Sangdong Overview via woulfe mining Woulfe Mining has a 100% interest in the Sangdong Tungsten/Molybdenum Project located in South Korea. The Sangdong deposit hosts one of the largest tungsten resources in the world, and was the leading global tungsten producer for more than 40 years prior to closure in 1992. Low metal prices, not the exhaustion of resources, led to the mine's premature closure.
Woulfe acquired the property in 2006 and has completed more than 30,000m of drilling from surface and underground locations. In March 2010, Wardrop, now a Tetra Tech Company, completed a scoping study which demonstrated very strong technical and economic fundamentals.
Significant progress has since been achieved. Mining approval was granted in June 2010 by the provincial government, portions of the upper levels have been rehabilitated for drilling access and bulk metallurgical sampling, and the feasibility study is nearing completion. Given the mine's long production history and the extensive database available, Woulfe has embarked on an early start-up approach focusing on the upper levels above the natural water level in the mine. Engineering drawings for the front end of the process plant have been prepared, a project construction manager has been appointed, and a mining contractor has been appointed to develop a new portal and decline access.
Woulfe is on track to build a state-of-the-art tungsten processing facility producing high quality ammonium paratungstate (APT) based on a world class, long life tungsten resource, with commissioning scheduled for the second half of 2013. The Korean operating environment is highly competitive, with relatively low materials and wages costs, low taxes and no royalties, and the forecast capital cost is significantly lower than that for most comparable Western projects.
Project financing is underpinned by the recent announcement of the deal with The IMC Group of Companies (IMC), 80% owned by Warren Buffet's Berkshire Hathaway. Under the agreement, IMC will contribute US$35 million cash for a 25% interest in the Sangdong mine and concentrator, and will construct and have a 55% interest in the APT plant. IMC will be entitled to the off-take at a discount to market price, and Woulfe will repay its share of the APT plant construction cost out of revenue.
Tungsten is a strategic metal and China dominates global production and consumption. China has recently extended its restrictions on the production and export of tungsten, along with the restrictions on rare earths and antimony, to conserve its resources and protect the environment. China had long been the largest exporter of tungsten however its own growth has turned it into the leading consumer of the metal. This, combined with the continued demand across the rest of the world, precipitated the recent sudden surge in the price of tungsten. The APT price is currently over US$400/mtu, almost 10 times the price when the Sangdong mine closed in 1992, and more than twice the price in late 2009.
The Sangdong mine is well placed to meet the looming supply shortage. By world standards, it is a very large uniform skarn deposit with significant residual resources. The NI 43-101 compliant Resource estimate determined by Wardrop in the scoping study totalled 103.2 million tonnes at an average grade of 0.35% WO3 with molybdenum credits, calculated using a cut-off grade of 0.10% WO3. The resource was contained within two parallel skarn lodes referred to as the Hangingwall and Footwall lodes. A central Main lode was the focus of historic mining and the remnant resources within this zone were not included in the scoping study resource estimate.
History
South Korea once had a thriving mining culture with many relatively small metallic mines including gold, base metals and tungsten/molybdenum. The Sangdong mine was the powerhouse of the economy in the post-Korean War decades, contributing more than 50% of the country's export revenue as one of the largest global tungsten producers. This mine along with almost all other metallic mines in South Korea closed in the 1990s primarily due to low commodity prices, at a time when Korea was emerging as a manufacturing powerhouse with companies such as Hyundai, LG, Samsung and Posco attaining international prominence.
The mining industry was relegated to an insignificant corner of the economy, now contributing less than 0.5% of the GNP. In fact, in recent years, there appears to be a widespread perception in Korea that the former mines were fully exploited never to be re-opened. The former owner of the Sangdong mine, Korea Tungsten Co, evolved into Korea's largest manufacturer of tungsten cutting tools and hard metal tools with the only integrated tungsten production plant in the world. Known as TaeguTec Ltd, it is wholly owned by IMC.
The boom in commodity prices is underpinning the revival of the Korean mining industry. Woulfe Mining was fortunate that it recognised the potential in Korea prior to the boom and secured title to several properties in 2006, including Sangdong, the Muguk gold/silver mine and the Yeonwha lead/zinc mine, both historically the largest producers of the respective metals in Korea, plus a number of other secondary properties.
Location and Geology
Location
The Sangdong property is located 187km southeast of Seoul, approximately three hours' drive via expressways and local sealed highways. The nearest settlement is the village of Sangdong within 0.5km and the town of Taebaek with a population of around 60,000 is located some 30km distant.
The property is located in an area of moderately rugged relief, with steep hills rising to about 500m above deeply-incised valleys. Despite the terrain, access is well developed; a paved road passes within several hundred metres of the old mill site and forestry roads traverse the property. A power line passes within several kilometres of the property and water sufficient for a mining operation is available either from ground water or from a nearby river.
Temperatures rise to a maximum of about 30°C during the wet summer months of June to August. The winter period is relatively dry and extends from October to March, with freezing temperatures occurring during the period December to February. Snow accumulations can be as much as 1m.
