TIDMWLFE
RNS Number : 0646V
Wolf Minerals Limited
31 October 2017
31 October 2017
Wolf Minerals Limited
Quarterly Activities Report
For the Three Months Ended 30 September 2017
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 2017 (the
Quarter).
Highlights
ü Tungsten concentrate production and sales both up 15% for the
quarter.
ü Successful first phase of processing plant improvements,
delivering increases in performance.
ü Tungsten price reaches 3 year high.
ü Further funding support provided by Resource Capital Fund VI
L.P.
Commenting on the Company's recent performance, Wolf's interim
Managing Director, Richard Lucas said:
"The September Quarter has been a very encouraging one. Our
operating turnaround plan continues to build momentum and deliver
benefits across the business, with production and sales both up 15%
for the quarter and system improvements achieved in maintenance and
supply chain. We are on track to address our remaining operational
challenges and achieve a sustainable production platform upon which
to pursue further optimisation and value adding initiatives.
Managing our operations successfully also involves continuous
investment in the relationships with our local communities,
including reductions in low frequency noise emissions. We are
committed to achieving a solution and are taking appropriate action
to ensure a positive outcome and return to normal operating
arrangements.
The tungsten price continued its remarkable run during the
Quarter, reaching a three year high in September of US$310 per mtu
in Europe before stabilising in October. There are positive
indications for prices to remain supported at current levels, which
is providing confidence for our future plans.
Our major shareholder, Resource Capital Funds, continues to
provide fantastic support to the Company, recently increasing its
bridge facility to a total of GBP55 million. The funding has been
integral to completing the operating turnaround plan and the
Company continuing towards its objective of becoming a reliable
steady-state producer."
Overview
There were two lost time injuries during the Quarter (compared
to six in the previous quarter). The Company's investment in a
behavioural based safety program has provided opportunities for
further improvements in safety performance.
The net cash used in operating activities for the Quarter was
A$17.5 million, including A$1.9 million on development, A$17.3
million on production and A$1.7 million on finance costs, with
revenue of A$7.8 million. As stated in the quarterly cash flow
report (Appendix 5B), also released today, the Company had A$4.7
million cash at the end of the Quarter, with further funding
arranged in October of A$16.9 million (GBP10 million) in available
loan facilities to support revenue, on a forecast gross cash
outflow of A$31 million for the coming quarter. Please refer below
for further details on funding arrangements.
Mining Activities
During the Quarter, mining activities focused upon ore feed
blending for the processing plant and the completion of Stage 2.2
construction of the Mining Waste Facility (MWF), which was achieved
in September.
A total of 789,413 bank cubic metres of material was moved
during the Quarter, with the ore grade averaging 0.21% WO(3) and
0.03% Sn. The improvement in the processing plant performance
continues to inform the blending strategy on optimal ore feed
quality for throughput and recovery. This will continue to be
reviewed as further processing plant improvements are made,
particularly in relation to the gravity fines circuit.
Following the resource definition drilling program, the mine
plan has also been updated for a further intermediate pit design to
optimise the short and medium term strip ratio and improve project
cashflows. In addition, further investigations are underway on
pre-processing opportunities to enhance the ore feed quality as
part of the Company's continuous improvement initiatives.
Processing Plant
The key production results for the last three quarters are shown
in the following table:
Key Production Sep Jun Mar
Results Qtr Qtr Qtr
2017 2017 2017
---------------- ---------- -------- --------
Throughput
tonnes 474,170 490,297 459,732
---------------- ---------- -------- --------
(Note
Change 1) -3% +7%
(Note
2) +29%
---------------- ---------- -------- --------
Production
tungsten mtu 35,601 30,996 26,903
---------------- ---------- -------- --------
Change +15% +15%
---------------- ---------- -------- --------
Production
tin tonnes 49 41 41
---------------- ---------- -------- --------
Change +19% 0%
---------------- ---------- -------- --------
Note 1: Based on tonnage reported.
Note 2: Adjusted for 5-days a week operation rather than 7-days
a week as in the prior period.
