CLICK HERE FOR FULL REPORT AND DISCLOSURES 3 May 2012
Wolf Minerals (WLFE.L) Closing Price: 24p Rating: Buy
Yesterday we attended an organised site visit to WLFEs Hemerdon project, located six miles from Plymouth in Devon.

This provided an opportunity to meet management, assess the likely impact of the operation on the local communities and gain comfort of the very good progress that is being made.

WLFE is well prepared for an early 2014 start-up.
� Yesterday we attended an organised site visit to WLFEs Hemerdon project, located six miles from Plymouth in Devon.

While the site visit did not highlight anything that was not already understood, it proved informative for several reasons: � Management.

It provided an opportunity to meet the senior people responsible for the permitting and approvals related to environmental, heritage and community issues, as well as those involved in financing and project management.

All facets appear to be well managed with few serious outstanding issues.

The project already has a mining licence in place.

The key permits that WLFE still requires are the water permit (expected before mid year) and the waste disposal permit (not required for another year, while there is a four month statutory review process).

Local flora of any size is mainly regrowth over previous mine workings. � Regional perspective.

We were able to again appreciate the likely extent of the operation and its impact on the local landscape.

WLFE has been eager to highlight that its project abuts some substantial clay mining operations in the region (owned by Sibelco and Imerys) and this is indeed the case, with the scale of these operations dwarfing the footprint that WLFE will create.

This sets an important precedent and important acceptance of mining in the local region.

It should also assist with any plans by WLFE to extend the mine life beyond the current nine years.

There is very little population around the planned operation and WLFE is well advanced in plans to acquire the 15 inhabited properties that will be necessary to purchase.

The mine is expected to employ in the region of 220-250 personnel and have an indirect employment benefit to over 1000 people. � Progress.

We were able to appreciate some of the effort that is already underway, including construction of the link road, due for completion in July 12.

There are decaying mine buildings that date back to historical production in WW1 and WW2 and these will need to be cleared.

The tenders WLFE has received for the EPC (Engineering, Procurement, Construction) contract for the plant are comfortably in line with the budgeted FS estimates. � Development summary.

The mine is expected to be a moderate sized operation, treating 3mtpa of ore to produce an average 345,000mtus (3,450tpa of tungsten in a concentrate grading 65% WO3).

The DFS indicated C1 cash costs of US$105/mtu versus the current spot price around US$400/mtu, bearing in mind that WLFE will also need to pay a treatment charge, expected to be equivalent to 20% of the tungsten price.

Therefore at the current spot price, WLFE would enjoy a margin comfortably over US$200 per mtu.

Capex is estimated at �104m ($140m). � Financing well advanced.

Following the recent announcements that WLFE had secured �55m of senior debt from ING, Unicredit and Cat Financial and �20m of subordinated debt from off-take partners, it is well advanced towards completing financing the project for construction from the end of 2012.

WLFE is targeting commercial production in the 2H14. � Overall.

Our target price of 39p per share is based on a peer group comparison.

On completion of financing and development we see substantial upside based on a fully diluted NPV.
Louise Collinge +44 (0) 20 7597 5779
Hunter Hillcoat +44 (0) 20 7597 5182
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