Rafaella Resources to acquire historic underground and open pit tungsten and tin operation in Spain

Perth-based junior explorer Rafaella Resources (ASX: RFR) has signed a deal to acquire 100% of private Spanish company Galicia Tin & Tungsten, which owns the historic Santa Comba tin and tungsten project in north-west Spain.

Located seven kilometres from the town of Santa Comba in a productive tin and tungsten province, the project is fully permitted for underground and open pit mining and boasts an inferred mineral resource in both areas.

The high-grade, vein-hosted underground resource is estimated to contain 234,000 tonnes at 0.95% tungsten oxide and 0.28% tin within four primary veins at the historic Mina Carmen mine.

The open pit scenario is based on 23 drill holes for 2,275m conducted over less than 10% of Santa Comba’s prospective endogranite lithology, to define 5.1Mt with an average grade of 0.203% tungsten oxide (at a 0.05% cutoff).

Significant investment by former owners has resulted in key infrastructure at the project such as 7,000m of underground development including decline access; and a processing plant which is approximately 70% complete.

Capex loan

Rafaella said the project was subject to an offer for offtake with technology metals supplier HC Starck Tungsten GmbH, which has obtained pre-approval for a $17.7 million loan from the German government to cover pre-production development capex costs.

The loan falls under Germany’s Untied Loan Guarantee Scheme, designed to enhance the national supply of commodities by providing financial guarantees to national and international banks which lend money to commercial projects in the mining and energy sectors.

To qualify for the scheme, a project owner is required to enter into a contract with a German offtake company for the delivery of reasonable quantities of natural resources over a contracted duration.

Rafaella plans to complete a $1 million feasibility study as a precursor to accessing the loan.

Deal consideration

Consideration for Rafaella’s acquisition will be the issue of 17.5 million Rafaella shares to Galicia, at a deemed price of $0.20 per share.

Galicia will earn an additional 15 million shares once it achieves a JORC-compliant measured and indicated resource of no less than 10,000t contained tungsten oxide, grading at least 0.18%.

A further 15 million shares will be earned once Santa Comba secures debt funding, subject to a mineral reserve of at least 7,000t of contained tungsten oxide.

This second milestone must occur within nine months of the completion of the project’s feasibility study.

Post-acquisition, Rafaella said it would spend $1.3 million on an 8,000m drilling campaign to upgrade the inferred resource and increase the overall resource base.

Transformative move

Rafaella executive director Ashley Hood said the proposed acquisition will be transformative for the company.

“The [Santa Comba] project represents an attractive tungsten opportunity with low entry costs and the prospect of exceptional returns for our shareholders,” he said.

“Low development capital, easy access to near-surface resources and simple processing allows favourable operating environments irrespective of the macro conditions.”

Mr Hood said the project’s economics are supported by a positive global outlook for tungsten.

“Currently China accounts for 85% of global tungsten concentrate supply and 50% of demand but with the continuing reduction of concentrate exports, non-Chinese supply will become severely limited,” he said.

Recommissioning the mine

The Santa Comba underground mine produced in commercially-significant quantities between 1980 and 1985, before becoming uneconomic due to low tin and tungsten prices.

Since then, surging demand and commodity prices has presented Rafaella with “a compelling opportunity” to re-commission the mine.

Galicia’s recent discovery of a near-surface resource suggests significant additional shallow tonnage could be developed via open pit mining.

At midday, shares in Rafaella were up 114.29% to $0.15.