During the Quarter, both production and sales improved
significantly, up 15% on the prior quarter, providing an increase
in revenue and taking advantage of higher tungsten prices. Further,
the processing plant recorded a number of new production increases
including:
-- Daily throughput of 12,370 tonnes.
-- Daily production of 1,048 metric tonne units (mtu) of tungsten in concentrate.
-- Monthly kiln throughput of 565 tonnes in September.
The throughput tonnes demonstrated solid improvement from the
June quarter, after adjusting for the reduced weekend operations,
with significant gains still to be made in the crushing and
screening circuit from reliability improvements and circuit
optimisation.
Similarly, the steady increase in tungsten pre-concentrate
recovery ahead of the gravity fines circuit improvements is
encouraging, with further run time gains to be made in the dense
media separation (DMS) circuit to assist with optimisation
activities on recovery and feed quality to the refinery.
During the Quarter, improvements in the refinery circuit proved
successful with an increase in kiln throughput after an initial
adjustment period. Further improvements are planned in the refinery
to enhance reliability and run time. The kiln throughput is being
supplemented by the consumption of bagged pre-concentrate on
weekends, which provides additional complexity in optimising the
circuit, however further opportunities are being explored to
improve the efficiency of magnetic separation and increase product
quality.
The operating turnaround plan progressed well during the
Quarter, with completion of the improvements in the primary DMS
circuit and the first phase in the refinery resulting in increased
performance in the second trial period conducted in September.
Further planned activities in the December quarter are expected to
build the sustainable production base.
In addition to the focus on production, the operating turnaround
plan also delivered improved performance in:
-- Planned maintenance activities and shutdown planning.
-- Supply chain management and critical spares inventories.
-- Employee training and standard operating procedures.
Sustainability
At the end of September the site recorded 21 injury free days
following two lost time injuries during the Quarter (compared to
six in the previous quarter). The Company has invested in and
implemented a comprehensive behavioural based safety program to
raise personal awareness and safety observations, which has had a
positive impact and provided a number of safety improvements which
are being addressed.
There were no significant environmental incidents during the
Quarter, however the Company continues to focus on technical
solutions to reduce the generation of low frequency noise (LFN).
During the Quarter, the Company continued to liaise closely with
the community mediator, Environment Agency (EA) and members of the
community to provide support and feedback whilst further
investigations are undertaken and the resolution to LFN is
developed and implemented.
The Company also implemented a temporary period of weekend
modified operations in which the vibrating screens in the
processing plant are turned off each week from 11pm on Friday until
6am the following Monday. This arrangement remains in place for the
December quarter.
The Company also assessed the costs of ongoing LFN
rectifications and announced on 17 August 2017 that it had decided
to notify its lead construction contractor, GR Engineering Services
Limited (GRES), of its intention to recover these costs from the
GBP7.5 million Performance Bond under the construction contract if
GRES did not take all necessary actions to do so at its own cost.
This remains the current position. The Company is confident that
the Performance Bond will be sufficient to cover the costs of
implementing the technical solutions required to deliver a
successful LFN outcome.
Increased Bridge Facility with Resource Capital Fund VI L.P.
In July 2017, the Company utilised the remaining GBP7 million
available from the GBP40 million secured bridge loan facility (the
Bridge Facility) provided by Resource Capital Fund VI L.P. (RCF
VI). In September 2017, RCF VI approved the release of the
additional uncommitted amount of GBP5 million on the same terms,
such that the total Bridge Facility of GBP45 million was accessed
and fully utilised by the end of the Quarter.
Subsequent to Quarter end, pursuant to its terms the Bridge
Facility mandatorily switched to a subordinated loan on 21 October
2017. If certain conditions precedent are satisfied (including
shareholder approval), RCF VI can elect that the subordinated loan
switches to a subordinated convertible note. As soon as reasonably
practicable, the Company will seek shareholder approval to enable
the issue of the convertible note and subsequent conversion into
ordinary shares in accordance with the convertible note terms under
the Bridge Facility. The convertible note is also conditional upon,
amongst other things, RCF VI obtaining FIRB approval.
