TIDMWLFE
RNS Number : 4734M
Wolf Minerals Limited
30 April 2018
30 April 2018
Wolf Minerals Limited
Quarterly Activities Report
For the Three Months Ended 31 March 2018
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 31 March 2018 (the
Quarter).
Highlights
ü Interim Managing Director, Richard Lucas appointed as Managing
Director.
ü Operating performance building on improvements prior to
extreme weather in March. Tungsten production up 40% over the last
12 months to 31 March 2018.
ü Pre-processing trial and ore body drilling program commenced
to support further development opportunities.
ü Tungsten price continues to strengthen, up 13 % during the
Quarter and currently US$325 per mtu.
ü Financing arrangements in place to support Wolf in achieving
long term self-sustaining cash flows.
ü Settlement agreement on Hemerdon Project EPC contract reached
with GR Engineering in April 2018.
Commenting on the Company's recent performance, Wolf's Managing
Director, Richard Lucas said:
"A very encouraging start to 2018, with the improvements to the
gravity fines circuit and the return to 7 days a week operations
providing an increase in throughput before mother nature intervened
in March with snow and freezing temperatures across the UK. This
new challenge delayed production whilst safety, access, and
equipment protection were prioritised and supply chains
re-established.
Subsequently, with the ore feed continuing to get harder,
optimisation activities have resumed to focus on tungsten recovery,
concentrate quality and waste minimisation to improve operating
cash flows.
The tungsten price has continued to build upon the strong 2017
performance, rising further to US$325 per mtu in Europe and China
followed by balanced market conditions in March.
The successful restructure of the Company's financing
arrangements during the Quarter has provided additional flexibility
to address our operational requirements as well as capacity to
investigate value adding initiatives for Wolf's long-term
growth."
Overview
There were two lost time injuries during the Quarter (compared
to three in the previous quarter) and no Category A environmental
incidents (compared to one in the previous quarter).
The net cash used in operating activities for the Quarter was
A$7.0 million, including A$2.5 million on development, A$13.6
million on production and A$0.7 million on finance costs, with
revenue of A$13.2 million. As stated in the quarterly cash flow
report (Appendix 5B), also released today, the Company had A$4.4
million cash at the end of the Quarter, with further funding of
A$9.0 million available to support revenue, on a forecast gross
cash outflow of A$28 million for the coming quarter. Please refer
below for further details on funding arrangements.
Mining Activities
During the Quarter, mining activities remained focused on ore
feed blending for the processing plant and the construction of
Stage 3.1 of the Mining Waste Facility (MWF).
A total of 506,584 bank cubic metres of material was moved
during the Quarter, with the ore grade averaging 0.20% WO(3) and
0.04% Sn. The mine has progressed to a depth of 50 metres and is
expected to complete the transition to consistently harder granite
ore feed in the second half of 2018. Subsequent to Quarter end, the
Company has commenced a further ore body drilling programme to
provide the next stage of grade control data and also an
opportunity to enhance the resources classification for the
deposit. The programme includes four holes 500 metres deep angled
below the final pit design, to expand the understanding of the
opportunity to access further ore at depth and also to determine
the extent of mineralisation intersected in the surrounding killas
within the current pit envelope.
Also, during the Quarter, the Company commenced the
pre-processing trial on a range of ore feed qualities and
mineralised wastes to identify potential improvements in processing
efficiency and project cash flows. The initial results on the lower
quality ore feeds have successfully replicated the laboratory
testwork. The trial is continuing throughout the June 2018 Quarter,
with potential to be expanded across additional material flows
generated from the processing plant.
Processing Plant
The key production results for the last four quarters are shown
in the following table:
Key Production Mar Dec Sep Jun
Results Qtr Qtr Qtr Qtr
2018 2017 2017 2017
---------------- ----------- ---------- --------- ---------- --------
Throughput
tonnes 521,812 485,788 474,170 490,297
----------------------------- ---------- --------- ---------- --------
(Note (Note (Note
Change Quarterly 1) +7% 1) +2% 1) -3% +7%
(Note (Note (Note
2) -20% 2) +3% 2) +29%
---------------------------- ---------- --------- ---------- --------
YTD (Note
1) +4%
(Note
2) +26%
---------------- ----------- ---------- --------- ---------- --------
Production
tungsten mtu 34,602 43,498 35,601 30,996
----------------------------- ---------- --------- ---------- --------
Change Quarterly -20% +22% +15% +15%
---------------- ----------- ---------- --------- ---------- --------
YTD +40%
---------------------------- ---------- --------- ---------- --------
Production
tin tonnes 81 124 49 41
----------------------------- ---------- --------- ---------- --------
Change Quarterly -35% +253% +19% 0%
---------------- ----------- ---------- --------- ---------- --------
YTD +66%
---------------------------- ---------- --------- ---------- --------
YTD: Comparison to the same period in the prior year (July -
March).
