TIDMWLFE
RNS Number : 7803N
Wolf Minerals Limited
31 October 2016
31 October 2016
Wolf Minerals Limited
Quarterly Activities Report
For the Three Months Ended 30 September 2016
Specialty metals producer, Wolf Minerals Limited (ASX: WLF, AIM:
WLFE) (Wolf or the Company) provides the following update on
progress at its Drakelands open pit mine (Drakelands) at the
Company's Hemerdon tungsten and tin project in Devon, southwest
England, for the three month period to 30 September 2016 (the
Quarter).
Highlights
ü Good progress at the mine and Mining Waste Facility, mining
record volumes in the Quarter
ü Successful restructure of Senior Debt. Scheduled repayments of
principal deferred to January 2018
ü Bridge loan for GBP20 million established with Resource
Capital Fund VI L.P.
ü Improved throughput, recovery and record production in the
processing plant
ü Lee Moor Road replacement well advanced for completion in
early 2017 to support the Mine Waste Facility
Commenting on the Company's recent performance, Wolf's Managing
Director, Russell Clark said:
"During the Quarter we saw excellent progress in the mine and at
the Mining Waste Facility at Drakelands in what was a relatively
dry summer and as a consequence we have temporarily reduced the
waste truck fleet size. This will conserve cash and reduce truck
movements during the more difficult winter conditions.
The challenges in the processing plant are well understood and
an improvement plan is now underway with initial positive effects
on plant throughput evident during the Quarter.
Given the continuing ramp up of the processing plant and
softness of the tungsten price, the Company had to strengthen its
financial position. On 24 October 2016 Wolf announced agreement
with its senior lenders, major shareholder Resource Capital Fund VI
L.P. and major customers to restructure the terms of its Senior
Debt and inject additional working capital into the company. This
will enable Wolf to focus on improving the operations at the
Drakelands mine to reach its true potential. It is very encouraging
to see the support from key stakeholders for this important
project, and we are looking forward to continuing our significant
involvement in the Devon community and economy."
Overview
There was one lost time injury during the Quarter when a
processing plant operator missed a day of work following a
fall.
Weather during the English summer was favourable, enabling good
progress to be made in the mine and at the Mining Waste Facility
(MWF).
The trial of 24 hour operations seven days a week at the
processing plant has been extended and will now run through to the
end of November 2016.
The total cash expenditure for the Quarter was A$28.5 million,
including A$6.1 million on development, A$13.8 million on
production and A$8.7 million on debt service and repayment, with
revenue of A$4.0 million. As stated in the quarterly cash flow
report (Appendix 5B), also released today, the Company had A$5.2
million cash at the end of the quarter and a cash outflow of A$25
million is estimated in the coming quarter.
Subsequent to the Quarter end, the Company announced a senior
debt restructure and GBP20 million (A$32.1 million) bridge loan
facility with Resource Capital Fund VI L.P. (see further details
below). The Company made an initial drawdown request for
A$10.4million (GBP6.5 million) from the bridge facility in late
October 2016.
Mining Activities
The favourable weather enabled good progress to be made in the
mine and at the MWF. A total of 728,452 bank cubic metres of
material was moved during the Quarter, a quarterly record for the
mining operations.
The ore body at Drakelands is located in a large granite dyke
that outcrops to surface. The granite is weathered at the surface
and current mining activity is in this softer part of the ore body.
Reconciliation of the grade of ore (%WO(3) ) extracted to date
continues to be positive when compared to the grade expected from
the ore reserve. However, as mining to date has predominantly been
near surface, the ore mined has had a much finer particle size than
what will be the average particle size extracted over the life of
the mine, the size for which the processing plant was primarily
designed, therefore adversely affecting current recoveries in the
processing plant. Drilling has confirmed that as mining gets
deeper, the weathering will reduce such that hard granite rock
becomes the principal ore feed to the processing plant. A gradual
transition from the soft ore currently being experienced to the
harder granite is expected to take place over the next twelve
months and should result in a consequential improvement in
recoveries and plant throughput.
Waste mining activities concentrated on waste stripping to
provide suitable building material for the MWF. The excellent
progress made through the summer months, providing sufficient
capacity in the MWF through to the spring, resulted in half of the
waste trucking fleet being stood down at the end of the Quarter.
