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Making headlines this week in tungsten was Wolf Minerals, which finalized a AU$192-million finance facility and secured an offtake agreement. With the tungsten market looking like it might be perking up, this news is a welcome step for the company.
Aerial view of Hemerdon Resource
Australia’s Wolf Minerals (ASX:WLF,LSE:WLFE) made headlines on Friday with the finalization of AU$192 million in debt financing for its UK-based tungsten project, Hemerdon.
Wolf has received approximately AU$113 million project financing from UniCredit Bank, London Branch, ING Bank and Caterpillar Financial. The structure for the senior debt financing is being supported by a guarantee provided by the German government’s United Loan Guarantee Scheme.
The remaining AU$79 million of the funding package is being provided from Resource Capital Fund (RFC) and will be drawn on first. Included in this package is a roughly AU$7-million consideration for the purchase of a 2-percent royalty by RCF on the gross revenues from the project. Wolf expects to have the first AU$38 million by the end of May; the balance will be available once all permits are obtained.
The funding spells good news for the company, which can now move forward with Hemerdon’s development. Initial funds will be used to kickstart Hemerdon’s Engineer, Design and Procure (EPC) contract; the purchase of properties will also be needed to complete the permitting.
Wolf Minerals has also entered into a binding offtake agreement with Wolfram Bergbau und Hütten and Global Tungsten & Powders, according to the company’s press release. With the agreement, the offtakers will provide a commercial guarantee for part of the senior-term loan.
As per the agreement, Wolf is to supply 80 percent of its expected output at a grading of 65-percent tungsten trioxide concentrate at a discount price to the APT price for a period of five years. Hemerdon is expected to produce an average of 345,000 metric tonne units (mtu) of tungsten trioxide per year. All concentrates will be priced according to Metal Bulletin’s European APT prices.
In his statement, Wolf’s CEO, Humphrey Hale, said he is pleased with the agreement, commenting, “Wolfram Bergbau und Hütten and Global Tungsten and Powders, which will help bring Hemerdon in to production as the world’s next major tungsten mining operation.”
Signs of a turnaround?
Tungsten is an important metal in everyday day life, and it is very useful. Because of its high melting point, tungsten is the ideal metal for a wide range of industrial applications. Unfortunately, the primary source of tungsten is China — which controls about 83 percent of production. That has effectively landed tungsten on the critical metals list.
Due to low prices, tungsten hasn’t been the most attractive of metals to mine. But with waning supply and mounting demand, the metal is shaping up to take off.
In an April interview with The Metals Report, analyst Ken Chernin said he believes that as far as tungsten prices are concerned, “we’ve seen the floor. I think we’re going to see APT prices back up around the $400/Mtu mark, if not by late 2013 then by early to mid-2014.”
Chernin stated that “no new tungsten projects are coming on-line in the next 12–18 months,” which, combined with the China’s impact on prices, and his belief that “China is[n’t] looking to weaken Western producers as it would be more beneficial to maintain healthy prices to fund its businesses,” the tides for tungsten could be turning.
Tungsten prices are already looking up. After several months of sitting around $305 to $325 per mtu, APT prices climbed to $350 to $355 per mtu, according to Metal-Pages.
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.
Editorial Disclosure: Wolf Minerals is a client of the Investing News Network. This article is not paid-for content.