Note 1: Based on tonnage reported.
Note 2: Adjusted for 5-days a week throughput in the September
and December 2017 Quarters.
The operating performance for the Quarter continued to improve
prior to the extreme weather event in March, which saw temperatures
quickly fall well below freezing and snow restricting road access.
This generated new safety risks, limited production and disrupted
supply chains across the United Kingdom.
Earlier in Quarter, upon the return to 7 days operations and the
implementation of the improvements in the gravity fines circuit,
capacity constraints were able to be alleviated and throughput
tonnes tracked +25% higher through January and February when
compared to the December quarter. Also, opportunities for further
improvements were identified in the crushing circuit, with material
upgrades for crusher segments to be trialled to extend run time
periods in preparation for more consistent harder granite ore feed.
However, the downtime during the March weather event and the
subsequent restart period constrained efforts to rebuild stable ore
feed until early April.
The commissioning of the improvements in the gravity fines
circuit initially required time to achieve stable operating
parameters in January as feed tonnes were also increasing into the
circuit, before beginning to provide an increase in circuit
tungsten recovery to pre-concentrate in February. This, together
with the associated restricted operating windows for optimisation
activities in the dense media separation circuit, limited growth in
tungsten pre-concentrate recovery prior to March. Following March,
tungsten pre-concentrate production in April has returned to
previous levels allowing optimisation activities to resume.
In the refinery, the kiln performed well with another strong
period of reliability and run time, replicating the average monthly
throughput tonnes from the previous quarter across January and
February. The final tungsten concentrate production during this
period was consistent with the December quarter monthly average,
before the downtime and subsequent restart following the March
weather event impacted recoveries and production. The excess
capacity in the kiln is also allowing further optimisation
activities to be explored with the kiln product to improve
concentrate quality.
Sustainability
The site recorded two lost time injuries during the Quarter
(compared to three in the previous quarter).
The Company's investment in safety awareness has provided a more
detailed database of risk assessments and improvements to operating
procedures, with consequently longer injury free periods being
achieved. Further, the additional safety risks presented by the
adverse weather event were addressed without injury, however
opportunities were identified to be better prepared for any such
event in the future.
Dedicated safety resources have been implemented to support
operational teams, with further leadership and coaching ongoing to
embed an injury free culture.
There were no Category A environmental incidents during the
Quarter (compared to one in the previous quarter). The Company's
ISO accredited environmental management systems are being updated
to ensure that they meet the new standard, ISO 14001:2015, with
completion targeted for September 2018. As part of this exercise,
the Company is also reviewing its waste streams for continuous
improvement opportunities and operating cost reductions.
Implementation of the noise and vibration management plan agreed
with the Environment Agency (EA) began during the Quarter, with
preliminary engineering and other enabling works progressing ahead
of the installation which is scheduled to commence in the June 2018
Quarter.
Subsequent to Quarter end, the Company entered into a settlement
agreement with GR Engineering Services Limited (GRES) to fully and
finally settle all claims in relation to the EPC contract, without
admission of liability by either party.
Under the terms of the settlement, GRES has agreed to contribute
a settlement sum to Wolf to fully fund the expected cost of the
noise and vibration management plan at no further cost to the
Company. Upon receipt of the settlement sum, Wolf has agreed to
return to GRES all security it holds under or in connection with
the Contract, including the GBP7.5 million Performance Bond.
The settlement is not expected to provide any change in the
Company's operating performance or cash flows and therefore is not
disclosed in the quarterly cash flow report (Appendix 5B) also
released today.
Senior Debt Restructure and Additional Funding
The progressive improvements in the operating performance at
Drakelands enabled Wolf and its key project stakeholders to develop
financing arrangements to support the Company in achieving long
term self-sustaining cash flows. As a result, during the Quarter
the Company executed binding agreements with:
-- the existing senior lenders (Senior Lenders) for an extension
to the standstill period of certain loan agreement conditions until
31 January 2019 and further restructure of the senior debt
currently outstanding (Senior Debt Restructure);
-- Resource Capital Fund VI L.P. (RCF VI) to provide an
additional GBP10 million, secured subordinated loan under the
existing bridge loan facility (Bridge Facility), with the potential
for this to be increased to GBP15 million at the discretion of RCF
VI. The additional GBP10 million brings the total subordinated
loans amount to GBP65 million. The subordinated loans are accruing
interest at a rate of 15% per annum, which is being capitalised. If
certain conditions precedent are satisfied (including shareholder
approval), RCF VI can elect that the subordinated loans switch to
subordinated convertible notes. The Company will, in due course,
seek shareholder approval to enable the issue of the convertible
notes and subsequent conversion into ordinary shares in accordance
with the convertible note terms under the Bridge Facility. The
convertible notes are also conditional upon, amongst other things,
RCF VI obtaining FIRB approval: and
-- the Company's existing offtakers, Global Tungsten &
Powders Corp (GTP) and Wolfram Bergbau und Hütten AG (WBH), to
align the Supply Agreements with the extended standstill period
under the Senior Debt and Bridge Facility.
