Near-term Tungsten Projects in Vietnam

ATC ferrotungsten refinery

With its 60-percent stake, Hazelwood Resources (ASX:HAZ) possesses the majority interest of Asia Tungsten Products, which owns ATC, a new ferrotungsten refinery in Vihn Bao. Hazelwood hopes to eventually become a vertically integrated ferrotungsten producer and is set to take a major step toward achieving that goal by bringing ATC online.

Terry Butler-Blaxell, managing director, said the resource protection measures implemented in China since 2008, especially the 20 percent export tariff on ferrotungsten, have impacted supply. Therefore, an ex-China source is expected to be well received.

ATC is expected to be the largest most advanced ferrotungsten plant outside of China. At stage one the refinery will have an annual maximum capacity of about 4,000 metric tons (MT). Hazelwood is expecting to reach one third of that capacity this year and to ramp up to producing at over half of the maximum capacity in 2014.

Butler-Blaxell said overhead is rather low so ATC can operate at partial capacity and still make money.

Having only a refinery means Hazelwood has to rely on the market for feedstock. The company has already sourced and contracted about 100 MT of concentrate per month.

Butler-Blaxell described operating ATC as playing a margins game. He said there is about a 35 percent difference between the prices of feedstock and ferrotungsten.

Most of the feedstock needed for initial production was already at the site, as of last week. The final lots were making their way through customs, a process that Butler-Blaxell asserts does not take too long.

Hazelwood plans to start commissioning after Easter and move toward first production by the first week in April. The first shipment of material is expected in April, driving the company’s expectations that it will record revenue next month.

Nui Phao

Masan Resources bought the controlling interest in Nui Phao, a polymetallic project located about 80 kilometers from Hanoi, in 2010, marking the largest merger and acquisition deal in Vietnam that year, according to parent company Masan Group.

Since then the emerging miner has developing the project with the expectation that Nui Phao will be the largest tungsten producer outside of China. It has 52.5 million MT of proven and probable reserves with an average WO3 grade of 0.21 percent and an expected mine life of 16 years.

Nui Phao is an open-pit mine with a low strip ratio and Masan expects it to be a low-cost operation. The mine is expected to provide four revenue streams from tungsten, fluorspar, bismuth and copper.

Based on metallurgical testing, Masan foresees an average of 4,100 MT of tungsten per year, with a grade of 88.5 percent, from the 3.5 million MT of ore it aims to produce and process. Once Nui Phao has reached full production, 50 percent of the revenue, estimated to be about $400 million per year, is expected to come from tungsten.

The company has already secured offtake agreements for the fluorspar and bismuth. Masan said it is engaged in discussions with potential tungsten clients and is hoping to find a range of customers who will provide exposure to a diverse range of end- use markets.

In 2011, Masan sold a 20 percent stake to Mount Kellet Capital Management, a private equity firm, for $100 million. The funds helped move the project through development. Having made significant progress with construction since then, Masan announced in September that it was on schedule for plant commissioning at the end Q1 2013.

Following a recent site visit by a delegation from the Central Economic Committee, Masan reportedly assured the officials that production at Nui Phao will begin in mid-April.

Securities Disclosure: I, Michelle Smith, do not hold equity interests in any of the companies mentioned in this article.