W Resources is now closing in on a final investment decision for the La Parrilla tungsten project in Spain
Michael Masterman has once again put his money where his mouth is by investing significant money into the company he chairs, W Resources (LON:WRES).

 

Masterman stumped up £75,000 as part of a wider £600,000 fund-raising announced on 5th November.

The funds will be deployed on early key stage engineering and procurement work on the flagship La Parrilla tungsten project in Spain and to enable W to shorten the development timetable.

 

It’s the latest in a series of positive announcements that have boosted the company’s share price by more than 60% in the last couple of months, as it moves forward both on La Parrilla and on its earlier stage Portuguese asset.

 

“There’s been an enormous amount of progress in Spain at La Parrilla and at Régua in Portugal,” says Masterman.

 

“Both have very low development costs and low operating costs. Both have significant momentum.”

 

Indeed, since the summer W has undertaken infill drilling at La Parrilla, has attained environmental approval for the development of La Parrilla, has drilled at Régua, has outlined a full-blown development programme for La Parrilla, has increased its landholding in Portugal, and outlined a new resource update for Régua. 

 

That’s not a bad record of work over a short period of time in a market that isn’t exactly encouraging smaller mining companies to put their heads above the parapet.

 

With the new money in, there should be lots more to come.

 

“There’ll be a lot of news flow in the months ahead,” says Masterman.

 

“In the last three-to-four months we’ve done several thousand metres of drilling and we’re completing met testing, the results of which will hopefully improve the economics,” says Masterman.

 

“We have a resource estimate due in the next three months, and we will update the mine plan and reserves in the New Year.”

 

It’s a packed programme, but anyone having trouble keeping up with events should bear in mind that Masterman will be presenting at the third Mining Capital Event to be held on the morning of 7th December at the Brewery In London's Chiswell Street.

 

It will be interesting to see what other progress Masterman will be able to update on at that stage.

 

“A lot of this work is about making sure we have the key banking ticks in place, including the approvals,” he says.

 

“The stage we’re at is often referred to as pre-FID, or Final Investment Decision. By the end of the year we’d hope to have a tight-focused final configuration of the equipment and the processing plant.”

 

Back in September, the cost of developing the Fast Track Mine at La Parrilla was put at a mere US$16mln, and one option is to bring a partner in to do much of the heavy lifting when it comes to putting those funds in place.

 

“It’s important to pursue multiple sources of finance,” says Masterman.

 

“There are currently two routes. The first is bring in a joint venture partner, and some of the key work we’re doing at the moment is to enhance that process by ticking the boxes that a joint venture partner will look at.”

 

The other route involves taking advantage of what Masterman calls “this incredibly low interest rate environment in Europe.”

 

So, in parallel to talks with joint venture partners the company is also exploring the option of export credit agency funding and other government funding sources.

 

A major equity raise is not likely at this stage, as notwithstanding the recent share price rise Masterman believes that the company’s market value is still less than the value of its respective assets.

 

That belief is set in the context of a wider, and now long-standing malaise in the mining equity markets.

 

During the previous boom, tungsten rode high, but no more.

 

“Like nearly every other commodity with the possible exception of gold, it’s down,” says Masterman.

 

But there is hope. Mines are now closing as pressure on margins becomes unsustainable.

 

That, says Masterman, clears the way for the next generation of companies.

 

The recent successful commissioning of Wolf’s (LON:WLFE) Hemerdon mine in the south of England has demonstrated to UK investors that tungsten mines can and will come on stream, not to mention providing a crash course on tungsten itself to the investment community.

 

Worth remembering too, though, that whereas Wolf’s start-up costs ran into the hundreds of millions, W’s Fast Track Mine costs are low indeed at US$16mln.

 

But while the costs are low, on the crucial numbers La Parrilla delivers.

 

The IRR runs at about 70%, while the net present value works out at around US$124mln.

 

“We can generate returns to investors,” says Michael.

 

And that’s what it’s all about.