() has delivered a Definitive Feasibility Study for its 70%-owned Watershed Tungsten Project in Queensland that outlined a development with an NPV of $112 million and an IRR of 22%.
This is based on a 2.5 million tonne per annum project capable of producing revenues of $1.08 billion EBITDA of $526 million and free post-tax cash flow of $256 million over an initial 10-year mine life.
Tellingly the delivery of the DFS is a key catalyst for partner Japan Oil Gas and Metals National Corporation (JOGMEC) to transfer its 30% interest in the Watershed Project to a new joint venture partner.
This would likely have an off-take interest and responsibility for arranging its share of project finance.
Shares in the company have risen 20% today on good volumes.
Pre-production Capex has been estimated at $172 million while Life of Mine C1 Cash Cost is about A$228 per metric tonne unit.
Payback is estimated at 2.6 years with the project expected to produce 25000 tonnes of WO3.
The company is targeting to commence construction in 2015 with first ore production before the end of 2016.
JOGMEC a Japanese government agency that is responsible for ensuring Japan has access to a steady flow of key natural resources including tungsten has already identified and met with a number of Japanese companies who may wish to acquire its interest in the Watershed Project.
Recent transactions by Australian resource companies involved in similar 70/30 joint ventures with Japanese companies have delivered very favourable debt funding outcomes for these companies and their projects.
A highlight of these transactions has been the low overall cost of project debt which tends to average around 4.5% of the drawn amount.
The DFS was managed by Vital with support and input from JOGMEC as well as a number of Australian and International engineering companies and industry experts.
Watershed
Watershed is now positioned for immediate development with all necessary environmental and indigenous approvals in place including seven mining leases covering a total area of 1904 hectares that are valid until 1 December 2033.
It has an Ore Reserve of 21.3 million tonnes grading 0.15% WO3 for 31400 tonnes of contained WO3 with a strip ratio of 3:1 as well as a total Resource of 49.32 million tonnes at 0.14% WO3 for 70400 tonnes of WO3 at a cut-off grade of 0.05% WO3.
Initial development will be as an open pit mining operation with mining conducted by excavator and truck.
Based on a mining rate of 2.5Mtpa it is expected that the project will have a life of 10 years with excellent opportunities to further increase the mine life through future exploration.
The project is accessible by means of a 24 kilometre formed and graded unsealed access road running from the state controlled dual lane Mulligan Highway which connects the Atherton Tablelands area to Cooktown.
A state owned power line runs parallel to the Mulligan Highway and the line currently has excess capacity which would meet the Projects requirements
Tungsten is slowly making its way up the global critical metals list with demand being driven higher by the proliferation of smart phones and tablets - tungsten is a critical component of these touch screens.
Vital had raised $1.05 million in July.
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