Carbine Tungsten (CNQ)

Fat Prophets

Friday 10th October 2014

Sharechat.co.nz – Hot Stock

Fat Prophets

What’s new?

Japanese corporate giant Mitsubishi Corporation RtM Japan (Mitsubishi) has, since 2011, been working alongside Carbine Tungsten to develop the latter company’s flagship Mt Carbine tungsten project in far North Queensland. Via a Memorandum of Understanding, Mitsubishi is providing technical, funding and product off-take support to Carbine Tungsten.

With the technical and off-take support in place, Mitsubishi has been conducting a separate due diligence of the Mt Carbine project to determine its operational viability and funding support. The study has culminated in the announcement, on 7 October, by Carbine Tungsten that Mitsubishi has approved a US$15 million (~A$17 million) loan to develop the first stage of its Mt Carbine project.

The first stage of development will involve the mining the ore stockpiles accumulated from the old tungsten mining activities conducted at Mt Carbine. Initially 1.5 million tonnes of ore per annum will be processed to produce approximately 78,500 metric tonne units (mtu) per annum (an mtu is equivalent to ten kilograms of tungsten). Carbine Tungsten will apply modern mining techniques including the use of x-ray to extract the tungsten ore.

Mt Carbine already hosts plant and infrastructure, including power and water, with a readily available workforce at hand. It is these factors that give the stage 1 development a price tag of only US$15 million. Operations will ultimately be ramped up to 157,500 mtu per annum under the stage 1 plant configuration. Operations have an initial mine life of 13 years.

With Mt Carbine already designated as a mine site, approvals are in place for mining operations to commence, which will allow production from stockpiles to commence in early 2015.

Tungsten is on the United States and European Union critical metals lists, as its availability is essential for high-technology, green and defence applications, but is vulnerable to politically driven fluctuations in supply. China controls some 80% to 83% of current tungsten production.

Aside from jewellery, tungsten is used in applications such as armour-piercing, light bulbs, oil drilling, rocket engine nozzles, electronic and electrical contacts, steel alloys and cemented carbine – just to name a few. As one of the world’s toughest hard metals, it is a resource that will not be easily replaceable when it comes to the various functions it is used in.

Outlook

With the funding secured to advance stage 1 at Mt Carbine, Carbine Tungsten will move swiftly to prepare the site and infrastructure for production. With a short site preparation period, Carbine Tungsten could be generating revenues from operations in the second part of calendar 2015.

With an ability to ramp-up operations in the near-term and the development of new hard rock tungsten deposit to feed long-term growth aspirations, the company appears to have a robust future ahead of it.

Price

Over the past two years, Carbine Tungsten has been trading in a broad sideways channel. Support has been found around 4 cents and resistance at 8 cents. In recent trading, the share price has broken above resistance at 8 cents to test its near-term high of 14 cents. With funding now secured from Mitsubishi to advance Mt Carbine to production; a break above the near-term high could be expected in the months ahead.

Worth Buying?

Whilst carrying a high risk rating, Carbine Tungsten in developing its Mt Carbine project appears well positioned to meet part of the growing requirement for Western nations to source independent supplies of quality tungsten. Meanwhile the potential long-life of the Mt Carbine project brings with it the added attraction of performing this function over an extended period.

Greg Smith is the Head of Research at Fat Prophets share market research.

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