Paying attention to local myths and legends may have led Primary Metals to a gold property in Portugal, but it was faith in another legend, the 112 year-old Panasqueira tungsten mine, that has led to prosperity. Lewis Black and his associates at Almonty LLC demonstrated great courage and foresight when they purchased a significant interest in Primary Metals, which owns the Panasqueira tungsten mine, at the time that tungsten prices were depressed and the market outlook was uncertain..

“The people in Portugal love the mine because the mine represents this great fighting spirit,” says Lewis Black, director, chairman and CEO of Primary Metals Inc. “Through thick and thin, it seems to survive. Not many mines or companies can say they are 112 years old.”

“We have extremely good relations with both governments, Portugal and Spain, because Panasqueira has a reputation of being a survivor. We think there are very good opportunities here, and we will select the ones that are realistic and feasible. That will keep us moving forward.”

Primary Metals Inc. owns a 100 percent interest in the Panasqueira tungsten mine in Portugal and is currently producing wolframite concentrates containing some 100,000 MTUs of tungsten trioxide per annum. In addition to operating the Panasqueira tungsten mine, the company is assessing the potential of its nearby Argimela tin deposit and its Quinta/Banjas gold property, also located in Portugal.

Purchased by Primary Metals four years ago, the Panasqueira tungsten mine is now producing 3,000 tons per day. In March 2007, Primary Metals announced that the total proven and probable reserve estimate had increased to 2.43 million tons with a grade of 0.243% WO3 (tungsten trioxide) compared to the 2006 estimate of 1.39 million tons with a grade of 0.233% WO3. This showed an increase of one million tons, together with a small increase in the tungsten grade of the reserves.

These new estimates, combined with the indicated resource estimates, total 5.13 million tons, enough to provide feed to the process plant for 8.5 years at the current operating rate of 600,000 tons per year, assuming tungsten prices stay near current levels.

The road to these levels of production wasn’t an easy one.

When Primary Metals Inc., made a decision to become involved in raw materials commodities, the most underappreciated metal was tungsten. In fact, 85 percent of the tungsten supply and consumption was controlled by China. Yet, significant Western corporations consumed tungsten, firms like Siemens, Alldyne, and Kennametal. Following acquisition of Panasqueira in 2003, the next two years were challenging for Primary because of low tungsten prices until prices showed an increase in mid-2005.

Black saw an opportunity early in 2005 for Almonty to take advantage of the low prices of tungsten, which is used in the production of cutting and grinding tools, cemented carbides (also known as hard metals) lighting filaments and electrodes, as well as steel alloys and super alloys, catalysts and pigments.

“The property in Panasqueira was relatively risk free, and it was not terribly expensive for Almonty to get involved through the purchase of an interest in Primary Metals. In terms of the world of tungsten production, there is no greater resource of knowledge than Panasqueira has because it’s been operating for 112 years. Even if the price didn’t appreciate significantly, there was always an opportunity to create a business where that knowledge could be used,” Black said.

As it happened, the price of tungsten appreciated very rapidly. “Then we faced the daunting prospect of having to renovate and put into significant operation a mine that had been starved of money for a decade,” Black recalled. “Tungsten, being one of the most abrasive materials out there, had degraded just about every piece of equipment.”

“In 2005 we showed very positive results because we were benefiting from a huge appreciation in price and relatively little investment, so we produced spectacular revenues,” said Black.

But Primary reinvested its earnings to ensure that the mine could operate for the foreseeable future along with extensive planning to assess the top priority repairs.

“We were able to work the higher grade zones to keep our heads above water. We spent a lot of time analyzing how to go about putting the company on a solid footing for the future,” said Black.

In the last 12 months, the amount of capital expenditures and ongoing development has affected earnings, as Primary Metals tried to catch up with a decade of neglect resulting from low tungsten prices.

“But as we said we would, in the current quarter, we began to see light at the end of the tunnel,” said Black. “Earnings are expected to start to head back in the right direction, because we have a much more stable and reliable setup. No longer subject to breakdowns and catastrophes, we can balance development with what is commercially viable and continue to increase our reserves.”

Black also feels the tungsten market will stabilize, now that China Minmetals Corp. has seen the value in getting illegal traders and miners closed down. He expects a gradual rise in demand and production.

China is now believed to have surpassed Europe recently as the largest user of tungsten. Next in order of magnitude is the USA, followed by Japan, then Russia/CIS. Other countries account for less than 10% of the total.

World tungsten production dropped from a peak of over 55,000 tonnes of metal contained in 1990 to just over 30,000t in 1997, rising again to an estimated 76,000t in 2005. Low demand, low prices, and the break up of the former USSR led to a collapse in tungsten production. As a result, China is now the predominant tungsten producer in the world.

“Those in the industry know that it’s not just a question of finding some Tungsten in the ground and milling it and selling it. It’s a long, drawn out process full of disappointments,” he said. It’s a big advantage having a producing mine. Primary Metals has reinvested its earnings in a much more stable and reliable production setup, positioning itself to take advantage of the tungsten demand of a developing world.

“Portugal has had a long history of mining. There are a number of very good looking projects here,” said Black.

Primary Metals has discovered a significant, low grade, high quantity tin property in Argimela, Portugal. Black expects that tin is now entering the same cycle as tungsten was two years ago. It is now at $14,500 a ton, up from $6,000 a ton eight months ago. One of the primary producers in Indonesia is now closing down their country’s illegal mines, just as the Chinese did.

They also have a very interesting Quinta/Banjas gold property, in the north of Portugal. Though the whole area was mined extensively by the Romans for 200 years, they missed the gold property that Primary Metals is now exploring, because it sits below schist and the Roman engineers didn’t know how to identify these deposits.

“We follow the principal of listening to every local legend in every town, to find projects that had been missed by the Romans,” related Black. “There’s always a little inkling of truth.

“We have the initial drill results and are just coming to the end of the first campaign of drilling. As with any exploration, you never really know until the end. But it looks good now,” he said.

“There are two types of investors in the market, those who look for a return in a very short space of time and those who recognize the longevity of an investment that will continue to be important,” said Black. “We are trying to have a longer term view.”

For further information contact:

Vancouver Office:
James Robertson
Phone: 604.669.8988
Email: info@primarymetals.ca

Investor Relations:
Jamie Mathers, Ascenta Capital Partners Inc.
Phone: 604.684.4743 extension 236
Toll free: 1.866.684.4743
Email: info@ascentacapital.com