The first GBP5 million tranche of the additional funding from
RCF VI was received in February and, subsequent to Quarter end, the
final GBP5 million tranche has been received in April.
As noted above, the March operating performance was constrained
by the adverse weather event, impacting cash flows for the Quarter.
Accordingly, Wolf remains in discussions with RCF VI on releasing
the additional discretionary GBP5 million as needed to progress the
Company's transformation activities to achieve design performance
at Drakelands and pursue further development opportunities for long
term growth in 2018.
Mining Tenements
As at 31 March 2018, the Company has an interest in the
following projects:
Tenement Location Interest Status Grant Date
--------- --------------- --------- ------- ------------
Hemerdon United Kingdom 100% Leased 10 February
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 30 June 2018, Wolf will continue to
progress the operations at Drakelands and build on its
transformation. Details of proposed activities include:
-- Continuing to drive improvements in safety performance, focusing on leadership and coaching.
-- Returning to stable operating conditions for optimisation activities in the processing plant.
-- Completing the ore body drill program and ore pre-processing trial.
-- Installing the new building cladding solution for the noise and vibration management plan.
-- Negotiating release of the further GBP5 million funding as needed with RCF VI.
Tungsten Market Trends
The ammonium paratungstate (APT) price published by London Metal
Bulletin (FOB Europe) continued to strengthen during the Quarter,
improving from US$293 per mtu to US$325 per mtu by the end of the
Quarter. The average for the Quarter was US$318 per mtu up from
US$282 per mtu in the December quarter - an increase of 13%.
The APT price rose quickly at the start of the Quarter and then
stabilised in the US$320 - US$325 per mtu range through March 2018.
Following the lunar new year, the tungsten market in China remained
buoyant and there continues to be positive indicators of growth in
tungsten consumption in the oil, gas and mining sectors with US rig
counts rising above 1,000 for the first time since April 2015 as
producers continue to ramp up activity amid stable crude
prices.
Corporate
Appointment of Managing Director
During the Quarter the Board appointed interim Managing
Director, Richard Lucas, as the Company's Managing Director.
Chairman, Mr John Hopkins OAM said "the Board is delighted with
the progress of Richard and his team over the last 12 months. We
have the upmost confidence in Richard's leadership and look forward
to his future contribution to the growth and the advancement of the
Company".
Mr Lucas was appointed as interim Managing Director in April
2017 as part of the leadership transition and the need for a
greater onsite executive team commitment to ensure the long term
successful operation of the Drakelands mine.
During the Quarter the Company closed its Perth office and moved
its principal place of business to its Drakelands operation.
Share Issues
The Company issued a total of 672,000 ordinary shares during the
Quarter to the Company's Non-Executive Directors under the Wolf
Minerals Limited Directors' Share Plan (as approved by shareholders
at the 28 November 2017 Annual General Meeting). Under the Plan,
Non-Executive Directors receive a portion of their fees in shares,
which assists the Company preserve its cash reserves. The Company's
current capital structure is as follows:
Number Class
-------------- ----------------------------------
1,089,368,830 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
-------------- ----------------------------------
929,155 Performance rights with a vesting
date of 30 June 2021
-------------- ----------------------------------
2,936,379 Performance rights with a vesting
date of 30 June 2022
-------------- ----------------------------------
Investor Relations
In March 2018, the Company provided an updated presentation at
the Proactive Investors One2One Mining Investor Forum in London,
highlighting the improvements to date and significant growth
opportunities available at Drakelands to build shareholder value.
Further investor roadshows are being planned for the second half of
2018 to provide an opportunity for investors to engage with the
Company on its future plans. Information about the Company
including the Company's corporate video, which contains footage of
the operations, and the latest presentation is 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 +44 (0) 20 7653 9850
Wolf Minerals Limited: Richard Lucas + 44 (0) 17 5239 3235
About Wolf Minerals
Wolf Minerals is a dual listed (ASX: WLF, AIM: WLFE) specialty
metals producer. In late 2015, Wolf Minerals completed the
development of a large tungsten resource at its Drakelands Mine,
located at Hemerdon, in southwest England.
DISCLOSURES
Certain disclosures in this report, including management's
assessment of Wolf's plans and projects, constitute forward looking
statements that are subject to numerous risks, uncertainties and
other factors relating to Wolf's activities as a specialty metals
exploration and producing company that may cause future results to
differ materially from those expressed or implied in such
forward-looking statements. Descriptions of these risks can be
found in Wolf's various statutory reports. Readers are cautioned
not to place undue reliance on forward-looking statements. Wolf
expressly disclaims any intention or obligation to update or revise
any forward-looking statements whether as a result of new
information, future events or otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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