drakelands was set at 5,000 mtpy.

Wolf has failed to meet its production targets at the mine ever since it came onstream in late 2015. In the fiscal year ended June 30, 2017, the mine produced 1,123 mt of W in concentrate. Wolf reported that its cost of sales in fiscal 2017 was A$76.3-million and revenue was A$24.7-million. For the half year ended Dec. 31, 2017, the mine produced only 791 mt of W in concentrate and Wolf reported a A$30-million loss for the half year.

Mining analysts do not agree as to why production at Drakelands has fallen short of expectations. Some blamed the processing plant which was designed to handle 3-million mtpy of ore but never processed more than 2-million mt in a year. Others said that recovery of tungsten from the ore had been lower than expected.

The recovery rate at Drakelands is 40-65% compared to the recovery of 80%-plus at the Panasqueira mine in Portugal where the coarse crystals of wolframite are relatively easy to separate from the surrounding rock. Recovery at Drakelands supposedly improves at deeper levels, but the costs of digging deeper have to be weighed against any improved recovery.

Wolf Minerals has been trying to develop the mine since 2007 and reportedly has taken on more than £70-million in debt. The company said it had signed supply agreements for future sales of output from Drakelands, but the agreements were contingent on Wolf meeting certain milestones in the project and contracted quantities being met.

It is not likely that the mine shutdown has left customers in the lurch, sources say, only because the operation has been faltering financially for so long. “I can’t imagine customers wouldn’t have worked out alternative supply sources,” said an analyst. The mine closure, however, could help boost to prices, given limited Western supply of W.

The irony is that tungsten prices have firmed markedly since the mine began production in 2015, reaching a three year-high of $319 per mtu for APT in March 2018.  Traders quoted APT prices this week at $275-280 per mtu conceding that sales were few. Said an observer,  “If Wolf couldn’t make money at these prices, I don’t see much future for that mine.”


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