interview. In the following brief excerpt from the METALS AND MINING Special Report, expert analysts discuss the outlook for the sector and for investors.
Brian Wesson, President and Chief Executive Officer of Woulfe Mining Corp., has been an Engineer for 30 years and has extensive experience in the operation, design and construction of mines and process plants. He is a Fellow of the Australian Institute of Mining and Metallurgy and the Australian Institute of Company Directors. Mr. Wesson holds an MBA.
TWST: What is Woulfe Mining Corp.?
Mr. Wesson: Woulfe is a TSX.V-listed company, trading as WOF. We, Westech, looked around the world for opportunities and we found significant assets in South Korea, which is a good, low-cost mining destination that is low risk with good fiscal policy. There are no royalties, no export tax, and obviously, being in Asia, there are many other advantages in inputs to production such as low power costs, labor efficiency and cost of construction - all far more cost efficient than the West. The two projects we have in South Korea, one is Sangdong tungsten/molybdenum mine that operated for 40 years and was the world's largest tungsten mine and remains one of the largest. The TSX.V-listed company went through a change in management and board after a refinance two years ago. A PEA was carried out for Sangdong in April 2010, which showed that the project had substantial value of $462 million at a tungsten price of $25,000 per ton. Given the value, Woulfe decided to move as quickly as possible to production. A mine development license was acquired in June 2010, which allows Woulfe to mine and produce metals at Sangdong. The license further allowed the company to reopen the old mine to drill the ore bodies from underground and assess the nature of the mineralization. The PEA determined that there was 103 million tons at 0.35% WO3 in resource. Two drilling campaigns have been completed that have confirmed an indicated resource of 16.5 million tons at 0.45% tungsten and an inferred resource of 19.6 million tons at 0.45% WO3 above the valley floor in the top 25% of the ore body. As we are mining above the valley floor, it makes for cost-effective bulk mining of the three 10 meter-high veins with a strike of 1.2 km. Current modeling indicates that the breakeven operating cost will be about $170 per MTU - $17,000 per ton tungsten - and today, the price is $440 per MTU - $44,000 per toe. This gives good margins and strong economics, reinforcing the need to develop the mine as quick as possible.
TWST: Would you give us an idea of what the background markets are in terms of pricing and demand?
Mr. Wesson: We just came out of gold two years ago. We went into gold when gold price was $300 per ounce and reopened and developed the Vatukoula mine over 18 months, which saw a doubling in gold price. Considering various commodities, we liked tungsten as it had been resilient during the financial crisis, but fundamentals were good for future growth to around $30,000 per ton. We took control in late 2009, when the price was $180 per MTU, which is $18,000 per ton. Most of the market is controlled by China. They supply around 80% of all tungsten into the market. So the price of the commodity is controlled by China, and it is high, and that's very advantageous to China. It is not in China's interest to allow the price to fall and China is reducing export quotas by 15% per annum, banning new mines in China, and tungsten export is taxed. China is focused on value adding all there raw materials, especially tungsten after it was made a strategic metal. The tightening of the non-Chinese market is putting pressure on the toolmakers to seek supply in the coming years.
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