W Resources Jumps on Tungsten Project Approval

Shares in W Resources (WRES) jumped 10% on news that its La Parrilla tailings project in south-west Spain had been granted approval by the mining department of the Junta de Extremadura, the regional authority.

The La Parrilla tailings project is expected to produce in the second half of 2013, with annual plant feed in the region of 330,000 tonnes and annual production anticipated to be 28,000 metric tonne units (MTU) of tungsten and 26 tonnes of tin, which at the current prices for the metals should deliver approximately €7 million (£6 million) per annum in revenue.

Construction of a processing plant located to the south-east of the La Parrilla site will commence in the first quarter. The capital cost of this plant is estimated at €1.3 million, for which the board is currently evaluating financing options. The company has already received one indicative offer for financing the La Parrilla tailings, which is currently under evaluation.

"This is an important milestone for W, as the La Parrilla tailings project is on course to deliver tungsten production within two years of the company acting on its new strategic direction,” commented chairman Michael Masterman.

Interactive Investor view

Shares in the company have doubled over the past year and are currently trading at around 0.6p.

The fundamentals are strong - the project comprises a tungsten mine and tungsten tailings project. The historic mine resource estimated in 2008 was 36 million tonnes at 0.09% tungsten trioxide, making it one of the largest tungsten deposits in the Western world.

The project is situated in the Extremadura region, in the Provinces of Caceres-Badajoz, approximately 310 kilometres south-west of Madrid. The site is accessed directly from the highway along a three-kilometre asphalt road and is serviced by electricity and water.

The La Parrilla tailings deposit and tungsten mine development also offers a low-cost, high-margin resource development opportunity for W Resources.

The price of tungsten has more than doubled over the past three years, driven by strong growth in Chinese consumption; the difficulty of finding a substitute for the metal; and the high cost of getting new mines into operation. And this is unlikely to abate.

Financially, the company appears to be close to receiving a loan for the construction of the processing plant, reducing the risk of an equity placing.

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