TORONTO (Reuters) - Woulfe Mining WOF.V has fast-tracked plans to bring the Sangdong tungsten mine back into production, as it looks to capitalize on higher prices driven by a Chinese clampdown on exports of the minor metal.
The company is modernizing the South Korea mine, which was shut down in 1992 due to falling metal prices, and plans to start building a new process plant on site this year, chief executive Brian Wesson told Reuters.
The push to get the mine back online comes as China, which produces 80 percent of the world’s tungsten, has cracked down on exports, sending prices up 90 percent in the last year.
“The issue at the moment is the grades are dropping — they’ve taken all the good stuff,” Wesson said of China’s tungsten mines. “So the cost of production is increasing.”
China’s domestic demand for tungsten, used in auto manufacture and in hard metals for mining and drilling, is rising, and that has reduced the supply available for export.
This has sent the price of APT (ammonium paratungstate), a processed form of tungsten, up to $460 per unit, or $46,000 a tonne, from $240 per unit a year ago, leaving customers like Korea’s TaeguTec Ltd and Japan’s Mitsubishi Corporation (8058.T) scrambling for new suppliers.
Wesson said Woulfe plans to start up production by late 2012 at Sangdong, which is just up the road from a TaeguTec facility. The project will produce some 4,000 tonnes of APT annually, along with molybdenum.
Modernizing the mine and building the plant to process tungsten into APT will cost about $135 million, but annual revenues from APT alone could top $180 million at current prices, said Wesson.
“We’re looking to get a very favorable off-take agreement with somebody,” he said. “That’s likely Korean, but you never know. Obviously it comes down to the best value for the company.”
With the tungsten mine well on its way to development, Wesson said Woulfe will be able to focus more attention on its Muguk project, once Korea’s largest producing gold mine.
The Muguk mine shut down in the late 90s, when the gold price slipped below $400 an ounce. With the spot gold near a record high over $1,660 an ounce, Woulfe has started drilling to better define the historical resource.
“We know gold is there,” said Wesson. “We just need to understand it under modern terms.”
Eventually Woulfe will likely spin off the gold project into a new company.
But a spin-off is still some time away, said Wesson, who is busy trying to get Sangdong online as soon as possible.
The company recently got permits to build a new adit for the mine, which will allow it to take bulk samples for the pilot plant, and to use larger modern mining equipment.
The next step will be a prefeasibility study next month, followed by a feasibility study before the end of the year.
Reporting by Julie Gordon; editing by Janet Guttsman