Member Info for richam

I had hoped we would never see a 19t shipment again, ever. And here we are, the second shipment in 2018, one container, 19 tonnes. Didn't they eek out enough product to fill a pitiful 40 bags? Or did they send the rest to Wolfram Bergbau for a change? I'm afraid we won't find out before the end of April. In any event, not exactly encouraging!

Exactly right. Why that late though? It took them way too much time to figure out what's going wrong and how to fix it. 2,5 years of repairing, upgrading, spending an extra 55 Million Pounds and all that got us to below 40% nameplate output!

One word: Recovery. While throughput is at least ~3/4 of what it should be, recoveries are less than half of what they should be. Combined, this results in production of <40% of what it should be. No real world tungsten price will ever make up for a shortfall like this.

to $317-325 per mtu from $315-320.

With this in mind the numbers suggest Wolf sold a better than 65% concentrate containing virtually no penalty elements during the December quarter whereas it used to deliver sub-spec material before. I'm still wondering why they sent 87% of product to the US and cut deliveries to Wolfram Bergbau und Hutten to 13%. I'm not quite sure whether Wolfram Bergbau is happy with it.

It appears I got the March '16 version of the report. Goes a long way towards exposing how quickly number can change completely. So once again, never rely on somebody else's guesswork.

Devonwolf,never rely on somebody else's (paid for!) guesswork! And it's 18 months old, too. Have a look at their guesstimates and compare them to actual results. WAY OFF! Papers like these are the result of what I call a "Cash for Comment" deal. Guess who paid! BTW, look again. Their prediction for recoveries from hard granite is a constant 65.7%. WAY OFF, too! Wolf barely processes any soft granite anymore.

Processguy, your input is greatly appreciated as you seem to be one of very few willing to reenact what I am doing. With regard to your recoveries argument, I don't think there are any "theoretical tonnes" involved. The tonnes in question have been processed, just at a different point in time. What we want to know is the ratio of WO3 produced to WO3 in ore processed. Certainly the result (recoveries) won't be perfect since the pre-concentrate represents frontend output of an earlier date (thus most probably lower quality). But if I left it out completely the error would be dramatically increased. Imagine Wolf had stopped processing ore altogether and had processed previously bagged pre-concentrate only. Would you then maintain they had produced X MTU of WO3 from zero ore? If I took 485.788t of ore as the basis for Q4 recoveries, I would also have to subtract out the MTUs that have been produced from bagged pre-concentrate. Otherwise I would grossly overestimate recoveries. Your argument is correct, however, with regard to previous quarters when recoveries probably have been underestimated due to the fact that we have not been told that (let alone how much) pre-concentrate has been stored in bags (thus has not been contributing to production). I'm sorry for not being able to explain it any better.

Sorry for the typos. The Woulf(e) one gave me a good laugh though.

Ophidian, the direction you provide is very helpful and well appreciated. I can only make use of the information that is publicly available. The BFS mentions a 65% tungsten concentrate and a 40% tin concentrate. This is my starting point. There is no mention of several tungsten products or sub-standard specifications. I am aware of the fact that there are penalty elements and such and once minimum requirements aren't met, price penalties are triggered. However, I do not have any information in this regard. If impurities were a problem, why wouldn't Wolf buy 3rd party concentrate in the spot market and blend it with own product in such a way that all requirements are? This is exactly what Almonty did at WCM. Also, I always wondered why Wolf didn't buy 3rd party concentrate in order to prevent the penalty from being triggered when it didn't meet its contracted supply commitments. Should impurities or other sub-standard specifications have become a significant factor for product pricing, I would have expected Woulf to keep its shareholders fully informed. With regard to what people should be able to see once they walk by, I can only think of pro-processing equipment like ore sorters. Unfortunately there is absolutely no chance for me to check it out on my own.

