TIDMWLFE
RNS Number : 5224V
Wolf Minerals Limited
31 January 2017
31 January 2017
Wolf Minerals Limited
Quarterly Activities Report
For the Three Months Ended 31 December 2016
Specialty metals producer, Wolf Minerals Limited (ASX: WLF, AIM:
WLFE) (Wolf or the Company) provides the following update on
progress at its Drakelands open pit mine (Drakelands) at the
Company's Hemerdon tungsten and tin project in Devon, southwest
England, for the three month period to 31 December 2016 (the
Quarter).
Highlights
ü Planning permission for Drakelands mine extended from 2021 to
2036.
ü Processing plant now permitted to permanently operate
24/7.
ü Successful restructure of Senior Debt. Scheduled repayments of
principal deferred to January 2018 and tenor of the Senior Debt
extended until June 2023.
ü Bridge loan for GBP20 million established with Resource
Capital Fund VI L.P.
ü Processing plant improvements to enhance throughput and
recovery on track for completion in the March quarter.
ü Lee Moor Road replacement well advanced for completion in
early 2017 to support the Mining Waste Facility construction.
Commenting on the Company's recent performance, Wolf's Managing
Director, Russell Clark said:
"During the Quarter, progress in the mine and at the Mining
Waste Facility at Drakelands has continued on track with reductions
made to the waste truck fleet size to conserve cash and reduce
movements during winter. A small trial batch of coarse ore was fed
into the processing plant with initial positive effects.
The challenges in the processing plant are now better understood
and an improvement plan is in progress with further equipment
changes and modifications scheduled for the upcoming quarter.
The approval of the extended Planning Permission and the 24/7
working by Devon County Council in November is a significant step
forward, allowing us to potentially produce more concentrates at
lower cost, and providing the time necessary to fully mine the
reserve that has been identified.
The global supply of tungsten concentrate is constrained, and
during the Quarter there were indications that the historic
methodology of determining tungsten concentrate prices relative to
the APT price may not be fully representative of the current
market."
Overview
There was one lost time injury during the Quarter when a
processing plant operator missed a day of work following a
fall.
The rainfall during the English autumn and early winter has been
relatively light, resulting in minimal disruptions to progress in
the mine and at the Mining Waste Facility (MWF).
Wolf's application to Devon County Council (DCC) to extend the
Planning Permission expiry date from 2021 to 2036 and to conduct
permanent seven day operational working was approved during the
Quarter and immediately implemented.
The net cash used in operating activities for the Quarter was
A$24.6 million, including A$4.2 million on development, A$20.7
million on production and A$5.0 million on finance costs, with
revenue of A$5.4 million. As stated in the quarterly cash flow
report (Appendix 5B), also released today, the Company had A$3.8
million cash at the end of the quarter and A$10.2 million in
available loan facilities to support revenue, on a forecast cash
outflow of A$19.5 million in the coming quarter.
Mining Activities
The moderate weather enabled good progress to be made in the
mine and at the MWF with a total of 467,468 bank cubic metres of
material moved during the Quarter.
The ore body at Drakelands is located in a large granite dyke
that outcrops to surface. The granite is weathered at the surface
and current mining activity is in this softer part of the ore body.
Reconciliation of the grade of ore (%WO(3) ) extracted to date
continues to be positive when compared to the grade expected from
the ore reserve. However, as mining to date has predominantly been
near surface, the ore mined has had a much finer particle size than
what will be the average particle size extracted over the life of
the mine, the size for which the processing plant was primarily
designed, therefore adversely affecting current recoveries in the
processing plant.
Drilling has confirmed that as mining gets deeper, the
weathering will reduce such that the hard granite rock becomes the
principal ore feed to the processing plant. A gradual transition
from the soft ore currently being experienced to the harder granite
is expected and should result in improvement in recoveries and
processing plant throughput. A small trial batch of coarse ore was
fed into the processing plant during the Quarter with improvement
in throughput and recovery noted.
