ATC Ferrotungsten Project

In May 2010 Hazelwood acquired a 60% interest in Asia Tungsten Products Company Ltd (ATC), which is building a new ferrotungsten refinery near Vihn Bao in Vietnam. Stage one of the ATC Ferrotungsten Plant has a nameplate capacity of approximately 4,000 tonnes of ferrotungsten alloy per annum, equivalent to 3,000 tonnes of contained tungsten per annum (at 75% minimum tungsten content). A second stage, if completed, would have sufficient capacity to supply around 25% of the world’s ferrotungsten.

Ferrotungsten is used in steels and alloys where hardness and heat resistance is required. Independent projections predict consumption in excess of 17,000 tonnes of contained tungsten in steels and alloys by 2013 (source: cru). Outside of China, there are few sources of supply of the material.

ATC will commence operation during 2011 as a refining business and it is planned to vertically integrate the refinery with Hazelwood’s Australian tungsten projects to decrease the reliance on third party feedstock (tungsten concentrate).

Hazelwood’s Joint Venture partner in ATC is backed by a team of experienced personnel from the Chinese tungsten and ferroalloy industries. Their experience is considered a key success ingredient in the challenging ferrotungsten production process. The Joint Venture partner is also brings a wealth of experience in the procurement of raw materials in the tungsten industry.

ATC’s ferrotungsten project will be the largest, most advanced ferrotungsten furnace outside of China. Construction commenced in May 2010 and the project is scheduled for commissioning during the March quarter of 2011. Total capital cost for the construction of the project is approximately $US11 million.

Under the Joint Venture Agreement, Hazelwood is contributing 60% of the capital cost for construction, and will provide 100% of the working capital required for production as a loan to the Joint Venture. A large component of the working capital is for the purchase of raw materials such as feedstock (tungsten concentrate.

Hazelwood and ATC have signed an exclusive agency agreement with Wogen Resources Limited for the distribution of ferrotungsten worldwide. The agency agreement is for an initial period of five years and favourable payment terms have been negotiated. Wogen Resources Limited is widely regarded as a leading trader in off-exchange metals for industry. Wogen Resources Limited primarily engages in the physical trading of specialty metals and minerals and the processing of metals and alloys.