TIDMWLFE
RNS Number : 9964U
Wolf Minerals Limited
18 July 2018
18 July 2018
Wolf Minerals Limited
Quarterly Activities Report
For the Three Months Ended 30 June 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 30 June 2018 (the
Quarter).
Highlights
ü Operating performance regaining strength following the extreme
cold weather in March, with record throughput in June. Tungsten and
tin production up 41% and 67% respectively over the last 12
months.
ü Pre-processing trial successful in upgrading ore feed to over
1% WO(3) , with operating plan being accelerated.
ü Tungsten price up 6% during the Quarter and currently at its
highest level since 2014 at US$347 per mtu.
ü Discussions nearing completion with financial stakeholders on
next tranche of funding required by the end of July to satisfy the
Company's short-term working capital requirements.
Commenting on the Company's performance during the Quarter,
Wolf's Managing Director, Richard Lucas said:
"The June quarter operating performance regained momentum
following the extreme cold weather in March, with several improving
trends gathering strength and culminating in record monthly
throughput in June. The additional volumes have provided a more
stable operating environment which has driven tungsten recovery and
product quality improvements.
In addition, the successful ore pre-processing trial results
have encouraged the Company to accelerate an operating plan to
enhance tungsten recovery and improve operating cashflows in the
current strong tungsten market conditions, with the tungsten price
reaching its highest level since 2014.
Following these positive results, the Company is nearing
agreement to obtain the funding required to support its short-term
cash flows and continue its transformation in 2018."
Overview
There were no lost time injuries during the Quarter (compared to
two in the previous quarter) and no Category A environmental
incidents (compared to none in the previous quarter).
The net cash used in operating activities for the Quarter was
A$2.5 million, including A$0.8 million on development, A$10.4
million on production and A$0.3 million on finance costs, with
revenue of A$12.7 million. As stated in the quarterly cash flow
report (Appendix 5B), also released today, the Company had A$19.8
million (GBP11 million) total cash at the end of the Quarter, of
which A$17.0 million (GBP9.5 million) was restricted for use on the
noise and vibration management plan (NVMP), on a forecast gross
cash outflow of A$39.5 million, including A$7 million (GBP3.9
million) of NVMP costs, for the upcoming quarter. Further details
on funding arrangements is provided below.
Mining Activities
During the Quarter, mining activities centred upon the
increasing ore feed volumes required for the processing plant and
the embankment construction of the Mining Waste Facility (MWF). In
addition, further studies commenced on the optimisation of waste
activities to reduce operating costs.
A total of 1,125,471 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 is progressing into harder granite ore feed,
with a +10% improvement in the coarser fraction volumes reporting
to the dense media separation (DMS) circuit in the processing plant
during the Quarter. The ore body drilling programme commenced in
April remains on schedule to deliver additional opportunities to
develop further value from the pit envelope, with results expected
in the September quarter.
The pre-processing trial continued during the Quarter, with
success on the lower quality ore feeds confirming an upgrade in the
tungsten head grade to over 1% WO(3) . The initial results of the
metallurgical testwork on this material indicates the upgraded ore
feed from pre-processing could provide a significant improvement in
tungsten recoveries, with further testwork required to confirm the
expected processing and cash flow benefits. The encouraging trial
performance has accelerated the development of an operating plan
for pre-processing to commence as soon as possible, whilst the
trial continues into mineralised waste in July.
Processing Plant
The key production results for the last four quarters are shown
in the following table:
Key Production Results June Mar Qtr Dec Qtr Sep Qtr
Qtr 2018 2018 2017 2017
Throughput tonnes 554,605 521,812 485,788 474,170
---------- -------- -------- --------
+7% (1) +2% (1) -3% (1)
-20% +3% +29%
Change Quarterly +6% (1)) (2) (2) (2)
----------- ---------- -------- -------- --------
+6% (1)
+23%
YTD (2)
------------------------------------ ---------- -------- -------- --------
Production tungsten
mtu 42,314 34,602 43,498 35,601
---------- -------- -------- --------
Change Quarterly +22% -20% +22% +15%
----------- ---------- -------- -------- --------
YTD +41%
------------------------------------ ---------- -------- -------- --------
Production tin tonnes 70 81 124 49
---------- -------- -------- --------
Change Quarterly -14% -35% +253% +19%
----------- ---------- -------- -------- --------
YTD +67%
------------------------------------ ---------- -------- -------- --------
YTD: Comparison to the same period in the prior year (July -
June).
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 regained strength
following the extreme cold weather in March, with throughput,
production and sales all recording improvements. The full year
results included throughput exceeding 2 million tonnes for the
first time following a production record of 222,541 tonnes for the
month of June. The increased volumes also provided a record in kiln
throughput of 2,274 tonnes for the Quarter, including a monthly
record of 790 tonnes in May.
The material upgrade on crusher segments has been a significant
driver of the increased volumes in the Quarter, leading to greater
availability and an opportunity to raise the throughput rate as
harder granite ore feed becomes more consistent. The initial trial
of the new crusher segments was successful and has improved
self-sustainability and operating costs, with the segments now able
to be refurbished on site.
Following the improved performance in the crushing circuit, the
subsequent operating stability in the DMS and fines recovery
circuits has provided an increase in the tungsten recovery rate at
the pre-concentrate stage, improving +5% compared to the previous
quarter, resulting in +22% increases in both pre-concentrate and
final mtu production.
