news release - my translationQuick look at the two recent news releases.
From January 23 2015 NR: "Company announces completion of the final update to the Feasibility Study and de-risking of the Tetra Tech 2012 Feasibility Study, on the Sangdong Project". "The final Feasibility Study was also delivered to IMC in fulfillment of closing procedures for the agreements ... with conditions remaining in place, including, subject to the terms and conditions of the agreements, IMC acquiring a 25% interest in Sangdong". "Based on the completed positive final Feasibility Study, the consultants to Woulfe have recommended to Woulfe that the project move to the financing and construction stages".
From December 17 2014 NR: "The completed Feasibility Study will, based on a positive study, be followed immediately by project financing and construction."
New information:
- The mine is anticipated to produce 450,000 tons of ore in year 1 of production and reach the final 12 year life of mine capacity of 640,000 tons per year in year 2. This is close to the 633,000 TPY option mentioned in the December update. So they adopted the lower throughput plan.
- Phase 1 of the mine gains 25% in reserves (7.4 MT at 0.54% vs. 6.4 MT at 0.49%) and 2 years of life (12 instead of 10).
- The financial numbers in the January release are for the full mine, but the number in the December release were for 75% that would be owned by Woulfe after the IMC deal. So yearly revenue and earnings are different in the two NRs and consistent with the 75/25 split.
- In the January news release, pre-tax IRR for the full project is 26%. It was stated at 36% in December. Given that revenue and earnings have not changed significantly between the NRs, the difference in IRR is likely due to the inclusion of the IMC portion (cash) as opposed to just the Woulfe portion (mostly financed).
- A 5% discount rate is used now, instead of 8%, to calculate the NPV. Decreasing the discount rate will increase the NPV and would indicate a lower perceived financial risk. With the 25M and off-take agreement from IMC, it should be possible to get the remaining 50M for construction from Korean Shinhan (a big bank) or any number of investors.
- It seems that EBITDA/share is now given on a fully diluted basis, including the 25% IMC share (560M shares total).
- Among the items singled out for completion in the December NR, the "processing plant engineering and cost estimates" was completed. However the hydro study is not mentioned. Looks like they decided it could wait.
- The company has negotiated an extension of the maturity date of the Dundee $350,000 convertible loan (January 2014). This convertible loan was not secured. Dundee can choose to convert at 11.5c plus a warrant at 11c. Maturity was pushed to July 2015.
- About 9k was paid in shares to one of the service providers in Korea (Alind Satya Nand).
My take:
The completion of the Feasibility study comes sooner than expected. It looks like there is a good chance to complete the deal before summer I don't know if they are going to still need to raise money before IMC financing comes in. If they do, it should not be a lot.
Will IMC close the deal? The trend among large Tungsten users has been to secure long-term Tungsten suppliers, given the recent price swings:
- HB Starck financed the Nui Phao mine (open pit, Vietnam). This mine started production quite a bit lower than expected two years ago and has not yet reached full capacity. The Nui Phao mine is private, and it is reported that CAPEX was over 500M. So its ratio CAPEX/capacity is 770 ($/mtu). At full capacity, this will be the largest Tungsten mine out of China.
- GTP is off-taking the Hemerdon mine (open pit, UK). This mine will start production at the end of 2015. The CEO is very confident all pieces are in place. With CAPEX 200M Hemerdon will have a ratio of 580 ($/mtu). Wolf (the owner of Hemerdon mine) is traded on the ASX and valued over 200M.
- IMC is negotiating Sangdong off-take with Woulfe. Using the latest numbers from the final feasibility study, the size of Sangdong mine will be somewhere in between Nui Phao and Hemerdon. There should be more than enough for IMC to off-take. With a very low ratio of CAPEX/capacity (180 $/mtu), this looks like the best deal of the three.