Woulfe, Wolf, other miners and financingWoulfe vs. Wolf Minerals.
- The Edison Investment report (Dec. 2014) is excellent. However, the Woulfe entries in the report contain mostly old information, predating the January 2015 release of final feasibility.
- From the report, Wolf Minerals (WLF) is the closest match to Woulfe in terms of size (and hopefully only about 6 months ahead in development). WLF has a large mine in UK at Hemerdon and is traded on the Australian Stock Exchange.
- The CEO of WLF has claimed the company could withstand $100 APT market price, which is obviously an exaggeration, and probably means it could survive at $150 APT prices. The feasibility study for Woulfe under the new mine plan indicates similar costs for production at Sangdong (the old mine plan would not be feasible at current tungsten prices). Woulfe could be financed and start construction even at today's depressed Tungsten prices, just like Wolf Resources.
- Of course waiting for higher prices to start the mine would make more money for the owner, but waiting too long may risk losing the off-take opportunity, so choosing the best time for financing and construction will be the big corporate decision. They may not want to be first, but cannot afford to be last. And there is also the matter of the mayor of Sangdong, who wants to see things moving. So it will be interesting to see how this develops. My guess is Woulfe will pull the trigger on financing and starting constuctoin when prices rebound decisively above 250/mtu (APT).
- Wolf Minerals, who has already pulled the trigger, has been funded to this stage (start of construction) with the help of financial/resource company RFC, who has played with WLF roughly the same role Dundee is playing with Woulfe. Through the years dilution has been substantial and share count for WLF is now over 800M, but the company (after feasibility, financing and now starting construction) is currently worth 235M USD (285M CAD). SP is currently 19 GBX = 29c US, price target 23 GBX = 35c.
BAsed on WLF experience an valuation, here is a possible financing scenario for Woulfe. My thoughts only. The scenario assumes IMC is on board for the off-take and the 35M deal (for 25% equity). For this analysis the recent appreciation of the USD is ignored, as construction will be done in Korea using Korean labor and Korean, Chinese and European hardware.
- 90M is realistically required to construct and start operating the mine. This includes the 75M indicated in the feasibility study + 15M startup reserve. 20M is the IMC contribution (for 25% of company after deducting 10M debt plus interest accrued). So 70M needs to be financed.
- Option conversion: Currently roughly 100M options are outstanding, with exercise price of options 20c on average. Conversion would bring in 20M, which leaves 50M to be raised. After conversion and the IMC contribution, the valuation of the company would be 90-110M, let's call it 100M.
- Raising the remaining 50M: If done by equity alone, 50M would dilute the stock 50% (new new share count becomes roughly 650M). If done by debt+equity (50/50) the dilution would only be 25% (new share count becomes roughly 550M). Both types of fiancing could be done by Dundee.
- Assuming Woulfe follows the same valuation behavior as Wolf Minerals (current market cap = 235M USD / 285M CAD) the SP of Woulfe after financing and at start of construction could be 36c US (43c CA) for all equity financing, and 43c US (51c CA) for 50/50 equity/debt financing.
A quick look at most of the tungsten mining companies that have prospects for new production:
- NCF (Northcliff) Market Cap (MC)=14M CAD. No current operations. New project is very large + high CAPEX. Has corporate backer. No financing.
- NTC (North America Tungsten) MC=10M CAD. Current operations are essentially excluded from valuation (company has a large barely profitable mine close to end of life). New project is very large + high CAPEX. No financing.
- AII (Almonty) MC=32M CAD. Current operations (small) are profitable. New projects are small + low CAPEX. Could be financed internally.
- WOF (Woulfe) MC=20M CAD. No current operations. New project is large + low CAPEX project. Has corporate backer. Partial financing (IMC) and off-takek deal.
- BHR (Black Heat) MC=6M CAD (these are former partners of Almonty people). No current operations. Exploration stage. Potentially very large project.
- MCP (Mega Precious) MC=16M CAD. No current operations. This is a large tungsten+gold exploration project (was just announced to be bought by Yamana at 100% premium)
- ORM (Ormonde) MC=11M CAD. No current operations. Medium size project. Possibly financed. This was Almonty's target for acquisition before Woulfe, and is now again.
- WLF (Wolf Minerals) MC=285M CAD. No current operations. new project is large + high CAPEX. mine constructoin is funded and started.
- For comparison, the valuation of a large operating Chinese tungsten mining company (Hunan Tungsten) was 900M CAD. The company was bought by MinMetal - China State owned - in Dec. 2014. This is a very large tungsten mine (size of NCF or NTC new projects).