Thursday 24th April 2014

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Full Feas Ahead

Woulfe Fast-Tracks Tungsten and Gold in South Korea

By Greg Klein

He’s not so much having it both ways as hedging it both ways—gold against a bear market and tungsten against a bull. That helps explain Woulfe Mining CEO/President Brian Wesson’s excitement about his company’s two South Korea properties, the Sangdong Tungsten-Molybdenum Project and the Muguk Gold-Silver Project.

“If you look at tungsten and gold, they’re based on totally different fundamentals,” he says. “If the world tanks, our company’s got gold. If the world keeps going as it is, we’ve got both. If the world comes right, tungsten will climb because it runs the GDP.”

It lacks gold’s illustrious image, but tungsten is employed to render other metals tougher and more resistant to heat, such as the drill bits used in mining. It’s also used to create hard-metal alloys, lamp filaments, electrical and electronic contacts and in chemical applications such as pigments, paints and lubricants.

Woulfe Fast-Tracks Tungsten and Gold in South Korea

“I think it’s about to have its day because without tungsten you can’t make anything,” Wesson says. “It’s very strategic, and it was outperforming gold until America was downgraded. I think gold is just ticking past tungsten at the moment.” Sangdong had been in production until 1992, when it was shuttered by falling prices.

About 85% of world tungsten supply comes from China, which has slashed exports and now imports the stuff itself. Meanwhile, demand increases elsewhere. It’s usually traded in the form of ammonium paratungstate (APT), whose spot price shot from $261 per metric ton unit in October 2010 to a high of $465 last July, Wesson says. He expects the price to hit $475 next year.

Yet Sangdong’s April 2010 PEA based its numbers on a price of $250 per mtu. The study projected a 3.4-year payback on a CAPEX of $289.3 million, a 26.4% internal rate of return, a $462 million net present value (at an 8% discount rate) and a 40-year mine life.

Not only has APT’s spot price risen dramatically since then, but so has Sangdong’s resource. Its July 2011 43-101 estimated 5.97 million tonnes grading 0.42% WO3 (tungsten oxide powder) and 0.4% MoS2 (molybdenum disulfide) indicated and 18.57 million tonnes grading 0.45% WO3 and 0.05% MoS2 inferred. Drilling continues.

“Grades have gone up 30% on the new resource,” Wesson points out. “The average Chinese grade is 0.2. Our grade is twice the average Chinese grade and four times some of the little projects around the world.”

The company has skipped the prefeasibility stage. “Feasibility is what we really need because that’s what the market wants,” Wesson says. “Prefeasibility is a bit like scoping—it’s another nice document, isn’t it?”

In July the company announced a radically reduced CAPEX, dropping from $289.3 million to $135 million for a bulk underground drift and fill mining operation. The saving means reducing plant capacity from 2.4 million tonnes to 1.2 million tonnes a year.

And with construction beginning before feasibility’s finished, patience isn’t obviously a Woulfe virtue. “The document will hit the market in probably January,” Wesson says. “But we’ll start putting concrete on the ground before the end of the year. We bought the crusher; it’s actually on a ship on the way to the site.” Production’s slated for late 2012.

Why the hurry? Wesson explains, “Now that the price of tungsten has almost doubled, there’s a lot of interest in getting this thing going.”

Feasibility is what we really need because that’s what the market wants. Prefeasibility is a bit like scoping—it’s another nice document, isn’t it? —Brian Wesson

Which should, in turn, help finance Woulfe’s Muguk Gold-Silver Project. Another past-producing mine, Muguk has a 1994 non-43-101 resource of 620,000 gold ounces and 3.3 million silver ounces.

Again, things are moving quickly. “What’s very significant about Muguk is it was mined all those years at an average cutoff grade of 10 grams,” Wesson says. “At today’s price you can run that mine at about two grams. It closed in 1997, but the law in Korea requires you to do a full survey of the mine before you close. So we’ve got a detailed survey that allowed us to do this very accurate 3D model, and we’ve just appointed [AMC Consultants] to do our 43-101 resource,” which is due in about six weeks.

Production, he says, could be as little as a year away. “We know we got gold in the ground; we know its free milling; we know there’s no metallurgical risk. We have no doubt that the project would be economic. I would say with Muguk our next step is to get underground. It all depends on the market. If the markets are very good, and we could list off part of it and get equity, we would probably just open Muguk.

“Everybody’s looking at risk—country risk, commodity risk and timing,” Wesson continues. “In Korea we have security of title, a good legal system, stable country, the world’s eleventh-biggest economy. Both our commodities are very strong and both of them at different sides of the market. Our tungsten grades are twice as high as China’s. Our gold grade is substantially higher. That puts us in the low-production cutoff. We went around and found these projects mostly to find something that could give a return to shareholders.”

Woulfe also has three early-stage projects in South Korea: the Ogchon Uranium Project, the Yeonwha Lead-Zinc Property and the Chongyang Mine, a former tungsten producer.

Woulfe has no debt, $5 million in cash and another $5 million in warrants due in December, Wesson says. At press time the company had 268.5 million shares trading at $0.215 for a market cap of $57.7 million. As of July, major shareholders included Colonial Bank of Australia with 13.8% and Korea Zinc Co Ltd with 12.5%.


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