In order to predict revenue figures I multiplied the amount of tungsten produced by the average quarterly tungsten price. While this may be sufficiently accurate when production remains constant over the course of the quarter, it is prone to error once the production rate swings significantly. Like in Q4 when much more tungsten was shipped towards the end of the quarter when prices were high as opposed to earlier when less product was shipped and prices were lower. In such an environment calculations using an average will underestimate revenues and calculated discounts will appear too low. So what I am going to do is calculate revenues on a shipment by shipment basis incorporating the respective prices at time of shipment. Also, I will introduce a REAL WORST CASE model with sales to Wolfram Bergbau cut to zero. I've been lucky insofar as my overestimation of tungsten revenues has been mitigated by better than expected tin revenues. So what is the bottom line? There has been a moderate improvement. I appreciate the hard work that is being done by the team at Hemerdon. However, the improvement was too little to get us anywhere near to where we should be. It appears to me too much precious time has been wasted (mostly during 2016) and time is running out now. Of course one can always add another 10 Million Pounds to the debt pile, time and time again. Hemerdon might operate self-sustainingly, eventually. But one thing is guaranteed: At the end of the day shareholders will pay the bill. The plant was supposed to produce 100% of nameplate 6 months after handover. As a matter of fact, more than two years (!) after handover, the plant produces at 39,5% nameplate and loses half a Million Dollars by the week. Until it happened right before my eyes, I would have deemed such dismal performance impossible. Particularly given the fact that the plant is located in a highly developed first world country, owned by a company based in Australia where mining is THE ONE major driver of the economy and where people are supposed to know what they are doing. You live and learn. Quite frankly, this is a World Class Debacle.

(for whatever reason my previous message was truncated. So here we go gagain...) This brings me back to the "extraordinary circumstances" that I mentioned before. Why would Wolf cut deliveries to Wolfram Bergbau and send 87% of total production to GTP? Of course this is all speculation on my side but if you think about it it makes perfect sense: From the day when Wolf announced it had "not met its contracted supply commitments to major customers" and a "price penalty [was] activated", revenues were crippled twofold. They fell short of expectations anyway and on top of that, the little that was produced had to be sold for a much lower price. As I had outlined in one of my earlier postings, the discount Wolf had to accpet vs. the price of APT was in the -40% region as opposed to a -20% discount normally. With this in mind it would make perfect sense for Wolf to send enough tungsten to ONE of its customers to get rid of the penalty. What's more, the penalties the other customer applies have less of an effect on overall sales since its revenue share is diminished anyway. Applied to Q4's numbers this means: If Wolf could get rid of the penalty with GTP, a normal 20% discount would apply to 87% of its deliveries whereas the 40% penalty discount would apply to 13% of deliveries only (if at all). So let's have a look at the discount that was applied in Q4: Overall revenues: AU$ 15,822M = US$ 12,2M. Less tin revenues of 124t * US$ 20.000/t = US$ 2,48M * 0,8 (smelter discount) = US$ 2,0M. Gives tungsten revenues of US$ 10,2M. US$ 10,2M / 43.498 MTU = US$ 234,50 per MTU. That's a discount of just 18,4% vs. my average quarterly APT price of US$ 288 (which for whatever reason differs a few Dollars from Wolf's). This suggests to me that the penalty was lifted. On the other side it brings up a few questions: 1) If the penalty was lifted, why didn't Wolf mention it in its report? 2) Is Wolf willing to ruin its relationship to a major customer by willfully diverting the vast majority of deliveries to a major competitor? 3) Aren't there legal implications possible? In any event I am looking forward to the March report in order to find out whether the -20% discount vs. APT will be confirmed. The -18,4% figure appears a tad too good as it should be more like -20% or -21% IMO. This brings me to the last point, measures that will improve my model...

processguy, I'll reply to that later, I stand to my calculation and will show your complain doesn't apply.

Production of tin: A pleasant surprise was the output of 124t of tin in concentrate. That's 84% of nameplate production. However, one should keep in mind that nameplate is a long term average. Tin grades will decrease over time (page 8). That's why tin production should be higher than average during the first few years and below average towards the end of the operation. Nevertheless an encouraging achievement. ------------------------------------------------------- Now a few considerations with regard to my model. During Q4-2016 deliveries to GTP accounted for 60% of total deliveries. During Q1-2017 deliveries to GTP accounted for 57% of total deliveries. During Q2-2017 deliveries to GTP accounted for 58% of total deliveries. The rest went to Wolfram Bergbau und Hutten. One can reasonably draw the conclusion that the 60:40 distribution is the norm and - barred extraordinary circumstances - should continue in the future. That's why my first scenario was based on the 60:40 distribution. We knew 37.870 MTU had been delivered to GTP so 37.870 / 60 * 100 should be the amount of total product shipped if the 60:40 distribution was still right. That's how I arrived at the 64k MTU prediction ("best case"). I wrote: "Consequently, in a "normal" quarter I would expect the total amount of tungsten delivered to be in the vicinity of 64k MTU." I went on to say that during Q3-2017, however, the distribution was different, i.e. 80:20. If that was to happen again, the GTP deliveries would represent 80% of total deliveries already and just another 20% would have to be added in order to get to the overall deliveries: 37.870 / 80 * 100 = 47.338 MTU. That's what I called my "worst case" scenario. I wrote: "should GTP once again account for a much larger percentage of overall deliveries (like they did during Q3), the total amount of tungsten delivered during the quarter could be as low as 47,3k MTU." Now we know actual total deliveries were 43.498 MTU as reported by Wolf. Quite clearly Wolf MISSED even the more PESSIMISTIC forecast. The reason is simple: They cut deliveries to Wolfram Bergbau even further to just 13% of overall deliveries. The 37.870 MTU to GTP that we knew about represented 87% of all tungsten deliveries already. This is the major disappointment to me since the GTP deliveries gave rise to hope a much better performance was in the cards. This brings me back to the "extraordinary circumstances" that I mentioned before. Why would Wolf cut deliveries to Wolfram Bergbau and send 87% of total production to GTP? Of course this is all speculation on my side but if you think about it it makes perfect sense: From the day when Wolf announced it had "not met its contracted supply commitments to major customers" and a "price penalty [was] activated", revenues were crippled twofold. They fell short of expectations anyway and on top of that, the little th

