An emerging tungsten producer that’s looking to fast-track hard-rock production at its Mt Carbine project in northern Queensland. The company is developing its association with Japanese heavyweight, Mitsubishi.
| Corporate Details |  |
| Status: Emerging Producer | |
| Size: Small Cap | |
| Commodity Exposure: Tungsten | |
| Share Price: $0.13 | |
| 12-month Range: $0.037 – $0.14 | |
| Shares: 297m, Options: 7.9m | |
| Top 20: 43% | |
| Net Cash: $2.1m | |
| Market Value: $39m |
| Key Parameters | Rating (✓out of 5) | Quarterly Statistics |
| Management Quality | ✓✓✓✓✓ | Q2 2014 Expl’n & Dev’t Spend: $0.349m |
| Financial Security | ✓✓✓✓ | Q2 2014 Admin Spend: $0.414m |
| Project Quality | ✓✓✓✓✓ | Exploration Spend 46%, Admin Spend 54% |
| Exploration / Resource Potential | ✓✓✓✓✓ | Q3 2014 Forecast Exploration Spend: $0.51m |
| Project Risk | ✓✓✓✓✓ | Q3 2014 Forecast Admin Spend: $0.2m |
We first introduced Carbine Tungsten to our Portfolio during January 2011 and it has remained one of our long-standing Portfolio tungsten exposures. The company’s recommissioned Mt Carbine project in northern Queensland has a solid production history as one of Australia’s leading tungsten producers, generating 40% of Australia’s output during the mid-1970s to mid-1980s. The company has tested the patience of long-time investors, but now is importantly making meaningful strides towards production.
Following recommissioning during 2012, high-grade tungsten concentrate has been produced on a limited scale by way of a tailings retreatment operation that is essentially a ‘starter operation.’ The strategy has involved low initial capital expenditure and modest initial cash flows designed to enable the company to learn more about the deposit from a bigger picture perspective. The ultimate goal has always been the resumption of primary tungsten production.
Carbine Tungsten’s strongly performing share price reflects the important steps the company is taking towards production status. This has culminated over the past six months with completion of a due diligence study by project partner Mitsubishi, beefing up of the company’s production experience with the appointment of a well-credentialed General Manager of Operations at Mt Carbine, along with the recently announced US$15 million secured loan from project partner Mitsubishi.
Recent Activity
US$15 million Mitsubishi loan deal
Carbine Tungsten has announced that Mitsubishi Corporation RtM Japan (RtMJ) has approved a US$15 million secured loan (including prepayment fund of the previous US$1 million loan) to fund CNQ’s initial phase of the Mt Carbine hard rock tungsten project, allowing the implementation of a 12 million MT stockpile project.
The finalisation of the loan agreement, which contains various conditions precedent to drawdown, is subject to final legal confirmation and CNQ’s board approval. The signing of the agreement is expected to take place during October 2014.
Confirmation of funding obviously puts Carbine Tungsten in a particularly good place in terms of its production ambitions and also reinforces Mitsubishi’s commitment to the project. Such a relationship with a ‘big brother’ is vitally important in a market where funding is extremely difficult to access.
Project Overview
Following nominal project recommissioning during 2012, high-grade tungsten concentrate has been produced by way of an initial tailings retreatment operation (essentially a ‘starter operation’ in the overall scheme of things at Mt Carbine). Tailings retreatment has been about low initial capital expenditures in order to generate modest initial cashflows that allow the company to learn more about the deposit from a larger production perspective. The bigger picture has always been the resumption of primary tungsten production.
While the company will continue to optimise the tailings retreatment plant to further enhance recoveries and provide ongoing cash flow, the focus is now firmly shifting towards the necessary development activities to commence processing of the existing hard-rock stockpiles, as well as bringing the hard-rock open-pit into production. The catalyst was the positive hard-rock feasibility study results announced during H2 2012, as well as the encouraging level of interest from both an off-take and funding perspective.
Mt Carbine was discovered at the end of the 19th century and was a major historical tungsten producer. The deposit is still relatively unexplored and there is considerable exploration potential for new tungsten mineralization within the mining leases and the surrounding exploration tenements. The present mining leases contain tailings dams (~2 million tonnes at 0.1% WO3), a low-grade mineralisation stockpile (historical records indicate ~12 million tonnes), and ~6 million tonnes of mineralised ore-sorting rejects.
The company completed its first drilling program and re-sampling of historic drill-core at Mt Carbine during 2010, resulting in the announcement of a maiden JORC compliant Inferred Resource estimate of 39 million tonnes of hard-rock mineralisation at a grade of 0.14% WO3 (at a cut-off of 0.05% WO3), adjacent to the existing open-pit.
Although it is relatively low in grade, the Mt Carbine mineralisation is highly amenable to ore-sorting, a pre-concentration process that retrieves a small tonnage of high-grade mill feed from a large tonnage of low-grade ore, at low-cost and with minimal loss of valuable mineral. Ore-sorting was successfully used at Mt Carbine between 1973 and 1986; however there have been important advances since then.
The company has a Memorandum of Understanding (MOU) with existing off-take partner, Mitsubishi, which will support the development of the project’s existing hard-rock stockpiles and historical open-pit mine. The MOU outlines MCU’s intention to provide funding (complete) for the hard-rock project and continue to participate in off-take once the project enters the development phase. The MOU covers both potential funding and technical collaboration for the development of the hard rock project, and includes an off-take consideration for 80% of the tungsten stockpiles and 50% of the ore produced from the historical open-pit tungsten mine, once in production.
The first stage of development will involve mining the ore stockpiles accumulated from the old tungsten mining activities conducted at Mount Carbine. Initially, 1.5Mt p.a. will be processed to produce about 78,500 metric tonne units (mtu) p.a. (an mtu is equivalent to 10 kilograms of tungsten). Operations will ultimately be ramped up to 157,500 mtu p.a. under the stage 1 plant configuration, with an initial mine life of 13 years.
Summary
The Mt Carbine project offers CNQ a number of options for growth from its existing tailings operational base at a time when the tungsten price remains buoyant. The partnership with and support of Mitsubishi is hugely important and their growing commitment to the project helps reinforce confidence. With Mount Carbine already designated as a mine site, approvals are in place for mining operations to commence, which will allow production from stockpiles to commence in early 2015, with the potential for first revenues during H2 2015. Given our strong existing exposure to Carbine Tungsten, we currently retain a Hold recommendation on the stock; although we maintain a Speculative Buy recommendation for those without exposure.
