Wolf Minerals has announced a substantial increase in capital and operating costs for its Hemerdon tungsten and tin project in England, which is now budgeted to cost $230 million to develop.
The capital cost estimate has increased by 15.5 per cent since completion of the project’s bankable feasibility study in 2011.
In addition, the project’s operating cost has increased by 3.7 per cent.
The project’s capital costs that were estimated at £104.1 million ($A194.7 million) in 2011 have increased to £123.2 million.
The operating costs have increased to $US109 per metric tonne unit (mta) of tungsten from $US105/mtu.
Wolf has also revised up the expected tungsten price, after an independent review of its DFS results.
The company stated that the capital cost increase was a reflection of “detailed design work and to account for any variance costs in the period of time” since the initial costs were estimated.
“Our focus in 2014 is to construct the project and ensure the funds are in place to support construction in line with our timeline for the commencement of production in 2015,” managing director Russell Clark said.
“The review of capital and operating costs, combined with the updated tungsten price forecasts, have reaffirmed the board’s view that the project remains financially attractive.”
Earthworks at the project site are due to commence this month, with construction to start in the June quarter.
Wolf Minerals has to raise additional finance before it will be able to complete the project.
A $US75 million bridge finance facility that was secured to fund initial work on the project is due to be repaid by June 7 2014.
A company spokesman said Wolf would be on the lookout for ways to finalise the repayment.
Financing of the repayment was likely to be a mix of equity raisings and other means of financing.
“It’s not accurate to say that it’s going to be full equity financing,” the spokesman said.
In today’s announcement, Wolf also disclosed it is required “to fund certain bonds, over-run facilities, debt service reserve account and producer shortfall guarantees” with a total of up to £29.4 million.
According to the statement, the company is yet to finalise the funding of these facilities, which would be managed through cash or letter of credit facilities.
