Tiberon Minerals (TBR-T) has inked Osram Sylvania to an initial five-year off-take agreement that will see the lighting giant buy at least 44% of the projected tungsten concentrate production from the Nui Phao tungsten-fluorspar project in northern Vietnam.
Sylvania also has an option to buy all of the project’s tungsten production; exercies of that option would see the deal stretch to 15 years, and generate up to US$1.2 billion in tungsten revenue, based on current ammonium paratungstate (APT) prices.
While the exact pricing scheme remains confidential, the companies say that prices will be based on the monthly average European market price per tonne of low ammonium paratungstate, as published by London’s Metal Bulletin, less a defined discount. Low APT prices have recently soared to record levels owing to reduced supply from China, the world’s largest supplier; on May 13 it was quoted at US$260 per tonne. APT is the most widely traded intermediate tungsten product.
Both the base and option cases include a floor price on the first five years of tungsten concentrate production. The option agreement provides Tiberon with an “escalated premium” on sales exceeding the 2,250 tonnes per year agreed under the base case.
Sylvania must decide whether to exercise its option before the end of the year; if it does so, it would also need to make a non-refundable multi-million dollar investment in the project.
“These contracts are an extremely important step toward putting Nui Phao into production and toward achieving Tiberon’s goal of becoming among the world’s largest single producers of tungsten concentrate,” said Tiberon CEO Mario Caron.
An interim feasibility study completed earlier this year pegged Nui Phao’s proven and probable reserves at 53.1 million tonnes grading 0.214% tungsten, 8.34% fluorspar, 0.192% copper and 0.097% bismuth, plus 0.214 gram gold per tonne.
Plans call for mining at a rate of 10,000 tonnes per day to annually produce around 4,319 tonnes of tungsten concentrate over 16 years. Total operating costs are pegged at US$7.92 per tonne. The project carries an estimated total capital cost of US$211 million, including a US$23.7-million contingency.
Projected recoveries are 61% tungsten, 78% fluorspar, 29% bismuth, 87% copper and 13% gold.
Project start up and commissioning are slated for the second quarter of 2007; deliveries under the offtake agreement would begin in early 2008.
In early March, the government of Vietnam approved the project’s environmental impact assessment; the mining license is still outstanding, and is required for mine development to proceed.
Situated 80 km northwest of Hanoi, the Nui Phao property is held by Tiberon, with a 77.5% interest, and two Vietnamese companies, with a total of 22.5%.
Shares in Tiberon were as much 44, or 17%, higher at a new 52-week high of $3.05 in early trading in Toronto on May 17. Tiberon currently has 40.9 million shares outstanding.