The good progress made in the MWF through the summer months
provided sufficient capacity through to the English spring to
enable half of the waste trucking fleet to be stood down at the end
of the September 2016 quarter. During this Quarter further
reductions in the fleet were made over weekends and public
holidays. This has facilitated more efficient and cost effective
operations.
The future development of the MWF requires Wolf to construct a
new public road to replace a five kilometre section of Lee Moor
Road. Construction of the new road remains on track for completion
in early 2017, at a total cost of GBP7.5 million.
Processing Plant
Wolf gained full operational control of the Drakelands
processing plant from GR Engineering Services (GRES) in the
September 2015 quarter. Since assuming operational control, Wolf
has worked collaboratively with GRES to close out outstanding items
and improve the processing plant's performance.
As previously advised, Wolf and GRES have formulated a work
program involving equipment changes and design modifications aimed
at achieving continuous operation at capacity, enhancement of
recoveries and general processing plant improvements. Completion of
the program in the first half of 2017 is on schedule with a number
of pieces of new equipment to be installed in the processing plant
in January and February 2017.
During the Quarter the processing plant treated 462,727 tonnes
of ore and produced 24,390 metric tonne units (mtu) of tungsten
concentrate. Production late in the Quarter was significantly
affected by the poor availability of the refinery circuit in the
processing plant due to difficulties with the kiln and its
surrounding equipment. Intermediary material was stock-piled during
this period and will be used to supplement production over the
coming months. Additional operational and maintenance personnel
have now been appointed to improve the performance of this
circuit.
Key appointments during the quarter included the Processing
Manager and Maintenance Superintendent, replacing employees who
left the Company earlier in the year.
Sustainability
Wolf's application to DCC to extend the Planning Permission
expiry date from 2021 to 2036 and to implement permanent seven day
operational working was approved during the Quarter. This approval
has the potential to increase production and reduce unit costs, in
addition to generating additional employment opportunities and
helping to ensure the longevity of the operation.
During the Quarter Wolf continued to focus on ways to reduce the
generation of low frequency noise (LFN) that has been a concern to
some nearby residents. The Company has installed additional bracing
on the roof of the processing plant, as the building appears to be
a source of LFN. Analysis is also continuing with the supplier of
the shaking screens used in the processing plant to establish
whether a solution can be identified at the source of the LFN
generation.
Wolf is undertaking regular blasting in the Drakelands open pit
with ground vibrations from blasting being measured below
prescribed levels. Wolf continues to receive feedback from local
residents expressing concerns about blasting and is working to
establish best practice blast design aimed at minimising impacts
felt by local residents. A trial of electronic detonators continued
during the Quarter to assess their effect on blast vibration and
operational efficiencies.
Senior Debt Restructure and GBP20m Bridge Facility with Resource
Capital Fund VI L.P.
During the Quarter the Company executed agreements with its
existing senior lenders (Senior Lenders) for a standstill and
restructure of the outstanding senior debt (Debt Restructure), and
with Resource Capital Fund VI L.P. (RCF VI) to provide a GBP20
million 12 month secured bridge loan facility (the Bridge
Facility).
The terms of the Bridge Facility provide that RCF VI, a major
shareholder and an associate of Wolf's other major shareholders,
Resource Capital Fund V L.P. and RCF V Annex Fund, will provide
GBP20 million, with the potential for this to be increased to GBP30
million (increase available at the sole discretion of RCF VI) for a
maximum of 12 months from the first drawdown. At the end of the
quarter a total of GBP14 million of the Bridge Facility had been
utilised.
The Company currently has GBP64 million outstanding under its
debt facilities with the Senior Lenders (Senior Debt).
The terms of the Debt Restructure provide that all Senior Debt
principal repayments are deferred until January 2018 and, following
DCC's decision to extend Drakelands' planning permission beyond
2021 the tenor of the Senior Debt is extended until June 2023.
