Deutsche Rohstoff AG takes over Wolfram Camp Mine in Australia

Deutsche Rohstoff AG takes over Wolfram Camp Mine in Queensland, Australia. Following completion of the due diligence process, Deutsche Rohstoff AG notified the seller of Wolfram Camp Mining Pty Ltd. that it wishes to adhere to the purchase contract concluded on 6 April 2011 and that it will refrain from exercising its option to withdraw. Australia’s Foreign Investment Review Board as well as the seller’s shareholder, Planet Metals Ltd., approved the transaction. After receipt of the first instalment in the amount of AUD 3.5m in the seller’s account, the transaction is deemed finalised. The closing payment of AUD 3.5m falls due and payable in shares or in cash by 1 September 2011. Wolfram Camp Mining Pty Ltd. holds an 85% stake in the tungsten and molybdenum mine bearing the same name (see press release of 6 April 2011, “wolfram” is a synonym for tungsten).

Production of tungsten and molybdenum concentrates projected to start this year

Heidelberg, Germany. Deutsche Rohstoff AG takes over Wolfram Camp Mine in Queensland, Australia. Following completion of the due diligence process, Deutsche Rohstoff AG notified the seller of Wolfram Camp Mining Pty Ltd. that it wishes to adhere to the purchase contract concluded on 6 April 2011 and that it will refrain from exercising its option to withdraw. Australia’s Foreign Investment Review Board as well as the seller’s shareholder, Planet Metals Ltd., approved the transaction. After receipt of the first instalment in the amount of AUD 3.5m in the seller’s account, the transaction is deemed finalised. The closing payment of AUD 3.5m falls due and payable in shares or in cash by 1 September 2011. Wolfram Camp Mining Pty Ltd. holds an 85% stake in the tungsten and molybdenum mine bearing the same name (see press release of 6 April 2011, “wolfram” is a synonym for tungsten).

In the preceding five weeks internal and external experts commissioned by Deutsche Rohstoff AG have carried out detailed due diligence on all aspects of the Wolfram Camp. This included a detailed investigation on available geological information, and a recalculation of the mineral resources available at Wolfram Camp. Mining and metallurgical studies were also undertaken, together with a detailed examination of the processing plant at the mine site. The market for tungsten and molybdenum concentrates as well as environmental, financial, legal and tax aspects related to Wolfram Camp Mining Pty Ltd were also considered in detail. One of the special foci of the due diligence process was placed on identifying the mistakes made in the past and specifying the concepts creating the groundwork for a successful operation of the mine in the future. The findings of the process may be summarised as follows:

  • The purchase represents an excellent opportunity for Deutsche Rohstoff AG to acquire a significant wolfram deposit and start production by the end of this year.
  • Mine operating performance can be optimised in particular through grade control, by modifying the installed processing equipment used for de-sliming and flotation as well as by means of an X-ray pre-sorter.
  • The volume of the resources proved under the Australian JORC Standard totals 1.42m tons, holding average concentrations of 0.60% of WO3 (wolfram trioxide) and 0.12% of Mo (molybdenum). Based on these calculations, a mine plan has been developed for mining 730,000 tons at a grade of 0.77% of WO3 and 0.056% of Mo. Open-pit mining will be conducted, an initial mine life extends until the end of the year 2014. Additional exploration is expected to extend the mine life considerably.
  • Start-up of tungsten and molybdenum concentrate production is projected before the end of the current year. Full-scale production of a maximum annual output of 2,400 tons of 65% WO3 concentrate (equal to 1,230 tons of pure tungsten) and 166 tons of 50% molybdenum concentrate is expected to be achieved in 2012.
  • Based on the current tungsten and molybdenum prices, the project will account for a net present value of approx. AUD 34m before tax (AUD 23m after tax) applying a 10% discount rate. This value solely reflects the current reserves to be exploited until 2014 and does not consider the significant potential for extending the reserves. The internal rate of return of the project reaches an after-tax value of 133%.
  • On the basis of the current price level, the concentrates will generate revenue of AUD 124m over the next four years.
  • The current prices for tungsten and molybdenum concentrates exceed the level, at which production at Wolfram Camp is considered profitable, by 42%.
  • Prior to commencement of production, an investment of approx. AUD 5m needs to be made. This capital expenditure mainly covers the procurement of an X-ray pre-sorter as well as an upgrade of the existing tailings storage facility.
  • All required permits and concessions have been obtained.

The months to come will focus on recruiting the required personnel, procuring the X-ray pre-sorter, modifying the processing plant, preparing the mining processes and upgrading the tailings dam. Additionally, off-take agreements will be concluded for the produced concentrates. Relevant negotiations with interested customers have already commenced. Production is planned to start as soon as possible, in any event by the end of this year. Operations are coordinated by Gus Phillips, CEO at Deutsche Rohstoff Australia.

Dr. Titus Gebel, CEO at Deutsche Rohstoff AG, commented on the successful acquisition: “Purchasing Wolfram Camp provides us with an excellent chance to become one of the few producers of a strategically important metal outside China. The processing plant was built as recently as 2008 and is in very good condition. Moreover, Deutsche Rohstoff has proved that we are very well proficient at mining dispersed mineralised vein-type deposits when exploiting our Georgetown gold mine. Last but by no means least: we can rely on an experienced and practised team in Queensland.”

Dr. Thomas Gutschlag, Deutsche Rohstoff AG’s CFO, adds: “We have bought a project for AUD 7m in which no less than AUD 34m have so far been invested. Our know-how collected in Australia and Germany creates the basis for making this mine another profitable production location within a short time.”

The marketplace for tungsten has been marked by a strong increase in prices in the preceding months. Experts expect prices to remain at a consistently high level in the years to come. Tungsten, just like rare earth elements, tin or tantalum, ranks among the type of metals which the German Federal Government and the EU Commission have classified as particularly important. About 85% of the world’s annual production volume of 61,000 tons of W (2010, pure tungsten metal) are exported from China. As for the other metals mentioned above, the Chinese Government has been implementing an export quota also for tungsten and a prohibition of exploring or producing tungsten in China, applicable to foreign companies for a couple of years now. Due to its hardness and its extraordinarily high melting point of 3,422 degree Celsius, tungsten is processed to harden tools, manufacture machine tooling, as alloy metal in the steel-producing industry, for bulbs, in the catalytic converter industry as well as in a multitude of further industrial applications.

Heidelberg, Germany, this 11 May 2011

Entry Standard-listed Deutsche Rohstoff AG is setting up a new commodity producer. The Group’s priority areas include gold, oil, gas and so-called ‘high-tech metals’ such as tungsten, tin and rare earth elements. All projects are located in politically stable countries, whereby special focus is placed on Germany. The Group’s business model is based upon (re)developing deposits which were already explored in the past. First production activities were taken up in January 2011 in Georgetown, Australia. For further information about Deutsche Rohstoff AG log on to www.rohstoff.de.

Contact:

Dr. Thomas Gutschlag
Deutsche Rohstoff AG
Friedrich-Ebert-Anlage 24, 69117 Heidelberg
Tel. (06221) 87 100-0
Fax (06221) 87 100-22
info@rohstoff.de
www.rohstoff.de

Horst Koppelstätter
Koppelstätter Kommunikation GmbH
Friedrichstraße 2, 76530 Baden-Baden
Tel. (07221) 97372 11
Fax (07221) 97372 22
hok@koppelstaetter-kommunikation.de

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