PERTH (miningweekly.com) – Australian tungsten developer Hazelwood Resources has acquired a 60% stake in Hong Kong-based Asian Tungsten Products Company (ATC), which is developing a downstream ferrotungsten processing facility in Vietnam.

Hazelwood will pay $825 000 to acquire a 60% stake in ATC and will fund 60% of the capital expenditure for the plant, as well as providing working capital.

The new ferrotungsten facility is expected to be completed and ready for commissioning at the end of 2010. Hazelwood stated that feedstock for the facility could be procured from multiple sources, including its Big Hill operation in Western Australia.

Hazelwood would start production at the Big Hill mine in 2011. It is currently conducting pilot processing test work for a definitive feasibility study.

The new Vietnam plant would be the largest producer of ferrotungsten outside China, capable of fulfilling about 25% of global demand for the product, Hazelwood said in a statement.

Ferrotungsten is used in steels and alloys where hardness and heat resistance is required.

Hazelwood said that the benefits of the acquisition of ATC were not restricted to ferrotungsten, as the company also had a letter of intent in place with downstream producer Xiamen Tungsten (XTC) for the toll processing of concentrates into the intermediate product ammonium paratungstate.

Under the arrangement, ATC could toll process tungsten concentrates at XTC’s facilities located in the Xiamen free trade zone in China.

The new business is expected to be cash flow positive late 2011/12 and at full capacity is projected to generate after-tax profits of about $32-million a year from 2012, Hazelwood MD Terry Butler-Blaxell said.

At full capacity, over a 12-year forecast period and using current prices, a total sales revenue of $1,7-billion was expected, with a margin on sales of about 24%. Internal rate-of-return over the same period was estimated at around 53%.

Butler-Blaxell said that the total capital costs for stage one of the project were estimated at $16,3-million, with a further $8,2-million required to increase the capacity in stage two of the project.

A capital-raising programme would be implemented to fund Hazelwood’s commitments, he added.

The initial production capacity during stage one is 2,4-million kilograms a year of contained tungsten in the form of 80% grade ferrotungsten, with plans to increase production to about 4,8-million kilograms a year of contained tungsten during 2012, subject to additional permitting and approvals.

Hazelwood quoted market intelligence group CRU, which has projected a 5,7% growth in consumption of tungsten in steelmaking and alloying applications out to 2013.

“We are now in the unique position of having both the Big Hill tungsten project, which will produce around 3% of the world’s primary supply of tungsten, and a majority stake in a high-value added downstream tungsten processing business that could produce 25% of the world’s ferrotungsten,” said Butler‐Blaxell.

“This is a rare opportunity and one that provides Hazelwood with excellent scale and vertical integration to emerge as a global player in tungsten raw materials and intermediate products.”

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