First things first. Production of tungsten: Wolf produced 43.498 MTU of WO3 during the December quarter, a plus of 22,2% vs. the preceding quarter. Let's put this into perspective. The plan as laid out in the feasibility study (I urge you to read this document!) https://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01180907 is to produce 345.000 MTU per annum on a 5,5 days per week basis (page 4). Adjusted for 24/7 operation that's 439.000 MTU per annum or ~110.000 MTU per quarter. What is important to understand here is while the front end* of the plant was shut down on weekends, the refinery was not. The refinery continued to produce WO3 concentrate on a 24/7 basis. Its feed was source from front end output on weekdays and from previously bagged pre-concentrate on weekends. That's why 24/7 is our benchmark. So the plan is to produce 110.000 MTU of WO3 per quarter. Accordingly, actual production of 43.498 MTU is 39,5% of nameplate output. That's where we are. The feasibility study projected "Plant ramp up in throughput & recovery over 6 month period" (page 9). As we all know, the plant was handed over to Wolf in September of 2015 and 100% of nameplate output should have been attained in March 2016. Throughput: The target is 955.000t per quarter. The amount of ore treated during the quarter was 485.788t. Operation was halted from Friday 11p.m. to Monday 6a.m. So this was basically a 4,75 days per week operation. Accordingly, adjusted for 24/7 operation throughput was 715.898t or 75% of nameplate throughput. Recoveries: The target is 64%. The BFS predicts 58% in soft granite and 66% in hard granite (page 16). According to the plant feed chart (page 8) the vast majority of feed in year 3 is hard granite. That's why I chose a target of 64%. The equivalent of 715.898t of ore has been treated. Mined grade was 0,20% WO3 so 1.431,8t (=143.180 MTU) of WO3 were present in the ore. Recovered were 43.498 MTU or 30,4% of the WO3 present in the ore. Think about it: Less than 1/3 of the tungsten was recovered and the rest (more than 2/3, that's 100.000 MTU!) was lost to tailings. Had Wolf achieved its recovery target of 64% (as they should do since March 2016, all other things equal), tungsten output would have been 91.635 MTU leading to revenues of AU$ 28,0 Million (tungsten) or AU$ 30,6 Million including tin which would have covered operating costs of -24,3 Million easily.

Of course it is.

Although Wolf beat my revenue forecast by a small margin, the top line can hardly mitigate numerous negative aspects. I clearly expect Wolf stock to decline from here in the short term. A detailed analysis will follow tomorrow.

Yet again, it's all made up. There simply is no short position in Wolf stock whatsoever. https://www.fca.org.uk/static/documents/short-positions-daily-update.xls

Thank you!

Processguy, while Wolf doesn't disclose when exactly they record revenues, they have to abide by strict accounting principles. Clearly revenues cannot be recorded when concentrate has been PRODUCED. Imagine VW recording thousands of vehicles as SOLD while in fact they pile up in parking lots waiting for an actual BUYER. What I do know, however, is common industry practice and there is no reason to believe GTP would allow Wolf to deviate from well established standard procedures while all other concentrate producers adhere to them. Normally, provisional payment (~80%) is effected on bill of lading ex-port. The invoiced amount is based on the seller's assays of WO3 concentrate and the contract price at the date of shipment (or some other pre-determined point in time). A subsequent adjustment is made once the product has been received and assayed by the customer. If seller and buyer agree, the balance is being paid. In case the Customer's assays differ from the seller's, the dispute is to be settled by an independent third party assaying service whose findings will be binding on both parties. Mabe deep throat can validate what I have said. Certainly unrelated to Wolf in particular, just with regard to common industry practices.