At the recent ITIA meeting, we caught up with the company’s Chief Operating Officer Steve Nicol and Executive Chairman Mike Donoghue to find out the latest developments. Although an Irish company, Ormonde Mining’s operations are centered in Spain.
Three Properties
Ormonde’s focus is on creating shareholder value and it has three assets in Spain that are intended to deliver that aim. The first of these is La Zarza, a copper-gold project in the south of the country that’s operated as a joint venture with South American copper producer Antofagasta. The project is at the exploration-advanced project stage with Antofagasta providing the funding and Ormonde managing the work programmes. Current resources stand at 61Mt grading 0.8% Cu, 0.9g/t Au, 2.0% Zn and 5.7g/t Ag.
The second property is an extensive gold exploration package in the Salamanca and Zamora region of Western Spain. This is an early stage exploration project with only limited drilling completed at the sites. However, a review by geological consulting company CSA Global concluded that Ormonde has discovered a new gold mineralizing district with the potential to host large, intrusion-related gold deposits. Elsewhere in the world these can be multi-million ounce in size. The company is in discussions to joint venture the project.
The third property, Ormonde's flagship venture, is the Barruecopardo tungsten project, which the company intends to bring online by late 2012. “It is, we believe, one of the best undeveloped tungsten projects in the world at the moment,” claims Steve. “We say that because it ticks all the boxes.”
Ormonde’s board comprises four directors, three of whom have been with the company around nine years and have collectively 75 years experience in exploration, development and running of producing mine operations. As regards Barruecopardo’s location in Spain, Steve says: “It’s a stable democracy; it has a well-established fiscal system, a highly skilled workforce. It has good infrastructure, it’s not a remote location by any stretch of the imagination and neither is it in a politically risky location.”
Barruecopardo
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Large, high-grade resource – 10.9Mt grading 0.45% WO3 = 4.9 million mtus (39,000 tonnes of tungsten) – likely long life |
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Simple processing & initial open pit mining = low capital & operating cost = low risk |
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Some 8% of non-Chinese global tungsten mine production at start-up |
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Planned increase in production post start-up |
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Tungsten price strong & rising, due to supply constraints (driven by China) |
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EU Commission (June 2010) included tungsten on its list of “Critical Materials” based upon probable supply shortages of the metal to the EU into the future |
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Major Western World tungsten producer by late 2012 – long-life mine |
Past Producer
Barruecopardo is in the west of Spain, with high-speed motorway links to Madrid and the coast. It’s also a past producer, tungsten concentrate having been obtained from the site for about 100 years until production ceased around 1983. In fact, over ten million tonnes were taken out of the site and put through the process plant to produce clean, high-grade and sought after scheelite concentrate.
Aerial Photograph – 1970s
According to Steve, the company is currently finalizing the open-pit mining optimization for the first 10 years of the project from the currently defined resource: “Ormonde has carried out 56 diamond drilling holes at the site to-date and is commencing a further program now, designed to infill the relevant parts of the resource for the definitive open-pit mine operation. Drilling to-date has shown a zone of mineralization that is 1.5-1.6 kilometers long. There are several mineralized zones within that broad zone and it’s open to the north and south, and importantly at depth.”
CSA Global was commissioned to undertake global and drill-compliant resource estimation. It found 11 million tonnes grading 0.45%WO3 in a JORC-compliant resource at a 0.25% WO3 cut-off. Having only drilled down to 200 meters, this could provide for a further five million tonnes for each further 100 meters of depth. The conclusion is that this is a long life mining operation with potential to increase significantly the resource. The grade of 0.45% WO3 puts the resource above the average for other operating projects, and when combined with the low operating cost gives a healthy safety margin.
Once mining operations start, they are expected to be technically simple. An independent study by consultancy Scott Wilson, a subsidiary of URS, recommended an open pit operation for the first ten years and then, after that, there’s the option to go underground.
Open Pit – early 1980s
“Open pit is technically less risky and complex than underground mining and start-up is much quicker,” says Steve. “In terms of processing, it’s technically simple because the mineralization is coarse. Ormonde has carried out three stages of metallurgical testing work on the project and there is a final stage commencing shortly. Already, we have sufficient information to be able to say that the upper liberalization size for the main mineralization zone is 3 millimeters. So we only need to crush this rock 3 millimeters to completely liberate most of the scheelite.”
Low Cost Processing
The coarse mineralization will result in reduced capital and operating costs plus increased recovery. The production and pre-concentration screening process will eliminate over 95% of the feed tonnage so that final processing is then on only the 4-5% that remains. This gives very simple, low cost processing.
The Scott Wilson report proposed the best way to start the project would be at 500,000 tonnes per year plant feed for an open pit to produce 155,000 metric tonne units (MTUs) of WO3 in concentrate, which is a significant production rate. “But that may be conservative,” remarks Steve. “Looking also at the further resource material, they came up with a possible 800,000 tonnes per annum, some 230,000 MTUs of WO3 per annum, if the confidence level of this further resource material can be increased.
“Based on this and economic modeling, net operating cash flows from a Base Case would be €13 million at current tungsten APT prices of US$290/mtu. Net operating cash flows from the Expanded Case would be €23 million based on this metal price. Most importantly, the capital cost of the Base Case is €30 million, which is a pretty low capital cost. If you compare that to other proposed projects at the moment, on a capital cost comparison basis, we’re right down at the bottom.”
Despite significant third party interest, Ormonde has not as yet entered into any off-take agreement for the project. As Mike Donoghue, Ormonde Chairman emphasizes, in the context of current tungsten market and forecasted supply deficits, the timing of such agreement is not appropriate: “We have raised funds to continue the feasibility stage of the project, which is already underway and will be completed by the end of 2011.”
Drilling is commencing to complete the technical studies, which are themselves underway. Engineering design work and documentation required for permitting is also progressing, with capital funding and off-take agreements being looked at in 2011. Construction is due to be underway by mid-2012 and initial production is expected before then end of that year.
Reasons to Invest
With everything taken together, Mike sees several reasons for investors to be interested in Ormonde. He cites the company’s low market capitalization, its focused approach, near-term production and cash flow opportunity. He adds that Barruecopardo is one the world’s premier tungsten projects, providing strategic value with tungsten being in increasingly short supply, and prices rising. Mike says: “The demand and supply situation is getting very tight. The Japanese are getting concerned about supply and the Chinese indicated they’re consuming more of their own. We’re getting into a critical situation but we’ve got near-term, good quality production, so we’re heading the right way.”
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China produces > 75% of World mined tungsten |
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It has increased regulation & preservation of its tungsten resources |
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The Rest of the World relies heavily on “intermediate” tungsten products exported from China |
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Increasing domestic consumption coupled with a move to “downstream” products is resulting in reduced exports of such products from China |
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This is resulting in supply shortages and steadily increasing tungsten prices |
Support was illustrated by the recent capital raising being significantly over-subscribed. “There’s a lot of interest in tungsten out there,” concludes Mike, “a lot of interest in the project.”
For More Information:
http://www.ormondemining.com
Ormonde Mining plc
Ormonde House
Metges Lane
Navan
County Meath
Ireland
Tel: +353 (0)46 9073623
Fax: +353 (0)46 9073654
Website: www.ormondemining.com
Email: info@ormondemining.com
Investor relations contact: Kerr Anderson