Almonty Finally Gets A Piece Of Woulfe Mining — What's Next?

Almonty Finally Gets a Piece of Woulfe Mining — What's Next?Surprising news hit the tungsten space last Tuesday when Almonty Industries (TSXV:AII,OTCMKTS:ALMTF) announced plans to invest in Woulfe Mining (CSE:WOF).

Specifically, the two companies signed an agreement for a non-brokered private placement for $1 million in principal amount of convertible unsecured subordinated debentures at a price of $1,000 per debenture. Almonty also inked a deal with Dundee (TSX:DC.A) and Dundee Resources to acquire 29,497,229 common shares in the capital of Woulfe currently owned by Dundee at a price of $0.056 per share. In exchange, Almonty will issue 2,949,723 of its common shares to Dundee for $0.56 a piece.

While deals like that aren't out of the ordinary, previous interactions between Woulfe and Almonty make the agreement an interesting one. To start, the two companies entered into a non-binding letter of intent back in January to merge and create "the leading tungsten producer outside of China." The agreement would have seen Almonty purchase all of Woulfe's outstanding shares at a price of $0.08 per share.

However, less than a month later, releases from both companies revealed that they had decided against the merger. Neither offered much in the way of an explanation. Fortunately, following Tuesday's agreement, the Investing News Network was able to catch up with Almonty's president and CEO, Lewis Black, to gain a better understanding of the companies' relationship and what investors can expect moving forward.

Timing is everything

"It was just a timing issue. I don't think it was any one thing. In February, it was a question of timing for both sides. Sometimes you don't have enough time," Black said in a phone interview. "We were working on so many other opportunities that we are still currently working on that the timing just didn't work. The dialogue never stopped between the parties."

After being asked about the other opportunities Almonty is interested in, Black explained the projects the company currently has under its belt, starting with two in Spain: the Los Santos mine, which the company acquired in 2011, and the Valtreixal tin-tungsten project, which it is now in the process of permitting.

"We acquired another site in Australia at the end of last year, which is in operation, [and] which we are now in the process of rehabilitating. And this is our fourth one," he said. "We anticipate that there are a couple other targets that are interesting to us. Some of them we may be successful at acquiring, some of them we may not."

Black said Almonty has access to capital and has "the strongest operational team that exists in tungsten concentrate production." That said, he noted that it can be frustrating because "sometimes it's very difficult to convince a management team that what is good for their shareholders is somehow good for them."

Seasoned vets

Black said that one of Almonty's strong suits is that its team comes out of the world's longest-operating tungsten mine, the Panasqueira mine in Portugal. "It has been running now for 120 years uninterrupted. So these guys have fourth- or fifth-generation knowledge, and there are no books, no school, no consultants you can go to for tungsten. All that knowledge disappeared in the west in the '60s and '70s."

He added that Almonty is fortunate to have that type of experience under its belt as it will allow the company to take a project that it considers viable and see what it can achieve economically. However, he did note that in regards to the working relationship between Almonty and Woulfe, it will ultimately be up to the shareholders to gauge how they see it moving forward.

"Do we put the companies together? Do we keep them separate? Ultimately we would like to see the companies together because we think from a financial point of view it makes sense. But we can only make that recommendation to shareholders and it's up to them to decide," Black said.

The Sangdong project and its clientele

Woulfe's 100-percent-owned Sangdong project in South Korea is considered one of the largest tungsten deposits in the world, making it understandably attractive to tungsten and molybdenum miners. Black affectionately referred to Sangdong as the "great lady of the east," and said that while it is a very technically challenging project, his team has looked at it extensively and believes it to be very similar to the Panasqueira mine.

"We like Sangdong because her history and her development are almost identical to the Panasqueira mine in Portugal. It had a huge contribution to the economic development of the country. The region that it sits in was entirely created to serve this mine. What we also found is there is a huge level of pride, almost militant pride, in that mine. We felt very at home there. It has many similarities culturally and through the community."

In regards to the project's financier, International Metalworking Companies (IMC), Black said that while Almonty has no prior relationship with the company, he feels that IMC will see the news as a positive.

"I would imagine that IMC will see what has happened favorably because when I go to their office, it will be the first time that they will have sat across the desk from someone that has successfully operated tungsten operations," he said. "I feel that IMC has only ever wanted to see supply. So I am not expecting a hero's welcome, but I think now that once we have closed the deal my first port of call is to go to meet with IMC and have this conversation as to what they want and what they expect from Sangdong."

Black explained that because Almonty has never breached a supply contract and has an impeccable track record for reliable supply, the relationship between the two should go smoothly if both keep up their side of the bargain.

"It is really getting to know our clients, and IMC is currently a client of Sangdong," Black said. "Traditionally, we have commanded the highest prices for our offtakes because of our reliability and the consistency of our material. But we have never, in fact, gone to an offtaker to look for funding. We feel that we are responsible for our business and they are responsible for theirs. Our relationship is that we deliver to them on time and to spec, and they pay us on time. And that is, I believe, the most positive relationship you can have between a supplier and a customer."

Investors will no doubt be watching to see how Almonty's relationships develop moving forward. At the end of day Friday, the company's share price was unmoved, trading at $0.55.


Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.

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Ormonde Mining Rejects Takeover Approach from Almonty

Almonty Finally Gets a Piece of Woulfe Mining — What's Next? from Tungsten Investing News