Mining Tenements
As at 31 December 2016, the Company has an interest in the
following projects:
Tenement Location Interest Status Grant Date
--------- --------------- --------- ------- -----------
Hemerdon United Kingdom 100% Leased 10/02/2014
--------- --------------- --------- ------- -----------
All tenements are held by Wolf Minerals (UK) Limited, a wholly
owned subsidiary of the Company. No farm-in or farm-out agreements
are applicable. No mining or exploration tenements were acquired or
disposed of during the quarter.
Planned Upcoming Activities
In the January 2017 quarter, Wolf will continue to progress the
operations at Drakelands, with a focus on implementation of the
work program in the processing plant to improve performance.
Details of proposed activities include:
-- Continuing to build throughput and production tonnages in the
processing plant.
-- Continuing to build the MWF.
-- Completion of the Lee Moor Road replacement.
Tungsten Market Trends
The demand for tungsten concentrate during the Quarter was
similar to the September 2016 quarter with firm interest in Japan
and Europe as a result of steady output from the automotive sector
and aerospace sectors. Demand from other regions remained low as a
result of soft conditions in the mining, oil and fracking
industries and the economic slowdown in China.
Current market conditions have resulted in some supply being
withdrawn from the market and are also increasing the difficulties
for new projects to get the necessary debt or equity funding to
commence construction.
Prices for tungsten concentrates have historically tended to
follow the same trend as prices for ammonium paratungstate (APT),
which is the key intermediary product in the tungsten supply chain.
APT prices for spot market transactions are published by several
data providers including Metal Bulletin and Metal Pages with prices
established through surveys of buyers, sellers and other industry
participants. The average APT Price published by Metal Bulletin for
the Quarter was US$194/mtu (FOB Europe).
During the Quarter, a European tungsten concentrate producer
announced that it had entered into several one year fixed price
off-take agreements with a net price to be received of US$210/mtu,
equating to an effective APT price of US$269/mtu (assuming an
industry average discount factor). At the time of the announcement
the average spot market price APT was approximately US$200/mtu.
The announcement of these agreements is consistent with Wolf's
view that the historic methodology of determining tungsten
concentrate prices relative to the APT price is not fully
representative of the current market.
Corporate
The Annual General Meeting was held on 29 November 2016, with
all resolutions put to the meeting being passed unanimously on a
show of hands.
The Company issued 1,696,928 ordinary shares during the Quarter,
859,283 of which were to the Company's Non-Executive Directors
under the Wolf Minerals Limited Directors' Share Plan (approved by
shareholders at the Company's Annual General Meeting on 29 November
2016) for the September and December quarters. Under the Plan,
non-executive Directors receive a portion of their fees in shares,
allowing the Company to preserve its cash reserves.
The Company issued 3,477,368 performance rights during the
Quarter to the Managing Director and other senior executives. The
performance rights were issued in accordance with the Wolf Minerals
Limited Performance Rights Plan, as approved by shareholders on 29
November 2016 and vesting is subject to a number of conditions as
specified in the Plan.
Investor Relations
The Company has continued to promote itself in Australia and the
UK with focused roadshows and targeted investor presentations being
undertaken. The Company's latest Investor Presentation and
corporate video which contains current footage of the operations
can be seen at the Company's website at www.wolfminerals.com.
ENDS
Wolf Minerals +61 (0)8
Limited: Russell Clark 6364 3776
John Prior/James +44(0)20
Numis Securities: Black/Paul Gillam 7260 1000
Adam Lloyd / Ed +44 (0)20
Newgate: Treadwell 7653 9850
+61 (0)2
Mandate Corporate: James Moses 8226 8562
About Wolf Minerals
Wolf Minerals is a dual listed (ASX: WLF, AIM: WLFE) specialty
metals producer. In 2015, Wolf Minerals completed the development
of a large tungsten resource at its Drakelands Mine, located at
Hemerdon, in southwest England.
This information is provided by RNS
The company news service from the London Stock Exchange
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