Woulfe Mining Corp WFEMF

bull dreams and bear realities re: woulfe

[74volfram]

Tungsten was all time high in 2011.  It has now dropped more than 50%.  Business environment has changed 100%. Investment thinking needs to be adjusted as well.

- Bull Market reasoning does not work at this stage.
in this part of the commodity cycle (low and nobody knows how close to the bottom - hopefully not too far) the logic that may have pushed people to buy mining stock during better times no longer applies.  During the bull market the best gains were from the small exploratory companies that drilled and sampled remote properties, and even maybe established marginal mines to feed into the high price market. At $400/mtu APT price almost any mine no matter how marginal can be profitable.  at $200 APT 50% of even established mines are losing money.  North America Tungsten is currently in bankruptcy protection even though it has the biggest producing mine and one of the biggest green-field projects outside of China. due to unsustainably high costs of production, customers not willing to pay higher to secure domestic supply and creditors unwilling to make concessions.

- Bear Markets demand efficiency and diversification.
Name of game is now is low cost production and diversification of assets. Tungsten is not the easiest ore in the world to process.  It seems the expertise to produce tungsten at low cost and in environmental responsible way is not widely available. Wesson failed and Dundee failed.  Jury is out on Mr. Black and Almonty team but I think chances for success have vastly improved here.  Diversification (having more than one asset and more than one customer) is also a plus and maybe necessary to survive at this stage. and whoever survives here will grow into the next tungsten major later.  Look at the big Chinese producers. They now all have multiple mines.  During a slump they may close one or two mines and consolidate resources, but by and large will continue operations and stay solvent.  Contrast that with the typical single tungsten mine operation which is the norm outside China.  The price drops below production costs and after some struggle to cope which further depletes cash reserves, the one mine closes.  Creditors now come in with bills to pay and the company has to ask for relief under CCAA.  This will wipe out shareholders most likely or dilute them at very unfavorable terms.  And after restructuring the company moves one to the next boom and bust cycle maybe even with same management and name, but definitely very different ownership.

- Things will change and mergers are necessary a this stage to grow in the up cycle.
Bull market mergers are a luxury and usually a waste (most end up written off).  Bear market mergers are a necessity (as in live or dia). In the current market, the Almonty Woulfe merger makes sense (at the fair conditions).  Given the respective assets and market conditions my valuation (SP) is 10c for Woulfe and 100c for Almonty (roughly speaking).  The Woulfe valuation does not include IMC off-take and equity offer (which may be contingent on management change and merger for all we know).

- Share Price manipulation
Right now I am not too concerned about the relative SP performance.  All it takes is a couple of moment trades (less than $2k) to move the SP 20% one way or the other.  Unlike insider PPs merger conditions are negotiated well in advance based on assets and valuations and through third party involvement. SP may be "adjusted" later to help digestion.  Currently looking at WOF bid/ask, there are only 400k shares offered at or below 10c.  less than $30k. Almonty is less traded even than WOF and there are only 3k shares offered below 100c.