Tenure
The property is comprised of 12 Mining Rights with an aggregate area of 3,173 hectares, held in the name of Sangdong Mining Corporation, a 100% owned subsidiary of Woulfe.
Regional Geology
Sangdong is a skarn deposit, a carbonate-hosted mineralisation that results from the alteration of limestone by mineralising fluids. The regional geology reflects the position of the Korean peninsula on the eastern margin of the North China-Korean platform underlain by three Archean-aged blocks separated by mobile thrust belts of Phanerozoic age.
Local Geology
At Sangdong the metamorphosed strata overlay the Le biotite granite that was intersected at 700m below surface during exploration drilling. They form a syncline that gently dips to north-northeast with the Jangsan quartzite forming the lowest 250m. Above lies the Myobong shale unit, a phyllite with calcareous horizons for a total 150-200m. Completing the succession is the Great Limestone series of Cambrian-Ordovician age comprising six formations extending over 1,000m of limestones and dolomites and interbedded with grey and black shales, and quartzites.
With the intrusion of the Le biotite granite came mineralised fluids that followed the more porous horizons. Two events have been recognised; first skarn mineralisation related to the alteration of limestones caused by the mineralising fluids reacting with the calcareous horizons and, second, quartz veining mineralisation in the central portion where 1-10cm wide veins are best developed.
The Jangsan Quartzite hosts a molybdenum-rich zone referred to as the Moly Stockwork Zone. This zone is located above a large granitic intrusion and the mineralisation extends into the skarn horizon.
Mineralisation
The tungsten mineralisation of the Sangdong deposit is contained within a series of tabular, bedding-conformable skarn horizons approximately 150m thick within the Myobong Shale. The mineralised zone strikes east-west and dips to the north at between 15-30° for maximum strike and dip extensions of 1.3km and 1.5km respectively, and outcrops at around 650m elevation on the property.
The mineralised horizons are interpreted as carbonate-bearing horizons that were altered and mineralised by fluids ascending from the underlying granite. From uppermost to lowermost, these horizons are termed the Hangingwall, Main, and Footwall Zones. The Main Zone contains the highest grade mineralisation and has been extensively mined. Little mining has taken place in the other zones.
The Hangingwall Zone (H1) is located near the upper contact of the Myobong shale and varies in thickness from about 5-30m because of the irregular boundary of the shale with the overlying Pungchon Limestone. This horizon has a strike length of more than 600m and a down-dip extent of about 800m. Above the most highly-altered portion of the Main Zone, the Hangingwall Zone is not tabular, but extends steeply and irregularly into the overlying limestone. The base of the Hangingwall Zone is approximately 14m above the upper contact of the Main Zone.
The Main Zone (M1) has a strike length is in excess of 1,300m and the thickness averages 5-6m. Alteration (skarnification) forms three, concentric, roughly circular zones. A central quartz-rich zone consisting of muscovite, biotite, quartz and minor chlorite is about 350m in diameter, succeeded outward by a hornblende-rich zone containing diopside, hornblende or tremolite, chlorite, fluorite and calcite, followed by diopside-rich zone containing garnet, diopside, quartz, fluorite, zoisite and plagioclase. The diopside zone is typically poorly mineralised.
The Footwall is comprised of multiple layers, including F1 approximately 2m in thickness and lying around 1m below the Main Zone, and the F2 and F3 Zones situated approximately 35-40m below the Main Zone. Further zones have been identified beyond F3. Areal dimensions of these horizons and zonal distribution of calc-silicate minerals in them are similar to that of the Main Zone.
The main tungsten mineral is scheelite (calcium tungstate, CaWO4), accounting for >95% of the contained tungsten, with minor wolframite. Molybdenite is present throughout as a subsidiary to the tungsten mineralisation, more abundantly occurring below the skarn mineralisation near the underlying granite and mainly hosted in the Jangsan quartzite. Minor bismuth and gold have been historically recovered.
Resources
The scoping study resource estimated prepared by Wardrop in 2010 was based on historical pre-2006 drilling comprising 788 holes for 30,000m, and surface drilling carried out by Woulfe between 2006-2008, comprising 90 holes for 22,800m.
This resource estimate based on a cut-off grade of 0.10% WO3 is shown in the following table.
| Class | Zone | Tonnage Mt | WO3 (%) | MoS2 (%) |
| 'Inferred' | Hangingwall | 45.8 | 0.32 | 0.05 |
| 'Inferred' | Footwall | 57.4 | 0.37 | 0.04 |
| Total Inferred | | 103.2 | 0.35 | 0.04 |
As the resource database included historical drilling data, which does not comply with NI 43-101 QA/QC requirements, the entire resource was classified as Inferred. Also, the interpretation of the mineralised zones for the whole deposit was a very coarse representation of the geology as understanding and data was very limited at the time of that study.
Following the completion of approximately 8,000m of underground drilling during 2011, and further historical data compilation, Wardrop updated the resource estimate for the feasibility study, based on drilling completed to the end of November.
