feasibility report (summer reading)The feasibility report downloaded from SEDAR has everything you always wanted to know about tungsten mining. and more. 1600 pages of good summer reading.
There is a lot to like here. Gantt charts are good for 20 month construction schedule. CAPEX is very low and off-taker seems to be on board.Life of the mine plan is reduced to 9.5 years, but does not include the HW which will be included as the mine gets going, as will the presently flooded levels. I expect the actual life of the mine to eventullybe in the 30-40 years. IRR and NPV of the present mine plan are very attractive. more so than before due to the lowered capex.
Big caution is the currently very low price of tungsten. Priced these days as though China and the rest of Asia manufacture were going to go bust tomorrow and no more oil drilling or car manufacture was going to take place. I do not think is going to happen, so I believe a floor is already in place or will be fairly soon for tungsten price.
Financials are reported in the summary and more exensively on pages 175-200. These contain very important sensitivity studies on the impact of variations in the cost and price assumptions. Particularly important is the sensitivity to tungsten price of all economic numbers.
The tables in the report show financials for 21,000, 18,000 and 15,000 tungsten prices (USD/ton WO3). The actual number these days is close to 12,000, which has a large impact on the economics of the mine.
With interpolation of the financials to the current WO3 price (12,000), the tables contain my evaluation of the mine financials. All numbers here refer to the current "mine plan" (three levels) for which the final feasibility applies, not to the whole Sangdong mine. The full value of the mine is not bankable but potentially much larger, to be unlocked (could be 5-10 years) using the cash flow from the present mine plan.
From this simple analysis it looks like the mine plan is viable and valuable even at these distressed tungsten prices. Certainly enough to warrant financing. The report contains a good analysis of the risk assessment and recommendations (p. 200 and following).
Tungsten price inmy opinion is not going to go much lower, except maybe on a very short term basis, and will start going up soon enough. These people know what they are doing. Wolf Minerals got funding, Ormonde got funding. I think the current SP is discounting a lower tungsten price than current and is a good entry point for Woulfe, well de-risked and with the added attraction that the company is now in the hand of technical management who gain by the tungsten they mine, not the "deals" they make.
Here are calculated financial tables that have SP valuation based on the feasibility report. numbers may or may not be accurate of course ....
| Debt Financing |
| WO price/ton | Earnings | NPV | TEV | CAPEX + Debt | IEV | SP cents (CAD) |
| 12 | 21,000 | 91,000 | 112,000 | 72,000 | 40,000 | 11.5 |
| 15 | 34,200 | 130,000 | 164,200 | 72,000 | 92,200 | 26.4 |
| 18 | 47,400 | 209,000 | 256,400 | 72,000 | 184,400 | 52.9 |
| 21 | 60,600 | 278,000 | 338,600 | 72,000 | 266,600 | 76.4 |
| | | | | | | |
| Debt+Equity Financing (35M from IMC) |
| WO price/ton | Earnings | NPV | TEV | CAPEX + Debt | IEV | SP cents (CAD) |
| 12 | 21,000 | 91,000 | 112,000 | 37,000 | 75,000 | 17.2 |
| 15 | 34,200 | 130,000 | 164,200 | 37,000 | 127,200 | 29.2 |
| 18 | 47,400 | 209,000 | 256,400 | 37,000 | 219,400 | 50.3 |
| 21 | 60,600 | 278,000 | 338,600 | 37,000 | 301,600 | 69.2 |
All values USD (1,000s) except SP (CAD cents)
TEV=Total Enterprise Value
IEV=Implied Equity Value (Market Cap)
All tungsten sold at market price
The first table assumes that the IMC loan is paid back, CAPEX is financed by commercial loan. Share count 440M.
The second table assumes IMC gets 25% of Sangdong mine (full mine) for 35M (including 10M loan) and remaining 45M CAPEX is financed. Share count 550M.
One is better short term, the other is better long term.