With Wolf Minerals, the owner of Drakelands Mine near Plymouth, having ceased trading last week – after losing £100 million over the last three years – the Plymouth Herald reports that there were warning bells ringing at the doomed mine as early as March 2016. Auditors raised concerns that financial losses and cash outflows indicated:
... the existence of a material uncertainty that may cast significant doubt about the company and consolidated entity’s ability to continue as a going concern.
Some months later, despite such uncertainty and even though mine vibrations at Drakelands were a "living hell", DCC approved a planning application from Australian-based Wolf Minerals to extend operations to 2036, permitting permanent 24 hour operations seven days a week at the processing plant, after MD Russell Clarke made representations to the Development Management Committee.
It was good news for Wolf, but a few months later Mr Clarke stepped down from the top job, not tempted to move from his home in Australia. His successor, Richard Lucas, brought "18 years of financial experience" to the table, in return for a pay packet of £269,000 a year.
More funds were raised. Wolf’s last Annual Report was upbeat:
We look forward to a successful year ahead, with Wolf realising its potential as a significant tungsten producer in the western world.
Even as recently as July, Mr Lucas reported:
The June quarter operating performance regained momentum following the extreme cold weather in March, with several improving trends gathering strength and culminating in record monthly throughput in June. The additional volumes have provided a more stable operating environment which has driven tungsten recovery and product quality improvements.
In addition, the successful ore pre-processing trial results have encouraged the Company to accelerate an operating plan to enhance tungsten recovery and improve operating cashflows in the current strong tungsten market conditions, with the tungsten price reaching its highest level since 2014.
Shareholders, however, were not convinced, and were not willing to throw more money down the pan.
Now that Wolf Minerals has run out of money, and the restoration of a huge scar on the Devon landscape hangs in the balance, the question is: will any other mining company have the wherewithal to take on Drakelands and continue to run it as a going concern?
Mining analysts Martin Potts and John Meyer, speaking to the Plymouth Herald, made it clear that any white knight would need deep pockets:
The analysts said a failure to hit targets on how much tungsten was produced was key. But while Mr Potts said this was due to failures at the processing plant, Mr Meyer thought it was because poor quality ore was being mined.
Mr Potts stressed that Drakelands mine had a target to recover 65 per cent of tungsten from the ore it dug up. The firm never got near this figure, its best quarterly result being 56.6 per cent, and most of its recovery rates were hovering around the 30 per cent to 40 per cent range. Also, the plant was designed to handle three million tonnes of ore, but production had only crept up to the two million tonne mark, meaning not enough raw ore was coming out of the ground. Mr Potts said it was clear that targets were not being hit and said: “The plant does not work.” He said that saving the mine was therefore not merely a matter of new ownership and re-financing, but serious capital investment too. He said it would need a “complete re-think” by new owners on how to make the processing operation work. “They would need to do a lot of test work before they restarted it,” Mr Potts said.
Mr Meyer put the problems down to the grade of ore being mined. He said the company had begun by digging up the finer ore, at the surface of the opencast pit. While this is easier to reach, it is of a lower quality and doesn’t produce as much tungsten. “We think it’s more about the pit than the plant,” he said. “The recovery rates have been very low,” he said. “You should get recovery rates of 60 per cent but they have been getting only half of that.
