W Resources PLC' La Parrilla ramp-up hasn’t gone to plan but plant and funding position improvement should see things turn around
W Resources PLC's (LON:WRES) Q120 production report from the La Parrilla Tungsten Mine, in Spain (Figure 1), demonstrates a recurring issue for companies developing mining projects, which is the ramp up of the processing plant not going to plan.
Figure 1: Map showing the location of the La Parrilla Tungsten Project
Source: W Resources
Operations at La Parrilla produced 3,306 metric tonne units (mtu) of contained tungsten and 12.1 dry metric tonnes of tin, which is below the companies target for this quarter. A combination of mechanical issues with the jig and the crusher sections of the plant led to down time at the plant with the implementation of a number of production improvement initiatives to increase operational efficiencies leading to further downtime and resulting in the company missing its targets. W Resources is not alone in facing these sorts of technical and operational challenges during the ramp-up of a mine, many if not most operations face similar challenges. What is important for the company is that is resolves them quickly, otherwise, as we saw at the Drakelands Tungsten-Tin Mine, in Plymouth, poor operational efficiencies can send a company to the wall.
W Resources is confident that it has now resolved many of the issues encountered during the initial ramp-up. The company plans to restart the concentrator plant following the installation of new cyclones on the spirals, which should improve density control and desliming and have a material increase in the concentrator plant recovery.
The Spanish COVID-19 shutdown, which came into force in late March has now been lifted for mining operations, so W Resources will potentially be able to re-start operations immediately after the improvements at the plant have been made.
Importantly, W Resources raised £756,000 in March and has made its interest payments to loan provider BlackRock Financial Management Inc. on schedule during the quarter. The company has also reached an agreement with BlackRock, subject to documentation, to allow a roll up of June quarter interest payments giving the company some additional short-term liquidity. W Resources also secured a £4m convertible bond in March with Atlas Capital Market. The bond has a coupon of 5% and a term of 3 years, and provides a backstop for additional financial liquidity should it be required.
In addition, W Resources has taken further precautions by applying to four banks for Spanish Government guaranteed loan facilities and expects to receive feedback during April on these applications as timing on receipt of the existing approved €5.3m grant is likely to be delayed with the Extremadura Government focussed on the COVID-19 crisis.
The ramp-up phase of a mining operation is always a difficult period and W Resources has faced a number of challenges. The company appears to now be passing through this difficult period and believes its operational improvements should right-size the mine. The company has secured a funding backstop to get it through this challenging position and it looking towards the rest of the year expecting to see significant operational improvements, once the plant improvements are finished.