This resource estimate based on a cut-off grade of 0.20% WO3 is shown in the following table.
| Class | Zone | Tonnage Mt | WO3 (%) | MoS2 (%) |
| 'Indicated' | Main | 5.95 | 0.50 | 0.03 |
| | F2 | 2.30 | 0.63 | 0.04 |
| | Intermediate F/W | 5.58 | 0.27 | 0.03 |
| | F3 | 2.60 | 0.56 | 0.05 |
| Total-Indicated | | 16.43 | 0.45 | 0.04 |
| 'Inferred' | H/W | 7.19 | 0.58 | 0.08 |
| | Main | 0.26 | 0.52 | 0.02 |
| | F2 | 2.68 | 0.50 | 0.03 |
| | Intermediate F/W | 6.52 | 0.23 | 0.02 |
| | F3 | 2.71 | 0.49 | 0.03 |
| Total-Inferred | | 19.67 | 0.44 | 0.05 |
In determining this resource, Wardrop focused on developing more detailed models of the three skarn zones from both drill data and historical geological mapping. Importantly, additional intermediate alteration mineralization was defined between the F2 and F3, that collectively make up the Footwall Zone. Additional mining records were digitized and detailed models of historical mining depletion were created.
This resource represents mineralisation only within the upper section of the mine, representing approximately one-quarter of the known dip length (broadly that above the historical -2 Level) of known mineralisation from the old mine. An updated estimate for the mineralisation down dip will be forthcoming in the near future. Drilling is continuing within the accessible working areas to refine the resource.
Project Implementation
In 2011, Woulfe embarked on an early-startup plan based on the exploitation of the remnant ore in the upper section of the mine. The recent resource estimate justifies this approach and will underpin the feasibility study to be completed in early 2012, with project construction to be fast-tracked. Detailed engineering of the process plant is well advanced.
Following mine approval in June 2010, Woulfe accessed the upper areas of the mine and this assisted in the compilation of the historical data. It was evident that there were substantial infrastructure pillars that could be exploited by modern mining methods, and significantly, there were areas of unexploited Main Zone ore that was not considered in the scoping resource estimate.
Woulfe commenced an aggressive drilling program in 2011 to upgrade the upper section resource to Indicated status for feasibility, and this is an ongoing program to progressively upgrade the resource estimate. The feasibility study is based on a mining rate of 1.2 million tonnes per annum with ore to be sourced initially from the Footwall and Main Zones using a drift and fill mining method. Access will be via a 6m by 6m adit and decline with extraction by conventional jumbos, shovels and haulage trucks.
The crushing circuit will be located within 100m of the adit and will comprise a jaw crusher, screens and a cone crusher. This will be followed by two-stage milling and classification, and three-stage flotation to produce moly, bulk sulphide and tungsten concentrates. The tungsten concentrate will be dried and passed to the APT plant for refining and sale.
The tailings will pass to a backfill plant to be used as paste fill underground, with excess tailings pumped to a dry stack storage facility. Site infrastructure will include a workshop/warehouse complex, mine and administration offices, a small accommodation complex, and utilities. Power will be tapped into the electrical grid with a purpose-built transmission line to be provided under an arrangement with local authorities.
The project implementation plan is based on an Owner Builder approach. A Project Team comprising personnel from Woulfe and its 100% owned Korean subsidiary Sangdong Mining Corporation is responsible for project design, engineering drawings, procurement and overall project management. The project construction manager is the major Korean group HanmiGlobal (formerly known as HanmiParsons).
HanmiGlobal is the largest construction and project management company in Korea and is ranked 18th worldwide, currently engaged in 120 projects in 40 countries. This appointment will accelerate the tendering and appointment of contractors and will contribute to building the mine and processing plants on a cost competitive and time efficient manner. HanmiGlobal have allocated key personnel and have commenced work on the tendering process.
Mine development is to be undertaken by Jinheung Mining Company, an experienced Korean mining contractor. Detailed engineering design of the process plant is being carried out by Contromation Energy Services of Jakarta, with the work reviewed by the Project Team and verified to Korean regulations by HanmiGlobal. The construction schedule will depend on the final plant design and the delivery of long lead items, with project commissioning anticipated in the second half of 2013.
The project capital cost is estimated at around US$140 million, including mine development and equipment, and the APT plant. This estimate has been derived using benchmark inputs, and the final cost is expected to be lower, quite possibly significantly lower, given the competitive Korean cost environment. The capital cost of other recent processing operations in Korea inspected by the Project Team supports this expectation.
At steady-state production, the Sangdong operation will produce around 5,000 tonnes of WO3 in APT and 500,000lb of Mo in concentrate. At the current APT price of US$425/mtu APT, this will generate revenue approaching US$200 million per annum, less discounts under the IMC agreement. There are no royalties payable on production, and the corporate tax rate is 22%. The estimated cash operating cost is less than US$200/mtu, less after moly credits, and the capital payback is under two years.
Overall, the Sangdong project is assessed as a very robust development with low inherent project risks given its long operating history and favourable country risk.
