Not your average financing and not your average financiers. A multi-billion dollar New Zealand company – the Todd Corporation – has struck a second deal that secures it a top shareholder position in a tungsten junior.
The first deal came late last year. The Todd Corporation – a Kiwi business with diverse interests led by John D. Todd who Forbes once called New Zealand's first billionaire – picked up a 19.9-per cent stake in Wolf Minerals, an ASX-listed junior that owns the Hemerdon tungsten-tin project in southwest England.
As is typical in such large financings, Todd paid a premium to get the shares at A$0.27 which have since risen to A$0.35.
This financing got Todd a board position and a significant stake in one of the world's leading undeveloped tungsten deposits. Wolf is angling to finalize environmental permitting on Hemerdon and deploy debt financing it has arranged to build an 8,000-tonne-per-day tungsten-tin mine encompassing, according to Wolf, the fourth largest undeveloped tungsten deposit in world. Wolf pegs Hemerdon reserves at some 27 million tonnes at 0.19 per cent WO3 and 0.03 per cent tin and has estimated the mine will cost about $168 million to build.
Now Todd is doing it again with another one of few other juniors with large, advanced stage tungsten deposits on the cusp of permitting.
Thursday TSX-V listed Northcliff Resources, an HDI Mining associated company, said Todd was buying a roughly 15-per cent Northcliff stake for $5 million, again at a shareprice premium, in a deal that, with further funding promises, could also get Todd a 21.5 per cent direct interest in Northcliff's Sisson tungsten-molybdenum project in New Brunswick for $34 million.
Here again one of the world's largest tungsten deposits – a sector otherwise dominated by domestic Chinese production – is at play.
Northcliff, which bought Sisson in stages from junior Geodex over the past few years, reports a heftier if lower grade resource than Wolf with reserves weighing in at 334 million tonnes @ 0.066 per cent WO3 and 0.021 per cent moly.
While a Todd representative couldn't be reached in an early morning call for comment on the deal, it seems fair to say anyway that the Todd family sees strength in the demand for tungsten in the decades to come and a fruitful life for once far less attractive tungsten deposits, economics wise.
Like many other metals, tungsten prices have surged in the past decade as Chinese hunger for raw materials boomed.
In tungsten's case, for a metal often used to make hard steel alloys or super alloys. That appetite propelled prices of tungsten, commonly sold in the form of ammonium paratungstate (APT), from around $100 per metric tonne unit in the mid 2000s to over $450 in 2011 (one MTU contains 10 kg tungsten). Prices have since come off, dropping to the mid $300s last year and since rising back to about $400 per MTU.
Prices are still strong by historical standards. Investments in Hemerdon and Sisson are bets they stay thus strong.
Both deposits have long been known about and wouldn't have made as much sense under cheaper APT pricing of past decades. But in recent years operators on both projects have been been able to produce positive feasibility studies and in the case of the more advanced Hemerdon project, attract sizeable funding and offtake agreements thanks to surging tungsten prices.
Hemerdon advertises a 21 per cent internal rate of return at $360 APT and Northcliff 16.3 per cent at $350 APT and $15 per pound moly. (Still assuming $350 APT, the latter IRR drops closer to 14 per cent at today's moly prices trading around $10 per pound. But then, at today's APT price, but lower moly, comes back up over 16 per cent again.) In these forecasts the Todd family clearly likes what they see and are manoeuvring to gain exposure to tungsten in the new world of APT prices assuming they're here to stay.