We sat down with Alexander Langer, VP Corporate Development and asked him some questions. Blackheath is focussed on tungsten exploration and development in Portugal.
Introduction
Blackheath is focussed on tungsten exploration and development in Portugal and holds interests in its maiden property; the past producing Covas tungsten mine in northern Portugal – a country with a highly attractive geological setting conducive to the discovery of mineral deposits and with a supportive legislative environment.
Blackheath also has recently acquired the rights to a 100% interest in the past-producing Borralha tungsten mine and the past-producing Bejanca tungsten/tin mine in northern Portugal.
We sat down with Alexander Langer, VP Corporate Development and asked him some questions.
Tungsten
- Why does Blackheath focus on Tungsten?
- Tungsten is a strategic metal in short supply with a great future. There are relatively few tungsten deposits in the world outside of China. Blackheath’s management team has extensive experience in tungsten projects and also in Portugal, which historically produced much of Europe’s tungsten before tungsten prices dropped in the mid-1980’s. Management was also involved in the 2007 sale of the Panasqueira tungsten mine, which is still operating in Portugal. The objective now is to acquire Portugal’s top past-producing tungsten mines for Blackheath’s portfolio of assets and to develop new resources for production.
- What are the main applications for Tungsten?
- There is a wide range of uses for tungsten and new uses are being developed for new, specialized applications. However, most tungsten is currently used in the form of tungsten carbide; which is almost as hard as diamond, on the tips of drills and saws for industrial cutting and machining applications and also as an alloying element in specialty steels to give hardness and wear resistance. Tungsten is also used in electrical contacts since it has high conductivity and wear resistance.
- What are your tungsten price estimates for five years from now?
- I wish I had a crystal ball, but I believe that tungsten prices will remain robust because of pressures of demand and limited supply. The tungsten trioxide (WO3) price has roughly doubled in the past five years or so, and is almost 30% higher now than it was early this year, and is currently around $40/kg or $400/MTU. A metric tonne unit is 10kg. So, following those trends, it would not be unreasonable to expect prices of, say, $60 to $70/kg or $600 to $700/MTU or more in the next five years.
China
- Can you explain why China is the dominant factor in the tungsten price and trade?
- Simply put, China currently accounts for approximately 85% of global tungsten output annually and it holds 65 percent of the world’s tungsten reserves. They also have large modern metal smelters and numerous tungsten refineries. Beyond that, China is the main user of tungsten and has recently, for the first time, started to stockpile tungsten. Because of this, there has been a tight supply of tungsten, which is the main reason we are seeing upward pressure on the price.
- Can you elaborate a bit more about China’s recent policy change?
- China’s National Land Resources Bureau has recently decided to implement volume controls of tungsten production and exports. In the latest edition of China’s ‘Five Year Plan,’ a new rule change capped any new production growth at 8 percent per year. The changes are due to increasing environmental protections in China. China’s tungsten ore reserves have declined from 4.2 million tons to 1.9 million tons, a decline of more than 50%. With the Chinese State Reserve Bureau continued stockpiling of tungsten and the capped production rates, it will be up to the rest of the world to mine more tungsten to meet future demand.
- As we saw on the site visit, there is already some Chinese presence in Portugal and even nearby the project.
- Very true, the Three Gorges Corporation, from Three Gorges Dam fame, has recently invested $3.5 Billion dollars for a 21% stake of Portugal’s National Energy Company, EDP-Energias de Portugal SA. It’s also interesting to note that Portugal returned Macao to China in 1999 and ever since the 2 nations have had great relations.
- How realistic is a scenario with Chinese involvement?
- Honestly, I think that could be a very realistic possibility. A number of groups, including several based in China, have expressed sincere interest in our projects and they continue to monitor our progress regularly. It is quite understandable due to the quality of our assets and the track record of management, both in tungsten mining and in the country of Portugal.
Personally, I’ve had success in finding large strategic partners, both European and Chinese; who have taken 19.9% equity interest in previous companies I’ve been involved with. As long as the visions of both companies are in line and there is an obvious mutual benefit, these types of partnerships generally work out extremely well for shareholders. For instance, if equity is issued, it is most likely done at a significant premium to the market price.
Portugal
- Portugal is a very mining-friendly country. You were recently awarded an experimental mining license on the Covas project. Can you tell us how important this license is for Blackheath, and what the next steps are?
- The granting of the Experimental Exploitation License (“EEL”) for Covas is an important step forward for Blackheath and comes following our renewals of the Exploration License. The first advantage is that the Company may proceed with trial mining tests and also bulk sampling for major metallurgical testing. At the same time, the Company may proceed with further definitive drilling and preparation of resource estimates.
The historic resources at Covas, as determined by Union Carbide, are 923,000 tonnes at a relatively high grade of 0.78% WO3 or 7.8 kg/tonne, but these resources are not compliant with current NI43-101 requirements and must be checked and expanded. Our EEL is granted for three years and may be extended for a further two years if necessary but we would expect to move forward more quickly than the time frame allowed. Our next steps will be to continue drilling before preparation of a NI43-101 compliant resource estimate and a Preliminary Economic Assessment, if warranted, before undertaking a Feasibility Study for Covas.At the same time, we shall be assessing our other past-producing tungsten projects at Borralha, which was the second largest tungsten mine in Portugal before it closed in 1985 as a result of severely depressed tungsten prices and Bejanca, which also produced significant quantities of tin as well as tungsten before it, too, closed in 1985. Neither of these projects has been drill tested and neither has seen much in the way of modern exploration techniques. We plan to change that.
Finally, we shall be keeping a watch for further high-quality tungsten projects to add to our portfolio.
Corporate
- What will be the next catalysts for Blackheath?
- From now until the end of the year, we will be extremely busy. We’ve recently started our phase 2 drilling program at Covas and we expect to see the first round of assay results in the not too distant future.
We should also have our first sampling results from Bejanca. We’ve sampled the majority of the 7 former producing mines in the district and are currently awaiting final assays. At Borralha we continue to explore and sample some of the 127 Square kilometer license.
As I hinted before, we have been looking for high-quality tungsten projects to add to our portfolio and if all goes well during the due-diligence process, we hope to be adding a few more to Blackheath’s portfolio.
- What’s your current cash position?
- We currently have around $1 million in our treasury, sufficient for our currently planned work and drilling program at Covas.
Disclosure: Blackheath Resources is a sponsoring company. Our site visit costs were reimbursed by the company. Please see our disclaimer for current positions.
