W Resources (AIM:WRES)  , the tungsten, tin and gold mining company with assets in Spain and Portugal, announces its Q2 2020 quarterly production update to 30 June 2020. 

Whilst Q2 production was impacted by various factors, including the impact of the COVID-19 state of emergency in Spain, combined shipments of tungsten and tin concentrate increased to nearly 100t in Q2 2020, taking total shipments to offtake partners to 89.0t of tungsten concentrate and 40.8t of tin concentrate for the half-year.  

Significant new test work programmes were completed to support decision making on improving tungsten recoveries and the operational team also implemented several plant improvements during the period including rectifying early-stage operational challenges at La Parrilla, several improvements to the jig plant and also replacement of the mill as a result of the vendor not providing fit for purpose plant and rolls. 

Notwithstanding the above investments, operating costs were carefully managed throughout the quarter and further cost reductions have been implemented. 

Production Overview  

The Spanish State of Emergency shut down operations in April. The mine and main plant reopened in May under the continuing COVID-19 protocol and in the face of supply change logistics challenges that the Spanish industry has faced. 

  • A total of 253,256 tonnes ("t") of Run of Mine ("ROM") ore fed to the La Parrilla plant  

  • Total tungsten and tin contained metal production increased by 0.5% to 47.6 tonnes during the quarter, mostly because of strong tin recoveries 

  • Tin ("Sn") metal production was the highlight increasing 65% to 20.0 dry metric tonnes ("dmt") 

  • Tungsten ("WO3") metal production decreased 17% to 2,756 metric tonne unit ("mtu") (27,560 kg) during the quarter because of the temporary mine closure and weaker than expected plant performance 

Shipments and Markets 

W Resources shipped 58.9t of tungsten concentrate and 40.8t of tin concentrate in Q2 2020, taking total shipments to offtake partners to 89.0t of tungsten concentrate and 40.8t of tin concentrate for the half-year.  

Market prices for European ammonium paratungstate ("APT") fell from 240-245 USD/mtu to 205-215 USD/mtu during the quarter. 

London Metal Exchange ("LME") tin prices increased 15.46% from 14,591 USD/t to 16,847 USD/t during the quarter. The LME Sn spot price is now at US$17,485 USD/t (21/7/2020). 

Projects and exploration in Portugal 

Mining operations at the Régua tungsten mine in northern Portugal commenced in March 2020 in the first of two adits with skarn ore zones intersected in the initial development. Mining activities were then paused following the COVID-19 related restrictions implemented by the Portuguese Government. 

Gold and Tungsten Exploration in Portugal 

The application for the São Martinho gold trial mine licence in Portugal continues to advance towards grant with the issue of the licence expected in late 2020. New expenditure on this project is pending grant. 

Management and Corporate Update 

The operational team was strengthened during the period with the appointment of Pablo Neira to an executive leadership role in Spain and the appointment of Danilo Diaz from Anglo American as Plant Manager. 

The Company also stated it is in the advanced stages of drafting documentation to allow Payment in Kind ("PIK") of the May 2020 interest payments totalling US$1.6m to BlackRock Financial Management Inc. 

To strengthen the balance sheet, the Company put in place the Spanish government guaranteed bank facilities with major Spanish banks for a total of €1.82m, which includes €800k of rollover of existing credit lines. The Atlas Capital Markets facility of £4m remains in place and there have been no drawings during the quarter. 

Outlook 

New Test work and  operational improvements should ‘increase production’ according the to the 2Q 2020 Update. 

A further 20.4t and 39.0t of tungsten and tin concentrate respectively have been shipped from 1 July to date with demand for APT in Europe and the United States trending stable to higher in the near term. (Source: Fastmarkets) 

Plant design and procurement activities are now near completion with construction activities at Régua rescheduled to commence in Q3 2020. 

The application to extend the period of the trial mine licence because of the COVID-19 emergency has also been made to the Portuguese mining authorities and is progressing. 

Shares in W Resources opened down 20% following the 2Q 2020 Update 

 

Michael Masterman, Chairman of W Resources, commented: "The second quarter was challenging with the State of Emergency shutdown in April, followed by constrained operations as a result of the ongoing COVID-19 pandemic. This was further impacted by operational challenges relating to EPC contractor equipment primarily in the jig and mill plant and in the concentrator rod mill. Short-term solutions including a replacement mill have been implemented and procurement of longer lead items initiated to further improve operations. While tin recoveries have been high, tungsten recoveries have lagged and extensive metallurgical and geometallurgical test work as well as plant modifications are underway with the aim to lift production. 

"Spanish operating capability has been substantially enhanced with experienced Director Pablo Neira moving to an executive leadership role running the Spanish operation and the appointment of Danilo Diaz from Anglo American as Plant Manager. We are seeing material improvements in plant utilisation and operation hours which should translate into higher production in the coming quarters. 

"With a strengthened Spanish operations team, implementation of improvement programmes and advancement in metallurgical work to lift tungsten recoveries we now have the fundamentals in place to increase production."