There have been significant gains made over the last 12 months,
with the tungsten recovery rate at the pre-concentrate stage
improving +12% for the Quarter, and +33% increases in both
pre-concentrate and final mtu production compared to the June 2017
quarter.
In addition to the tungsten recovery rate increases, the final
concentrate quality improved by +4% WO(3) grade in the Quarter,
providing a higher net realised value on a rising tungsten
price.
The Company's transformation activities in the September quarter
targeting forecast production improvements include:
Availability
-- Developing further expertise on quick change management
systems for critical high wear assets, through dedicated
resources;
-- Additional stockpile capacity to decouple the crushing circuit from the DMS circuit;
Throughput
-- Increasing the capacity of the DMS circuit;
Recovery
-- Further upgrades and modifications to the crushing circuit
and scrubber to improve metal split to the DMS circuit;
-- Implementing new technologies to assist operators and automate process controls;
-- Optimising the DMS circuit for sizing and scavenging activities;
-- Commencing feed of upgraded ore from pre-processing activities; and
Product quality
-- Additional technology to enhance magnetic separation efficiency.
Sustainability
The site recorded no lost time injuries during the Quarter
(compared to two in the previous quarter), with the Company
reaching 96 injury free days at Quarter end.
The Company has appointed a new Health & Safety Manager in
June, with a detailed review of the management system and safety
performance in progress as part of continuous improvement
initiatives across the site. Preparations are also underway for the
site to accommodate the NVMP installation works in conjunction with
an operating facility, to ensure additional health and safety
controls are implemented to support the site activities during this
time.
There were no Category A environmental incidents during the
Quarter (compared to none in the previous quarter). The Company was
also successfully recertified and achieved ISO accreditation for
its environmental management systems under the new standard, ISO
14001:2015.
Implementation of the NVMP agreed with the Environment Agency
(EA) progressed during the Quarter, with the completion of
preliminary engineering and other enabling works ahead of
finalising the installation schedule. Subsequent to Quarter end,
the construction contractor commenced on site on 9 July 2018, with
site activities in progress to prepare for installation over the
next three quarters.
During the Quarter, 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 agreed to contribute a
settlement sum to Wolf to fully fund the expected cost of the NVMP
at no further cost to the Company. Wolf has received the settlement
sum, and returned to GRES all security it held under or in
connection with the Contract, including the GBP7.5 million
Performance Bond.
Funding Arrangements
In April 2018, the Company received the second tranche of GBP5
million from the additional GBP10 million secured subordinated loan
under the existing bridge loan facility (Bridge Facility) from
Resource Capital Fund VI L.P. (RCF VI), bringing the total
subordinated loans amount to GBP65 million. The Bridge Facility can
be increased by a further GBP5 million at the discretion of RCF
VI.
The Company's cash position at the end of the Quarter was A$19.8
million (GBP11 million), of which A$17.0 million (GBP9.5 million)
was restricted for use on the NVMP. There is the potential that the
A$17.0 million (GBP9.5 million) may be excess to NVMP requirements,
however access to this cash for working capital purposes would
require the consent of the senior lenders.
Wolf is in discussions with its financial stakeholders regarding
further funding of A$7.1 million (GBP4 million) and other
opportunities to support short term cash flows as the Company
progresses its transformation activities in the September quarter.
The Company is aiming to conclude the first stage of these
discussions and reach agreement shortly, in order that the first
tranche of further funding (circa GBP2 million) is received by the
end of July, which is necessary to ensure that the Company has
sufficient working capital to meet its short-term requirements to
continue as a going concern.
Mining Tenements
As at 30 June 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 September 2018, Wolf will continue to
progress the operations at Drakelands and build on its
transformation. Details of proposed activities include:
-- Finalising the health and safety review and improvement plan.
-- Implementing further production improvement initiatives in the processing plant.
-- Completing the ore body drill program and ore pre-processing
trial and developing the pre-processing operating plan.
-- Commencing installation works for the noise and vibration management plan.
-- Finalising agreement with financial stakeholders on support for short term cash flows.
Tungsten Market Trends
The ammonium paratungstate (APT) price published by London Metal
Bulletin (FOB Europe) continued its strong run during the Quarter,
improving from US$325 per mtu to US$347 per mtu by the end of the
Quarter. The average for the Quarter was US$336 per mtu up from
US$318 per mtu in the June quarter - an increase of a further +6%,
bringing the 6 month total to +19% and the 12 month total to
+65%.
The APT price reached its highest level since 2014, driven by
supply constraints in China as the largest producing region in
Ganzhou reduced volumes whilst improving environmental measures
following the latest round of government inspections. The demand
for tungsten remains strong with European car sales and the US rig
count improving in the Quarter.
Corporate
The Company issued a total of 715,503 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.
In addition, on 3 July 2018, the Company issued 795,918 shares
to a former employee upon vesting of performance rights issued in
accordance with the Wolf Minerals Limited Performance Rights
Plan.
The Company's current capital structure is as follows:
Number Class
1,090,880,251 Fully Paid Ordinary Shares
---------------------------------------
261,130 Performance rights with a vesting date
of 30 June 2019
---------------------------------------
290,476 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
No investor presentations were made during the Quarter. A
program of investor roadshows are being planned for late 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, is available from
the Wolf website at www.wolfminerals.com.
ENDS
Wolf Minerals Limited
Richard Lucas + 44 (0) 17 5239 3235
Numis Securities
John Prior / James Black / Paul
Gillam +44(0)20 7260 1000
Newgate
Adam Lloyd +44 (0) 20 7653 9850
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 news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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