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Vital Metals Ltd and Senior Resource Analyst, Mark Gordon, featured in The Courier Mail 19th January 2015


Breakaway Research’s Senior Resource Analyst, Mark Gordon, quoted in an article in The Courier Mail written by Glen Norris, ‘Japanese Giants Eye Investment In North Queensland Tungsten Mine’,

To view the article, visit The Courier Mail website:

As written by Breakaway Research on Vital Metals Ltd (September 2014):

Vital Metals has released the results of the Definitive Feasibility Study for its 70% owned Watershed Tungsten Project in North Queensland. Watershed is one of the 10 largest un-developed tungsten deposits in the world, and has the potential to be a major western producer, with production of ~3,200tpa of WO3 for the initial three years, with a life of mine average of ~2,500t of WO3 per annum. The initial higher production rate allows rapid repayment of debt at the critical start-up stage of the project through increased revenue and lower operating costs per mtu of WO3 produced.

Key points highlighted by Vital Metals include:

  • Project is fully permitted with all Mining Leases, Environmental Authority and Indigenous Land Use Agreement in place.
  • DFS delivery is the expected catalyst for JOGMEC to transfer its 30% interest in the Watershed Project to a new Joint Venture partner that would have an off-take interest and responsibility for arranging its share of project finance.
  • Maiden Ore Reserve of 21.3Mt grading 0.15% WO3 for 31,400 tonnes of contained WO3 with a strip ratio of 3:1 waste to ore.
  • Simple open cut mining operation using excavators and trucks, no pre-strip required. Ore is processed into readily saleable concentrate using simple processing involving ore sorting, spirals and flotation.
  • Metallurgical test work has indicated average process recovery of 73.6% WO3 to deliver a high-grade concentrate (>65% WO3) with very low contaminants, making it extremely attractive to tungsten metal producers located in Japan, USA and Europe. Further test work could increase recoveries.
  • Significant exploration potential to add additional mineral resources near to the proposed mine development.
  • Based on successful completion of project finance, there is a clear pathway to begin development in 2015.

The results indicate a robust project, with an NPV in line with modelling in our May, 2014 report, which returned a value of $153 million. There are some differences in inputs, including the reserve grade being lower than the grade assumed in our modelling and a more favourable concentrate pricing structure than originally envisaged. Vital has based its tungsten prices on forecasts by Tungsten Market Research, an independent tungsten research consultancy.

This can also be considered a base case study – there is scope to increase near mine resources and hence increase mine life once in production.

The project strength is its simplicity– a low strip ratio (3:1), open cut mining operation, with a +65%, low contaminant, ready marketable concentrate produced using standard “off the shelf” ore sorting, spirals and flotation beneficiation.

A key outcome of the completion of the DFS is that it is a trigger for JOGMEC, 30% holders of Watershed, to transfer their interest to a new Japanese joint venture party that would have an offtake interest, and the potential to help secure attractive project financing. A potential funding model is the Salar de Olaroz Lithium Project in Argentina, an incorporated JV between Orocobre (ASX: ORE, 66.5%) and Toyota Tsusho Corporation of Japan (25%), with the Jujuy State Government having an 8.5% interest.

Here, JOGMEC are guarantors to a maximum facility of US$191.9 million provided at the project level by Mizuho Corporate Bank – this includes a primary facility of US$146.3 million, which, with equity capital of US$82.8 million covers the US$229.1 million estimated construction cost. The financing has very attractive terms, with a maximum 70:30 debt: equity ratio, and estimated financing costs of 4.5% of the drawn amount, fixed for the ten year term of the loan.

JOGMEC has already identified and met a number of potential partners for Vital – the completion of the DFS should be a catalyst for taking negotiations to the next step, which would then be followed by a decision to proceed and arranging of project financing. Crucially, Watershed is fully permitted and hence development ready – this should help facilitate financing, and once financing is secured, allow for rapid development. The potential contrasts with many other tungsten projects that need to go through the permitting process. This should prove a competitive advantage in securing offtake/funding partners – particularly with expected shortfalls in supply as a result of Chinese export restrictions – Japan currently has a demand of around 6,500t WO3 per annum (~10% of world demand), with no domestic supply.

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About Vital Metals:

Vital Metals Limited (ASX:VML) is an Australian based emerging tungsten producer and West African gold explorer. Vital’s flagship Watershed Project recently secured environmental approvals from the Queensland government. Vital is progressing the Watershed Project through a feasibility study in a joint venture with JOGMEC (Japan Oil, Gas and Metals National Corporation).

Vital also holds a 100% interest in the Doulnia Gold Project located in southern Burkina Faso, West Africa. The Project is located in highly prospective Birimian Greenstone terrain with over 850 sq. km of contiguous tenements lying on the trend of the Markoye Fault Corridor and the Bole shear zone and hosting the Kollo Gold Project and Boungou South Gold Prospect. (Source: Vital Metals Ltd website:

About Breakaway Research:

Breakaway Research is part of the Breakaway Investment Group, and has been providing thematic and company research on the resources sector for over 9 years. A particular strength of the Breakaway research team is that it combines technical experience with financial expertise. This leads to research reports that are supported by a technical assessment of resource projects along with financial metrics for the company.

An important function of these independent research reports is to provide investors and company shareholders with the identification and quantification of the perceived value drivers within a company, which the company may otherwise find difficult to present. Indeed shareholders are an often overlooked but important target in the distribution of these research reports – with well informed retail investors often creating a stable share register.

Our high research quality stems from the extensive experience of our analysts, combined with a process of extensive interviews with company management and industry specialists, as well as site visits if appropriate.

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