1. company profile
90
vietnam, australia
hazelwood resources
market is vietnam
junior’s for taking
Having started the year in a blaze of glory, with record ferrotungsten sales from its Vietnam plant
and prefeasibility completed for its Mt Mulgine tungsten concentrator in WA, HAZ’s future is
looking bright. Anthony Barich reports
H
azelwood
Resources (ASX:HAZ)
has capitalised on being in
a small specialty sector of
the tungsten industry.
It has weathered the storm of 2012
and persevered through the market’s
lack of understanding of ferrotungsten
(FeW) to emerge as one of the
dominant players in its space.
HAZ has a 60% interest in the ATC
Ferrotungsten Project in Vietnam and
is moving toward 100% ownership.
The ATC facility is the largest,
most advanced FeW plant outside
China. In the process, the company
has seen grades increase to an average
78% tungsten content, exceeding
typical market expectations.
The furnace throughput has also
improved and now typically processes
22 tonnes per day of tungsten
concentrate.
But the major news for the
first quarter of 2014 was HAZ’s
announcement that it had shipped
about $A13 million of high-grade
FeW from its recently completed third
campaign at the ATC project.
This campaign was the company’s
largest yet, run until January to match
the arrivals of new feedstock coming
from a range of international sources.
Overall, the production campaign
was expected to generate about $12
million in ferrotungsten sales – so the
result stunned the market and showed
HAZ was a force to be reckoned with.
During the ramp-up phase of
the project, more than 500t of the
specialty alloy has been shipped,
representing more than $20 million
in sales.
The ATC facility was newly
built in 2012 and is supported by
an experienced team of production
engineers from the Chinese tungsten
industry. HAZ sells the material with
the assistance of Wogen Resources, a
veteran minor metals group with 40
years’ experience.
HAZ’s plant, while relatively
simple in its layout, is highly
technical. Its operations team has
been hand-picked from the Chinese
FeW industry, which is a pioneer of
innovation, and their skillset has been
lost in the outside world as to how
to run the process. So HAZ has the
cream of the crop.
HAZ managing director Terry
Butler-Blaxell said the operation itself
had been incredibly capital efficient.
Having built the plant for about $12
million, the company was expecting
a turnover of $55 million by the
2014 calendar year and $100 million
the year after. Full capacity is $140
million turnover.
HAZ also has some assets in
Australia that it will look to integrate
into the Vietnam refinery down the
track. However, the company is in the
unique position of being able to take
its time to choose the most capital-
efficient path for vertical integration.
“The company can certainly make
some money in the meantime by
sourcing external feedstock,” Butler-
Blaxell said.
In December, HAZ announced
it had completed a $5 million share
placement, with a share purchase
plan to raise an additional $2 million
underway.
That said, Butler-Blaxell added
that the company’s cash position had
been tight recently because it had
been tied up buying increasing levels
of feedstock to meet the ramp-up
schedule.
“So the company did the raising
just to help with the ramp-up profile.
Given that the project has doubled its
production in each ramp-up campaign
to date, a lot of working capital has
been used,” he said.
He noted that while the company
had had conversations with major
banks, providers of debt on Tier 1
mainstream, “it keeps coming back
to us that we need at least 12 months
of operating cash flows before we’re
candidates for conventional bank
sources of financing for inventories”.
There is no doubt the company is
on the right track though, because
its market capitalisation has drifted
into the $50 million range a few
times now, with indications that the
company is starting to attract interest
from the institutional investors.
The business plan is simple but
effective – and the way the tungsten
market is heading, it’s all good news
for HAZ looking into the future.
“We operate in a small specialty
sector of the tungsten industry,”
Butler-Blaxell said.
“Our end users are different –
MARCH 2014 RESOURCESTOCKS
Ferrotungsten from
the ATC facility.