Winter conditions in the mine can be challenging and reduced truck
movements are anticipated to enable more efficient and cost
effective operations.
The future development of the MWF requires Wolf to construct a
new public road to replace a five kilometre section of Lee Moor
Road. Construction of the new road is on track for completion in
early 2017, at a total cost of GBP7.5 million.
Processing Plant
Wolf gained full operational control of the Drakelands
processing plant from GR Engineering Services (GRES) in the
September 2015 quarter and has processed almost two million tonnes
of ore to date. In the period since taking operational control,
Wolf has worked collaboratively with GRES to close out outstanding
items and improve the processing plant's performance.
The Company continues to concentrate on increasing overall run
times and building throughput tonnages. Demonstrating progress, the
processing plant treated 505,414 tonnes of ore during the Quarter
and produced 29,981 metric tonne units (mtu) of tungsten
concentrate, both records for a quarter.
As previously advised, Wolf and GRES have formulated a work
program involving equipment changes and design modifications aimed
at achieving continuous operation at capacity, enhancement of
recoveries and general plant improvements. Production is expected
to increase during implementation of the program over the coming
quarters, however, completion of all elements of the program,
expected in the first half of 2017, is required before the full
effects on processing plant performance can be ascertained.
Sustainability
Wolf has submitted an application to Devon County Council (DCC)
to extend the Planning Permission expiry date from 2021 to 2036 and
to implement permanent seven day operational working. This has the
potential to increase production and reduce unit costs, in addition
to generating additional employment opportunities and helping to
ensure the longevity of the operation. A decision on the
application is expected before the end of 2016.
During the Quarter Wolf continued to focus on ways to reduce the
generation of low frequency noise (LFN) that has been a concern to
some local residents. The Company has already installed additional
external steel columns around the processing plant and will also
add additional bracing on the roof of the plant, as the building
appears to be a continuing source of LFN. Analysis is also being
undertaken with the supplier of the shaking screens used in the
plant to establish whether a solution can be found at the source of
the LFN generation.
Wolf is undertaking regular blasting in the Drakelands open pit
with ground vibrations from blasting being measured below
prescribed levels. Wolf continues to receive feedback from local
residents expressing concerns about blasting and is working to
establish best practice blast design aimed at minimising impacts
felt by local residents. A trial of electronic detonators was
carried out during the Quarter to assess their effect on blast
vibration and operational efficiencies.
Senior Debt Restructure and GBP20m Bridge Facility with Resource
Capital Fund VI L.P.
Subsequent to the quarter end the Company executed agreements
with its existing senior lenders (Senior Lenders) for a standstill
and restructure of the senior debt currently outstanding (Debt
Restructure), and with Resource Capital Fund VI L.P. (RCF VI) to
provide a GBP20 million 12 month secured bridge loan facility (the
Bridge Facility).
The terms of the Bridge Facility provide that RCF VI, a major
shareholder and an associate of Wolf's other major shareholders,
Resource Capital Fund V L.P. and RCF V Annex Fund, will provide
GBP20 million, with the potential for this to be increased to GBP30
million (increase available at the sole discretion of RCF VI) for a
maximum of 12 months from first drawdown.
During its term, the Bridge Facility will be fully secured and
rank pari passu with the Senior Lenders on substantially the same
form and terms as existing under the Senior Debt.
The Company may pre-pay the Bridge Facility in certain
circumstances, and if not prepaid at the conclusion of the 12 month
term the Bridge Facility will mandatorily switch to a three year
subordinated convertible loan, if certain conditions precedent are
satisfied, or a three year subordinated loan.
In the event the Bridge Facility switches to a convertible loan,
RCF VI may convert the loan in whole or in part at any time at a
conversion price based on the 20 day volume weighted average price
prior to date of the Bridge Facility maturity, subject to a minimum
of A$0.13 and a maximum of A$0.20.
As soon as reasonably practicable, the Company will seek
shareholder approval at an Extraordinary General Meeting to enable
the issue of ordinary shares in accordance with the convertible
loan terms and approving the grant of the security under the Bridge
Facility. The convertible loan is also conditional upon, amongst
other things, RCF VI obtaining FIRB approval. Under the Bridge
Facility the Company has also given RCF VI certain warranties and
indemnities and RCF VI has certain limited rights of
termination.
