Woulfe aims to re-start Sangdong mine in 2013

At its height, the Sangdong mine in South Korea was one of the largest tungsten-molybdenum mines in the world. But after a 40-year run, the mine, located 170 km southeast of Seoul, was shut down in 1993 when the price of ammonium paratungstate (APT) fell to US$40 per metric tonne unit (mtu). 

Today Vancouver-based Woulfe Mining (WOF-V), which bought the mine in December 2009, says it will be ready to make a production decision in 2012 and potentially start mining in March 2013. Indeed it is so confident that Sangdong will become a company-maker that it skipped the prefeasibility stage after completing a scoping study last March and moved right into a bankable feasibility.

Now it is finishing up a 5,000-metre drill program (six drill rigs are onsite, three at surface and three underground) and expects an updated resource estimate will be completed in late June. The definitive feasibility study will be out in the latter part of the year.

So far the company has spent about US$900,000 on detailed environmental work, and a permit for the process plant site and infrastructure is expected by July. 

In January, Korea Zinc, a US$5-billion listed smelting company, bought 30 million Woulfe Mining shares for $10 million, or 30¢ apiece.

Under an agreement between the two companies struck last November, Korea Zinc is also committed to a further investment of $38 million for a 51% ownership stake in Sangdong Mining Corp., a 100%-owned Woulfe subsidiary, which holds title to the project. Korea Zinc has also said it will arrange $75 million in debt based on the completion of the feasibility study.

These funds, along with $11 million in cash and about $6 million in warrants that are all in the money and are likely to be exercised before the December 2011 due date, will provide enough money to take the project forward into 2012, the company said in mid-March. 

Detailed design work on the process plant is “well advanced,” the company noted, and will be based on mill throughput of 1.2 million tonnes a year producing about 400,000 mtu of APT and 500,000 lbs. of molybdenum.  

The company says that the high-grade central Main zone of the deposit was largely mined out during previous production, apart from support pillars and protective areas around infrastructure, mainly in the top and margins of the lodes. But the overlying Hangingwall zone and the underlying Footwall zone are largely intact.

Woulfe’s scoping study was based on inferred resources within the Footwall only (not the inferred resource contained within the Hangingwall), or about 55% of the total inferred resource of 103.6 million tonnes averaging 0.35% tungsten oxide and 0.04% molybdenum sulphate at a cutoff grade of 0.1% tungsten oxide.

Based on mining 36 million tonnes of footwall mineralized material, the scoping study outlined an internal rate of return of 26.4% and a capital cost payback period of 3.4 years. Wardrop envisioned a 2.5-million-tonne-per-year processing plant and a mine life of 15 years based on an assumed price of US$250 per mtu of APT. Net present value, based on a 10% discount, was calculated to be $367 million.

But at today’s prices for APT, which are nearing US$400 per mtu, the project looks even more attractive, the company says.

The Sangdong mine is underlain by metasedimentary rocks belonging to the Yangdok and Great Limestone series that are on the south limb of a syncline. The mineralization is of a skarn-type tungsten-molybdenum-bismuth deposit within altered horizons in the Cambrian-age Myobong shale formation.

Along with Sangdong, Woulfe owns the Muguk gold-silver mine, formerly South Korea’s largest gold mine.

At presstime Woulfe was trading at 24.5¢ per share, within a 52-week range of 7¢ (July 7, 2010) and 55¢ (Nov. 26, 2010). It has 266.3 million shares outstanding.