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Tungsten production fall offsets significant positive developments in Wolf’s December quarter

Wolf Minerals reported revenues from sale of tungsten concentrates at its Drakelands open-pit mine, in Devon, of A$5.4m for the quarter ended 31 December 2016. After considering spending of A$4.2m on development, A$20.7m on production and A$5.0m on finance costs, net cash used in operating activities for the quarter was A$24.6m.

At the end of December, the company had A$3.8m in cash as well as A$10.2m in available loan facilities to support revenue, on a forecast cash outflow of A$19.5m in the current quarter.

During the quarter, Wolf received approval to operate its tungsten plant on a 24/7 basis, permanently, and permission to extend mining activities to 2036. Both permissions will have a significant positive impact on future production. The increase in plant working hours means that the company can up annual ore throughput from 3Mt to approximately 3.8Mt.

The mine, which opened in September 2015, has struggled to reach planned production rates owing to low plant recoveries, caused by finer than expected ore and mechanical failures in the plant. In addition, cashflow has been negatively affected by continuing low tungsten prices on the world markets.

Since the beginning of 2016, the performance of the plant has improved and the September quarter saw a significant upturn in ore processed and tungsten produced (30,000 metric tonne units (mtu) of tungsten concentrate). However, in the December quarter, poor availability of the refinery circuit led to a fall in tungsten concentrates to 24,390mtu.

During the December quarter, the company executed agreements with its existing senior lenders for a standstill and restructure of the outstanding senior debt, and with Resource Capital Fund to provide a £20 million, 12-month secured bridge loan facility (See article 24 October).

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