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A very English mess: The Wolf stops howling at Hemerdon

October 12, 2018

The fourth largest tin-tungsten deposit in the world sits silent in the countryside near Plymouth (UK) this morning. Who saw it coming and what does it mean for England, and Europe’s struggling miners?

Workers arrived this morning to find the mine shut down (Image: Plymouth Live – Erin Black)

Wolf Minerals‘ Hemerdon project is/was England’s only metal producing mining project until some 12 hours ago, when administrators were called in, 200 staff were sent home (reportedly without pay), doors were closed and ASX trading was suspended. The company failed to resolve the financial woes which have plagued them since first re-opening the mine in the South-West of England. It’s not the final whistle, but in all honesty, recovery seems unlikely.

Yesterday auditors rejected financial statements from the project for 2018 and financiers ‘Resource Capital Funds’ called the company’s bluff and called in their dues to the tune of £2.1m in interest.

Tim Jones, the chairman of South West Business Council, said:

“This is an economic body blow. It is a double blow because the South West built its economic success around the mineral industries, and we had hoped that Wolf Minerals were going to be leading the way for lots more extractions companies to follow.

The hope is that the tungsten market will prove to be resilient leading to an early resolution to this. The immediate issue is over the displaced workers – it is essential that we do not lose their skills.”

Wolf suffered for several reasons and should have flourished for others…

For use as a proxy for global tungsten prices, this chart shows the price per mtu (10kg) of APT (Ammoniumparatungstate) in Australian dollars (image: Vital Metals)
For use as a proxy for global tungsten prices, this chart shows the price per mtu (10kg) of APT (Ammoniumparatungstate) in Australian dollars (image: Vital Metals)

PRO: Global tungsten prices are high and still climbing thanks to stifled Chinese supply and increased US demand in the oil and gas industry, they hit a record high in April 2017 and have not dipped majorly since. There is demand for tin and tungsten worldwide and Wolf’s sales were increasing at around 15% quarterly.

CON: Wolf’s Quarterly Activities Report for the three months to September 30, 2017, said net cash used in operating activities for the quarter was A$17.5 million with revenue of A$7.8 million. That amounted to an annual loss of some A$80.7m that financial year. in Total they lost around £100m in 3 years.

PRO: Earlier this year, Wolf had secured an extended bridging loan of £10m to continue operating. This was supposed to see the company in the clear and able to begin financially sustainable operation.

CON & ultimate flaw: The project was in the UK…

The Hemerdon tin and tungsten Production plant in Devon, England
The Hemerdon tin and tungsten Production plant in Devon, England

This project was heralded by British geologists and investors as a beacon to encourage more exploration and more national extraction. Many in the industry felt some attachment to it, they had regular representation at society events, student field trips and outreach, great intentions with their community and a genuinely world-class metal deposit. This project really made British geologists and investors enthusiastic about British projects again…

Wolf Minerals’ mistake however, was believing in England at a time when England believes a little too much in itself. They have ended up proving that Britain’s people can’t sustain a viably competitive environment for resource extraction, especially once their struggling nation stands up and goes it alone without a European umbilical cord.

Despite technological improvements, production at the mine had been significantly limited due to complaints from locals about noise and dust…

The same locals (I have to imagine) who have recently protested about the development of a regional business park all the while Britain faces one of its greatest youth unemployment crisis in living memory and a hastily diminishing economy. Without any real purpose or outlook past their own tiny hills these people forced Wolf to cease their weekend and overnight production, cutting their output by far more than could be accounted for and (I believe) costing 200 people their jobs.

Looking into the Wolf Minerals 'Hemerdon mine' in Devon, England (image: jeff collins)
Looking into the Wolf Minerals ‘Hemerdon mine’ in Devon, England (image: Jeff Collins, Dartmouth Today)

Wolf were partly an unfortunate victim of something truly European, a symptom of community, unity and over exposure to major issues, without necessarily possessing the critical thinking skills required to resolve or understand them. I refer to it to as ‘Auto-protest’ (in fact, I coined the term in a formal publication at the 2017 EGU conference in Vienna). Auto-Protest is the uninformed public reaction to anything related to mining.

Your average Western European newsreader will immediately conjure up images of coal covered and ragged faces and children pushing dirty trolleys around Victorian era pits, they will assume without any research that any company will completely destroy the land around them irreparably. No positive development will be considered, encouraging environmental reports will be ignored.

These same people are the most likely to share their faux-outrage across social media to other uninformed friends without any reference or research or attempt to engage the company, so the chain begins. Before the company have even struck hammer to rock, a hundred thousand people will be up-in-arms complaining about every imagined notion of impact and projects are thus set up to fail.

I would hesitate to say, these easily riled social media types are also the biggest users of the technology that demands these more niché resources. They will be the same people queuing for a new Apple product, demanding reusable tungsten hardened metal straws and supporting the electric car boom. The lack of global perspective collectively owned by these Devonians is thus also a contributing cause of poor quality mining practices in Central Africa and Asia and a major factor halting sustainable development in developed and controlled countries.

Yes, stopping a monitored and controlled production facility in a developed country can directly result in increased production in a developing nation without any environmental standards or human rights watch. Nobody considered this, the workers, nor anything other than themselves and when they complained and started a petition… But their ill conceived actions could have globally reaching consequences.

9 of the 10 poorest regions in Northern Europe are apparently in the UK, including Cornwall, where many of Hemerdon’s geologists and workers were based. (image – Independent)

I must stress that all the issues were started initially by poor financial management on the company’s part, these were definitely exacerbated by the English people surrounding the project though. Locals ultimately destroyed the first major employer to come to them in a century and thus chose themselves to stifle development and remain bordered with the second poorest region in Northern Europe a little longer. We can but hang our heads in disbelief at almost everything that comes out of the UK at the moment.

I shall end this article (as I have several others) with one of my favourite quotes, which I believe applies to metals as much as it does the shale gas Dr. Nield was originally discussing:

“Everybody wants energy, as much of it as possible, and cheap. And nobody wants it to be generated – or its feedstocks extracted – by any method whatever, anywhere at all, and certainly not near where they live – unless they become rich in the process, in which case it’s fine, because they can move somewhere else.” Dr. Ted Nield, GSL Geoscientist Editorial, 2013

Original article written by Liam Hardy for MiningIROpinions expressed here are those of the author, not necessarily of MiningIR.

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MiningIR hosts a variety of articles from a range of sources. Our content, while interesting, should not be considered as formal financial advice. Always seek professional guidance and consult a range of sources before investing.
James Hyland, MiningIR