The Company currently has GBP64 million outstanding under its
debt facilities with the Senior Lenders (Senior Debt).
The Senior Lenders and RCF VI have agreed a standstill of the
Senior Debt conditions until the earlier of a decision by the Devon
County Council to extend the Drakelands' planning permission's
expiry date beyond 2021 (decision expected before end-2016) or 31
January 2018. The standstill provides that a limited number of
events of default shall apply under the Senior Debt and Bridge
Facility, along with certain waivers of, and amendments to, the
Senior Debt conditions for any non-compliance and grants relief
from financial and other covenants.
The terms of the Debt Restructure provide that all Senior Debt
principal repayments are deferred until January 2018 and the tenor
of the Senior Debt is extended until June 2023, conditional upon a
decision to extend Drakelands' planning permission beyond 2021.
A portion of the Company's Senior Debt is supported by
guarantees provided by the German government's Untied Loan
Guarantee Scheme (Ungebundene Finanzkreditdeckung - UFK), and
Wolf's tungsten concentrate customers, Wolfram Bergbau und Hütten
AG and Global Tungsten & Powders Corp (together Guarantors).
The Guarantors have consented to the Debt Restructure, and the term
of the Guarantees and the term of the Company's supply agreements
with Global Tungsten & Powders Corp and Wolfram Bergbau und
Hütten AG have been extended to align with the revised tenor of the
Senior Debt.
Mining Tenements
As at 30 September 2016, the Company has an interest in the
following projects:
All tenements are held by Wolf Minerals (UK) Limited, a wholly
owned subsidiary of the Company. No farm-in or farm-out agreements
are applicable. No mining or exploration tenements were acquired or
disposed of during the quarter.
Planned Upcoming Activities
In the December 2016 quarter, Wolf will continue to progress the
operations at Drakelands, with a focus on implementation of the
work program in the processing plant to improve performance.
Details of proposed activities include:
-- Continuing the trial of seven days a week, 24 hour operations
of the processing plant.
-- Continuing to build throughput and production tonnages in the
processing plant.
-- Continuing to build the MWF.
-- Continuing to build the Lee Moor Road replacement.
Tungsten Market Trends
Prices for tungsten concentrates tend to follow the same trend
as prices for ammonium paratungstate (APT), which is the key
intermediary product in the tungsten supply chain. APT prices for
spot market transactions are published by several data providers
including Metal Bulletin and Metal Pages with prices established
through surveys of buyers, sellers and other industry participants.
The average APT Price published by Metal Bulletin for the Quarter
was US$190/mtu (FOB Europe). Demand for tungsten concentrate during
the Quarter was similar to the June 2016 quarter with sound
interest in Japan and Europe as a result of steady output from the
automotive sector and aerospace sectors while demand from other
regions remained low as a result of soft conditions in the mining,
oil and fracking industries and the economic slowdown in China.
Current market conditions have resulted in some supply being
withdrawn from the market and are also increasing the difficulties
for new projects to get the necessary debt or equity funding to
commence construction.
Investor Relations
The Company has continued to promote itself in Australia and the
UK with a number of roadshows and targeted investor presentations
being undertaken. The Company's latest Investor Presentation and
corporate video which contains footage of recent activities can be
seen at the Company's website at www.wolfminerals.com
ENDS
Wolf Minerals +61 (0)8 6364
Limited: Russell Clark 3776
John Prior/James Black/Paul +44(0)20 7260
Numis Securities: Gillam 1000
Adam Lloyd / Ed Treadwell +44 (0)20 7653
Newgate: / Helena Bogle 9850
+61 (0)2 8226
Mandate Corporate: James Moses 8562
About Wolf Minerals
Wolf Minerals is a dual listed (ASX: WLF, AIM: WLFE) specialty
metals producer. With global demand for tungsten rising and future
global production expected to be constrained, Wolf Minerals has
recently completed the development of a large tungsten resource at
its Drakelands Mine, located at Hemerdon, in southwest England.
This information is provided by RNS
The company news service from the London Stock Exchange
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