Investors might not be familiar with Carbine Tungsten, but the time has come to pay attention.
In a December 2011 research note put forward by Hallgarten & Company, the list of tungsten producers and near-term tungsten producers was short enough that all the companies could be counted on one hand. Fast forward mid-2013 and the tungsten landscape has changed considerably.
When tungsten APT prices were at a high of $450 per metric ton unit (mtu) in 2011, profits were ripe for the taking. Producers and near-term producers were shifting gears, getting ready to take on the world. And then prices took a hit, falling back to $305 per mtu. Producers fought to stay in production, and some of the near-term producers fell back.
However, the fact remains that tungsten is still a necessary metal. While some companies fell by the wayside, others plowed ahead with their plans for production. One of those companies is Australian-based Carbine Tungsten Limited (ASX:CNQ) who has silently been producing around 1,500 mtu of tungsten concentrate per month from its tailings retreatment for the last year More importantly for the company, however, is the progress being made on re-establishing production from the existing hard rock stock piles and pit known as the Mt. Carbine tungsten mine which once was the largest producer of Tungsten concentrate in Australia.
Mt. Carbine is a formerly producing open pit tungsten mine located in North Queensland Australia. The mine was in production up until 1987, when like many of its peers, it closed due to low Tungsten prices. Due to past production, the site is well resourced with transportation infrastructure, accessible power at site, and all the necessary facilities to re-establish commercial production quickly and cost effectively.
At the moment, Carbine is profiting from the tailings stockpiles at the mine site, which has enabled the company to shift into the role of tungsten producer as it works on bringing the Mt. Carbine project back to production. The company’s tailings re-treatment program started as a research and development project that has worked to help Carbine achieve commercial production of a low-grade resource totaling 1,500 metric tons per month, all of which is being purchased by its off-take partner, Mistubishi Corp of Japan. The company has been collaborating with Mitsubishi since 2011.
In February 2013, Carbine signed a memorandum of understanding (MOU) with Mitsubishi to support the development of the company’s hard rock mining operation. As part of the agreement, Mitsubishi will fund $15 million of the project’s capex for 80 percent of the company’s pre-mined hard rock stock pile production and 50 percent of its existing JORC resource in the Pit.
Before Carbine is eligible to receive the funds from Mitsubishi, however, it must obtain approval for its Environmental Management Plan (EMP) from the Queensland government, which the company expects to receive by the latest of September 2013.
According to the feasibility study that covers a 10 year JORC mine life for Mt. Carbine, the project has a tungsten resource of 47 million tonnes (Mt) of of 0.13% WO3 from the mine, 12 Mt at 0.07% WO3 from stockpiles and another 2 Mt of 0.1% WO3 from tailings. The project’s NPV stands at $161 million.
The project also has significant upside potential with the mineralization remaining open at depth and length with widening to be well within the extendable area of the existing mining licence. The project has what looks to be a three tiered approach to production that started with tungsten being produced from tailings that will be followed up with low grade production from their in situ hard rock stock pile resource and then further development of the open pit mine in 2014 before further high grade production begins in roughly 2015.
In addition to developing existing production, the Mt Carbine project has significant exploration upside within the existing mining lease and across adjoining exploration leases.
“We’ve been very conservative in our estimates,” Carbine Tungsten’s director Tony Gordon told Tungsten Investing News. “The scheelite and wolframite is absolutely acceptable, and they are very good grades that can deliver a quality product. A lot of our testing has shown that our hard rock stockpile will give us a profitable outcome for what we mine, and should return a profit for our investors.”
Past producers for the win
Tungsten is not only the hardest metal in industry, it is also a hard metal to see successfully through to production as far as mining is concerned. Prices have played a large role in the success of tungsten projects, as evidenced by the number of past producing mines around the world.
Commenting on the nature of the tungsten market was Christopher Ecclestone, founder and Principal of Hallgarten & Company: “this is an industry where you cannot be a dark horse in the race that comes right from the back with no history and no resource and win the race ” he told Tungsten Investing News, “This is a race that only past runners are going to win and that is why you have to be a past producer.”
Past producing projects, that were shut down on the basis of price, for the most part still have valid resources. Companies that work on bringing that past production online, without spending unnecessary funds on trying to redefine and expand resources, could potentially miss out on the “right now” opportunity of the market.
Investors might not be incredibly familiar with Carbine Tungsten, because, as Managing Director Jim Morgan explained to Tungsten Investing News, “We preferred to get the company in a stable and realizable position before we hit the market.”
As far as Carbine Tungsten and Mt. Carbine is concerned, Mr. Morgan maintains that the company does not want to “wholesale this project; we would like to see this project right through to execution,” he explained, “We have a very strong project and management team. We feel like we are in a very good spot.”
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.