2. 91
hazelwood
resources
at a glance
Head Office
Unit 2, 13 Oxleigh Drive
Malaga WA 6090
Australia
Ph: +61 8 9320 5220
Fax: +61 8 9320 5299
Email: info@hazelwood.com.au
Web: www.hazelwood.com.au
Directors
Terry Butler-Blaxell, Frank Ashe,
John Chegwidden
Market Capitalisation
$A38.2 million (at publication)
Quoted shares on issue
1.158 billion
Major Shareholders
Valentino Nominees Pty Ltd 5.51%
Jemaya Pty Ltd 4.18%
Perth Select Seafoods Pty Ltd 3.65%
Baxchang Pty Ltd 2.93%
Tarney Holdings Pty Ltd 2.74%
The ATC plant
in Vietnam.
they’re the steelmakers and foundries
who use our ferrotungsten to make
tool steels and high-speed steels,
along with temperature and corrosion-
resistant alloys.
“The Chinese put a 20% export
tariff on the material, and have
restricted the production and supply
to the outside world. Hazelwood is
the only western company making
ferrotungsten in any quantity.
“There is another small producer
in Vietnam but it has been besieged
recently, with Hazelwood able to
capture market share.
“Hazelwood had issues raising
the money to buy feedstock initially,
because it’s common knowledge
that its ferrotungsten feedstock is
challenging to get hold of, which is
why there are a plethora of western
companies talking about building
tungsten mines.”
HAZ sources material from a
range of international sources and
also locally in Vietnam. Wogen has
been of great assistance in feedstock
procurement, both logistically and
financially, drawing upon its wide
network of sources.
Elsewhere in Vietnam, the world’s
largest tungsten mine - Masan
Resources’ massive Nui Phao
polymetallic mine - has just moved
online, for which tungsten is a by-
product.
Vietnam is expected to emerge as
the second-largest tungsten-producing
nation in the world behind China in
the coming years.
For FeW consumption, the main
geographic segments HAZ focuses
on are Japan and Europe, although it
has sold product to consumers in all
geographic market segments.
HAZ’s ATC plant can make
4000tpa of ferrotungsten, containing
3000t of contained tungsten.
Ferrotungsten was fetching $US47/kg
in February.
“The recovery in the non-
China steelmaking sector is quite
reassuring,” Butler-Blaxell said.
“Europe is heading for a good
year in 2014, as is Japan, so we are
approaching pre-GFC levels of usage
of tungsten in steelmaking.
“Hazelwood has surprised itself
by penetrating a number of other
geographic sales areas outside the
mainstream European and Japanese
sales territories, selling material to
Ukraine, Russia, South America, and
even the US.
“The quality of our product and
the traceability of our supply chain is
something that compels the people to
look at our material.
“If we don’t supply it, the end
user has few choices. They can buy
Chinese ferrotungsten with a 20%
export tariff, or smuggle the material
– and borders are far less porous now.
With these factors in play, the market
has been Hazelwood’s for the taking.”
HAZ has two advanced tungsten
deposits in Western Australia
that could be potential sources of
feedstock and offer the company
additional margins to its overall
business – Mt Mulgine and Cookes
Creek tungsten projects.
On January 29, HAZ announced
that the engineering prefeasibility
study for its 330,000tpa Mt Mulgine
project revealed a capital estimate of
$31.5 million for the concentrator;
with infrastructure options to be
assessed. It also outlined a capital-
efficient path to vertical integration,
in keeping with the company’s
impressive track record in this area.
“Sales margins for ATC look to be
initially around 10% during ramp-up
and are improving with capacity,”
Butler-Blaxell said.
“If we vertically integrate with our
upstream mining assets in Australia,
we believe we can add about $10/
kg to our bottom line, so overall the
affect on the business would be a 30%
margin – not bad, if you can get it.”
He noted that tungsten concentrate
represented 90% of the operating cost
of the ATC ferrotungsten project.
“The challenge is to develop a low
lead time mining project at the right
scale that can readily recover the
capital,” he said. “These results move
Hazelwood closer to the potential to
provide a strategic internal source
of tungsten feedstock to our very
successful ferrotungsten processing
business in Vietnam.”
MARCH 2014 RESOURCESTOCKS
“There is another
small producer in
Vietnam but it has been
besieged recently, with
Hazelwood able to
capture market share.”
terry butler-blaxell
hazelwood resources