“Playfair = Tungsten = Opportunity”: Critical Exploration for A Critical Metal
ANALYSIS—Prospectingjournal.com—Tungsten is a hard, white metal with physical properties that are next to impossible to substitute. With the highest melting point and the greatest tensile strength of all elements, this “critical metal” is an essential component in a wide number of industries. It’s irreplaceable in mining equipment, where it reinforces the durability of drills. Armour-piercing bullets would pierce nothing without it, and even fake gold bars owe their scam to the metal’s high density. Yet about 85% of Tungsten’s global production is from China. Very little Tungsten production comes from North America, even though it’s on American Elements’ 2011 Top 5 US Endangered Elements List.
“Tungsten is a critical metal everywhere in the world except in the investor’s mind.” This statement, by Steven Chan of Playfair Mining Ltd.[PLY –TSX.V], captures the essence of the current tungsten scene. With lustrous metals such as gold stealing the headlines, it appears that the markets have shuffled this critical metal to the side. Yet it can’t be for long; as Chan points out, “Tungsten is fundamental to everything we do. It’s industrial, it’s everywhere.”
As we mentioned in a recent article, the junior exploration market is slowly waking up to tungsten. A junior explorer with multiple properties, Playfair Mining represents one of only a few tungsten players on the continent. The company’s tungsten properties include four high-grade deposits with two located in the Yukon, one in the Northwest Territories and the Grey River in Newfoundland.
The company has pushed forward with plans to develop its 100% owned Grey River tungsten deposit, with a recent, positive news release that highlights an updated Preliminary Economic Assessment (PEA). According to the PEA, Grey River is a “potentially viable project that will return a positive net discounted cash flow.” Don Moore, Playfair’s Chairman and CEO, states
“Grey River is an economic project . . . The relatively low pre-production capital cost of US$32 million provides a low capital barrier for Playfair to become one of the world’s few tungsten producers outside China. I am also very excited that this PEA is based on only two of over 300 veins and veinlets that ASARCO mapped over 50 years ago. The remaining veins have seen little significant work to date and provide an excellent exploration opportunity.”
As the company’s focus project, the Grey River property consists of nine minerals claims (1,750 hectares). The property’s tungsten veins are “typical fluorite-rich wolframite-quartz greisen vein deposits, with a small number of small sheelite occurrences.”
The Number 10 vein (above) is better than first thought. This vein, which dips from 70 to 80 degrees, shows results from the updated mineral inventory in the PEA of 1.2 million tonnes of inferred mineralization grading 0.73% WO3. According to the PEA, the vein contains 18.8 million pounds of tungsten trioxide or 853,000 metric tonne units (MTU). This bodes well for future mine production, which is proposed at 400 tonnes per day or 146,000 tonnes per year.
The total mining resource in the PEA, which will be used for mine planning, design and cashflow analysis, is 1,268,306 tonnes at a grade of 0.524% WO3. The pre-tax cashflow is estimated to be positive at US $15.5 million over a mine life of approximately 9 years. This increases to US$75.3 million at a tungsten price of US$21/lb (current prices are close to US$20/lb).
Following is a summary of the PEA project parametres:
|Underground Mining Resource||1,268,306 tonnes|
|Mined Grade||0.524% WO3|
|Mining and Milling Rate||400 tonnes per day
146,000 tonnes per year
|Total LOM Capital Costs||US$50 million|
|Pre-Production Capital Costs||US$32 million|
|Total Operating Costs||US$107.50 per tonne|
With the positive PEA and the importance of tungsten, one would think that an exploration company like Playfair would attract big attention. As Moore points out, “Never in all my career have I had so much interest from so many heavyweight people kicking the tires on tungsten.”
“We have had serious conversations with Fortune 500s and those kinds of groups,” states Chan. “We are speaking with the right people.”
But why the public disconnect with tungsten? A metal that is so crucial to a vast array of applications must surely be a key asset in the geopolitical sphere. Seeing as China controls a large share of the market, it wouldn’t be much of a leap to wonder if the price is set to rise with a future demand crunch. As Moore states, “the price of tungsten could very much go through the roof in the next couple years.”
Whether for price speculation or geopolitical strategy, an element such as tungsten will not go ignored for long. Good news from Playfair’s Grey River project will further position the company to ride the demand wave that will rip into the tungsten market as governments scramble to gain control over critical metals. As Moore puts it, “Playfair = Tungsten = Opportunity.”
Disclaimer: The author does not currently hold any shares of any of the companies mentioned in the article. However, some members of Prospecting Journal may or may not have interests in one or more of the companies mentioned at the time of publication. Staff members from the Prospecting Journal reserve the right to acquire interests in any of the companies mentioned after 36 hours have elapsed upon initial publication of this article. Playfair Mining is a sponsor of the Prospecting Journal.