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West Yield High Resources may have been hit hard by the market, but the Canadian miner could still be worth keeping an eye on.
West High Yield Resources (TSXV:WHY) may have been hit hard by the market, but the Canadian miner could still be worth keeping an eye on. Though WHY still needs to complete metallurgical testing at its wholly owned Record Ridge project in Southern British Columbia, a research note from Fundamental Research concludes that “further test results could be a near-term catalyst for WHY.”
Results from WHY’s June 2013 preliminary economic assessment (PEA) point to an inferred resource of 260,000 tonnes of contained magnesium and an indicated resource of 10.59 million tonnes of contained magnesium. In December 2013, WHY retained SRK Consulting to complete a project review report. Fundamental Research states that SRK is now working to provide WHY with a list of further data and information required for a prefeasibility study; production should commence in 2020.
Testing and development
The company has also engaged Orion Laboratories to complete metallurgical testwork with the goal of evaluating new approaches for the extraction and production of magnesium, magnesium oxide and iron-bearing silicon. That is key, as Fundamental Research’s update points out that according to the December PEA, additional testing is needed to confirm estimates for magnesium recovery and sodium sulphate by-product production.
Fundamental Research also references a development timeline from WHY’s management that estimates that the company will construct a pilot plant in 2015, with prefeasibility and feasibility studies, along with some permitting, expected to be completed in 2016. Although WHY reported a $0.59-million net loss from January through September 2013, with negative working capital of $0.95 million, Fundamental Research is still optimistic, noting that the deficit was due in large part to an outstanding related party loan. The firm states, “we believe the company will likely be able to postpone the maturity date of the loan. The maturity date was previously renegotiated from July 2013 to July 2014.”
Other considerations
Since 2008, market prices for magnesium have dropped significantly, to roughly US$2.13 per pound. Also, most of the world’s magnesium comes from China, where low production costs allow Chinese magnesium to beat out the already low prices elsewhere on the market.
Despite these considerations, Fundamental Research suggests that WHY’s Record Ridge project should be viable, noting that the company’s PEA uses, for the price of fused magnesium oxide, a price of $1,100 per tonne, “which … is a reasonable long-term forecast.”
The report outlines other risks, such as the early stage level of WHY’s metallurgical processing methods and the company’s need to secure some privately held land sections included in the PEA. However, the firm still expects metallurgical tests by Orion to shed light on the viability of recovery and production methods for fused magnesium in the near term, which would further delineate the project’s outlook.
Notably, as Magnesium Investing News reported in January, rising auto demand from Europe could be a boon for magnesium markets in the near future.
As a final point, it is important to note that fees were paid by WHY to Fundamental Research for the undertaking of this week’s note. The firm takes steps to ensure independence, and does not own any shares in WHY, nor does it market or offer shares for sale. While Fundamental Research’s research is valuable, it is always important to consider all disclaimers and perform adequate due diligence when considering investing-related news.
Securities Disclosure: I, Teresa Matich, hold no investment interest in any companies mentioned
Editorial Disclosure: West High Yield Resources is a client of the Investing News Network. This article is not paid-for content.
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