Colt gets positive PEA for Tabuaco tungsten project

VANCOUVER — A preliminary economic assessment (PEA) says the tungsten mine that Colt Resources (TSXV: GTP) is planning at its Tabuaco project in northern Portugal works on paper. It’s a vote of confidence for Colt to expand the resource, trial mine a bulk sample and push ahead with permitting before its targeted 2017 start-up date.

Tabuaco hosts two tungsten deposits: Sao Pedro das Aguias (SPA) and Aveleira. Colt has drilled more than 100 holes into the mineralized bodies since acquiring the 45 sq. km project in late 2007, and the effort has defined 1.5 million indicated tonnes grading 0.55% tungsten trioxide (WO₃), plus 1.2 million inferred tonnes averaging 0.59% WO₃.

The tungsten at Tabuaco occurs in skarn-type scheelite deposits. The PEA envisions mining these deposits at a rate of 1,500 tonnes per day. With a 90% tungsten recovery rate, the mine could produce 1.2 million tonnes of WO₃ in its 12-year mine life.

It would cost US$87 million to put Tabuaco into production. Colt vice-president and CEO Declan Costelloe says the deposit itself gets credit for the relatively low development cost.

“Due to the natural geometry of the deposit, the biggest strength would be for Colt to mine the deposit underground,” Costelloe writes in an email to The Northern Miner. “Our ‘drift and fill’ underground mining approach provides us with an opportunity to put all the tailings and most of the waste back underground. Because of that our modelling done to date indicates no need for a tailings facility, thereby removing a typically significant capital item.”

Costelloe notes that advances in scheelite processing and recovery technologies help constrain capital and operating costs. For example, sorting at the crushing stage reduces the amount of material sent through the plant, allowing for a smaller processing plant and lower operating costs.

By investing US$86.8 million at Tabuaco, Colt could produce a tonne of tungsten trioxide for US$201.20. Using a WO₃ price of US$400 per tonne and a 5% discount rate, Tabuaco carries an after-tax net present value of US$67.4 million, and the mine would generate a 30.7% after-tax internal rate of return.

Tabuaco is 100 km east–southeast of Porto, in the heart of Portugal’s port wine producing country. In fact, there is a vineyard on top of the deposit, which Colt bought in mid-2011. The vineyard can keep producing during underground mining operations.

“Colt has taken an aggressive stance towards minimizing the impact on the environment when planning the mining of this high-grade tungsten deposit,” Costelloe writes. “The biggest weakness is that the area is well-known for the production of port wine. Our project is being designed to have no negative impact on this business.”

With the PEA complete, Colt plans to strengthen the project in a few areas before completing a feasibility study, which the company aims to release before the end of 2014. Before then Colt intends to upgrade the inferred resources at Tabuaco so that the tonnes can be included in a mine plan; develop an adit into the mineralized body to assess geotechnical conditions and take a bulk sample for metallurgical test work; use the metallurgical test results to finalize plans for the processing flow sheet at Tabuaco, where several options are being considered; and study options to minimize the mine’s environmental impacts.

Tungsten is hard, and has the highest melting point of all metals, which has led to its primary use as a strengthener in metal alloys. Used in applications ranging from artillery to aerospace, tungsten has steady global demand.

China produces 80% of the world’s tungsten, but in recent years China has become a net tungsten importer. This shift has put pressure on tungsten supplies, and as a result the price of ammonium paratungstate (APT) — the primary form of raw tungsten traded on the market — has climbed. In early 2010 a tonne of APT could be bought in Europe for US$200. Eighteen months later, the price had climbed above US$450 per tonne. Prices  settled through 2012, but have since inched back up to the US$415-per-tonne level.

Colt also has money in the bank, having recently closed a $5-million private placement. Those funds brought the company’s bank balance up to $6.5 million.

Colt’s other assets are all in Portugal and include the prefeasibility stage Boa Fe gold project, four early stage gold projects, a gold-copper property and a gold-tungsten project.

On news of the Tabuaco PEA Colt’s share price gained a cent to close at 32¢. The company has a 52-week share price range of 16.5¢ to 56¢, and 153 million shares outstanding.