Australian Company Marches towards Completion of Watershed Tungsten Study

Vital Metals (ASX: VML) is moving closer to the completion of a Definitive Feasibility Study (DFS) for its Watershed tungsten project in Queensland, having received detailed engineering designs. 
The DFS is slated for completion in the March quarter of 2013, with Vital’s end goal being production by 2014.
Mark Strizek, managing director, commented: “The Watershed Definitive Feasibility Study is in the final furlong with tangible results expected to be available in the next quarter as to the project’s value, CAPEX and OPEX.”
Vital will decide on the best configuration for plant based on capital cost and return, which will lead into pit optimisation and financial modelling.
This will then pave the way for the company to provide an update on project value.
Vital has made substantial progress on metallurgy at the project, with whole of ore flotation testwork indicating the potential to significantly improve the economics of the project through an increase in the recovery of scheelite mineralisation.
Lock cycle tests have been able to achieve a concentrate grade of 65% tungsten for a scheelite recovery of 84%.
The addition of whole of ore flotation to the DFS means that Vital is optimising two metallurgical processes with the goal of identifying which one provides the most cost-effective dollar per mtu option with regards to both capital and operating costs.
Given the high grade scheelite concentrate and high metal recoveries being achieved whole of ore flotation is currently Vital’s preferred option.
Vital and farm-in partner Japan Oil, Gas and Metals National Corporation (JOGMEC) have had meetings with five Japanese companies that have declared an interest in the project as potential partners and offtake buyers.
JOGMEC has been a key player in initiating discussions between Vital Metals and interested parties, as it has a mandate to secure supplies of ores and metals for Japanese companies, which is the reason for its involvement in the Watershed Project.
Japan needs a new source of tungsten, with 85% of tungsten coming from China alone.
JOGMEC is earning a 30% stake in the project by funding the Definitive Feasibility Study.
This partnership values Watershed tungsten project at $18 million.
Importantly, the JOGMEC funding has been brought forward from $900,000 to a complete spend of $5.3 million by the end of the March quarter.
Exploration upside

The Watershed Project ranks in the top 10 unexploited tungsten deposits worldwide, outside of China.

Measured, Indicated and Inferred Resources now total 20.6 million tonnes at 0.25% for 50,700 tonnes of tungsten at a 0.1% cut off.
The project has drill ready targets at surface and remains open at depth.
Project approvals are expected to be received in the first half of 2013.Analysis

Vital Metals flies under the radar for now.  Tungsten prices have been under pressure. The completion of the Watershed DFS in early 2013 should spark investor interest in Vital Metals.
A further catalyst for rerating of the company would be the securing of a Japanese partner for Watershed, which is highly possible with JOGMEC on board generating interest in the tungsten project.
Five Japanese companies have already declared their interest in the project as potential partners and offtake buyers.
Vital and its investors will soon have a clear indication of the value of the Watershed Project, which ranks in the top 10 unexploited tungsten deposits worldwide outside of China, through the delivery of the DFS.
The company’s market valuation of $6 million is light when considering the strong partner, discussions already underway with potential partners and offtakers, and a DFS on its way to completion.

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