Small Talk: Wolf Minerals goes hunting for tungsten in South-west England
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Monday 07 November 2011
Although the list of miners based in Australia is very, very long, there can be few that resemble Wolf Minerals. The business, which last week announced its intention to list on AIM, is based in Subiaco, a suburb of Perth in Western Australia but – and here is the twist – its main asset is in Devon. Yes, Devon in South-west England, where Wolf is hunting for tungsten and tin.
The Hemerdon Ball project, as the company's mine is known, is believed to contain the "fourth-largest tungsten resource in the world", according to Wolf. The metal was first discovered at Hemerdon in the 1860s, but the resource was not developed until the First World War, with production continuing until the end of the second.
The mining group Amax was active on the site in from the late 1970s but eventually withdrew in the early 1990s as falling commodity prices hit the economics of the project. North American Tungsten took over in 1997, but, with tungsten prices remaining low, left six years later. Wolf, which is expected to start trading in London at the end of November, arrived in December 2007, when it signed an option agreement for the project.
Feasibility work followed and then, in May this year, the company moved forward with taking on the Hemerdon project and, subject to financing, developing it into a large-scale open-pit mining operation.
Analysts at Blackswan Equities reviewed Wolf's definitive feasibility report and agree that the opportunity could prove lucrative for the company. The fact that the Hemerdon mine is in the UK should also help, as it attracts the interest of investors looking for stocks that give them exposure to the current commodities boom without the political and investment risks attached to some resource-rich countries.
"[Wolf] is a single project company, reliant on the world's fourth-largest undeveloped tungsten resource located in a stable political jurisdiction within trucking distance of end user markets," Blackswan's analysts said when the report came out in May.
These factors should give Wolf the resources it needs to capitalise on tungsten's role as a strategic metal, they added. "Strategic metals are metals integral to a nation's defence, aerospace or energy industries, but domestic demand for them outstrips supply capability now or in the future," Blackswan said. "The USA and China both classify [tungsten] and [tin] as strategic metals, and Europe and the UK have also declared tungsten a 'critical raw material'."
In terms of consumers, China, unsurprisingly, stands out as the biggest in the world, making up for some 60-odd per cent of world demand.
Given the levels of economic growth seen in the country, its appetite for metals is not expected to dip any time soon, with demand for tungsten expected to grow by about7 per cent anually "over the long term", according to estimates from Blackswan.
Confident Endace sees growth in sales
Endace chanced upon some good timing last Tuesday, with its first-half results coinciding with the London cyber-security conference that generated more than a few headlines last week. The company specialises in network monitoring products that allow companies and governments to keep tabs on activity across their systems, something that is seeing growing demand as organisations wake up to the need to protect their data and hardware in today's world.
The results back up this trend. Endace said sales in the six months to the end of September had soared by 37 per cent to $18.6m, with gross margins improving to 72.6 per cent. It also reported a strong sales pipeline, which bodes well for the future.
"While mindful of the uncertain macroeconomic conditions, we have not seen any change to expected order patterns," it said, pointing to "very exciting" opportunities as demand for its services rises.
With these prospects in mind, Endace has also been busy bolstering its top marketing team, recently hiring Spencer Greene from Juniper Networks to set up a new California office as the Auckland, New Zealand-based company looks to boost its sales and marketing activities.
Analysts picked up on these moves, with Panmure Gordon noting the growth not just in sales, but also in Endace's confidence.
"We sense a new confidence from this global tech leader," its analyst George O'Connor said, increasing his estimates on the back of the improvement in Endace's margins and repeating his "buy" recommendation on the company's shares. "It has been at least five years in the making and for us is built on a firm foundation of product leadership."
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