On 27 October 2017, the Company reached agreement with RCF VI to
increase the existing Bridge Facility and to provide the Company
with a further GBP10 million subordinated loan. The funds advanced
under the Bridge Facility to date have been used to progress the
operating turnaround plan and support short term working capital as
the Company progresses towards long term self-sustainable
operations at Drakelands. The Company will continue to review its
long term capital requirements as the operating turnaround plan
progresses and further value adding opportunities and cost
reduction initiatives are investigated.
Mining Tenements
As at 30 September 2017, the Company has an interest in the
following projects:
Tenement Location Interest Status Grant Date
--------- --------------- --------- ------- -----------
Hemerdon United Kingdom 100% Leased 10/02/2014
--------- --------------- --------- ------- -----------
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 three months to 31 December 2017, Wolf will continue to
progress the operations at Drakelands, with a focus on completing
the operating turnaround plan to improve performance.
Details of proposed activities include:
-- Continued emphasis on personal safety awareness and improvements.
-- Updating the action plan on reducing LFN generation.
-- Continuing to build throughput and production in the
processing plant, including the third trial period of the operating
turnaround plan.
-- Continuing to build the MWF.
-- Review of the Company's capital structure to provide
sustainable working capital support for Drakelands.
Tungsten Market Trends
The ammonium paratungstate (APT) price published by London Metal
Bulletin (FOB Europe) had a significant increase during the Quarter
reaching a 3 year high, with prices rising over US$300 per mtu
during September 2017 before stabilising in early October 2017 at
US$280 per mtu. The average for the Quarter was US$265 per mtu up
from US$216 per mtu in the June quarter - an increase of 22%.
The rapid rise in APT price during the Quarter has been
attributed to a combination of Chinese supply constraints from the
enforcement of higher environmental standards and continued growth
in end user markets, particularly the United States where Argus
notes imports of tungsten carbide (considered to be a good
indicator of oil and gas drilling demand) have more than doubled
year to date. There has been some destocking and profit taking in
October 2017, however underlying demand for tungsten ores and
intermediate products continues to provide a positive outlook on
prices.
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/0646V_1-2017-10-31.pdf
Corporate
In the quarter ended 30 September 2017, the Company cancelled
152,778 performance rights previously issued under the Wolf
Minerals Limited Performance Rights Plan, which lapsed due to the
vesting conditions not being met.
No shares were issued during the Quarter. The Company's current
capital structure is as follows:
Number Class
-------------- ----------------------------------
1,087,645,948 Fully Paid Ordinary Shares
-------------- ----------------------------------
273,350 Performance rights with a vesting
date of 30 June 2018
-------------- ----------------------------------
261,130 Performance rights with a vesting
date of 30 June 2019
-------------- ----------------------------------
1,086,394 Performance rights with a vesting
date of 30 June 2020
-------------- ----------------------------------
760,897 Performance rights with a vesting
date of 30 June 2021
-------------- ----------------------------------
Following the completion of the Company's financial year end
reporting activities and a number of project activities, Mr Stephen
Hill completed his contract assignment as the Company's interim CFO
on 20 October 2017. The Board would like to thank Mr Hill for his
assistance and contribution and wish him well for his future
endeavours. The Company is undertaking an external search for the
CFO role.
The Company's Notice of Meeting for its 2017 Annual General
Meeting was released on 20 October 2017.
Investor Relations
The Company's 2017 Annual Report and corporate video which
contains footage of the operations are available from the Wolf
website at www.wolfminerals.com.
ENDS
For further details, please contact:
Numis Securities: John Prior/James Black/Paul Gillam +44(0)20
7260 1000
Newgate: Adam Lloyd / Ed Treadwell +44 (0) 20 7653 9850
Wolf Minerals Limited: Richard Lucas +61 (0) 8 6143 2070
About Wolf Minerals
Wolf Minerals is a dual listed (ASX: WLF, AIM: WLFE) specialty
metals producer. In 2015, Wolf Minerals 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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