Vital Metals (ASX: VML) has made solid progress on both its Watershed tungsten project in Queensland and the early stage Doulnia gold project in Burkina Faso in the past year, securing strategic relationships with two internationally recognised partners.
At the end of the 2012 financial year, the company successfully secured $3 million in alternative funding from Macquarie Bank to satisfy financing needs.
During the year, Vital Metals also secured a formal farm-in agreement with Japan Oil, Gas and Metals National Corporation (JOGMEC).
JOGMEC is spending $5.4 million to fund the Definitive Feasibility Study for the Watershed Project, which is due for completion in the March quarter of 2013, and earn a 30% stake in the project.
This partnership values Watershed project at $18 million.
On completion of the DFS, JOGMEC's interest will be assigned to a Japanese Corporation, which will then partner with Vital in the development and operation of a mine at Watershed.
The Watershed Project is among the top 10 undeveloped tungsten resources outside of China.
Measured, Indicated and Inferred Resources now total 20.6 million tonnes at 0.25% for 50,700 tonnes of tungsten at a 0.1% cut off.
Vital is in discussions with a number of potential project partners and offtake buyers in relation to Watershed.
The company has been in meetings with several Japanese corporations, in both Australia and Japan, which are showing strong interest in future partnership and offtake.
JOGMEC has been a key player in initiating discussions between Vital Metals and interested parties, as it has a mandate to secure supplies of ores and metals for Japanese companies, which is the reason for its involvement in the Watershed Project.
Vital has also recently made substantial advancements in the Definitive Feasibility Study for Watershed, with encouraging recoveries achieved in the Whole of Ore test program.
The Whole of Ore flotation process delivered a concentrate grade of 65% tungsten for over 80% recovery.
Further test-work is required to optimise the flowsheet for a production environment but the results achieved to date are extremely encouraging.
Vital has appointed a project manager to manage the DFS and environmental approvals.
The company hopes to provide further updates on the DFS progress and project metrics over the next few months.
Meanwhile, in Burkina Faso, Vital has earned a 60% interest in the Doulnia and Kampala tenements. The company was also granted two new tenements in the region - Zeko and Mediga.
Exploration drilling continues to intersect shallow high grade gold mineralisation, at less than 100 metres depth, at the Kollo Gold Prospect.
Gold mineralisation remains open at depth and along strike, providing the exploration upside.
Highlight assays that have been returned previously from drilling are 5 metres at 60.36 grams per tonne (g/t) gold from 75 metres, including 2 metres at 128.5g/t gold; and 44 metres at 6.39g/t gold from 8 metres, including 4 metres at 58.03g/t gold.
Four new gold prospects have been identified at the Doulnia Project from geochemical soil sampling.
Vital is working towards defining a JORC resource at the project.
David Macoboy, chairman, commented on the year of progress: "We anticipate that within the next few months, Vital will be in a position to provide more definite metrics for valuation by investors in both projects.
"The completion of the DFS will provide a clearer understanding of the potential value of the Watershed Project whilst further resource delineation is anticipated from our next drilling program at Doulnia.
"For Watershed, our aim is to bring the project to a stage where a commitment is made to go ahead with it. For Doulnia, the target is a JORC delineated resource with a clear pathway to cash flow generation."
The completion of the Watershed DFS in early 2013 and potentially new assays from Doulnia early in the year should spark some investor interest in Vital Metals.
A further catalyst for rerating of the company would be the securing of a Japanese partner for Watershed, which is highly possible with JOGMEC on board generating interest in the tungsten project.
Importantly, Vital is adequately funded to complete the Watershed DFS, and advance Doulnia towards the definition of a JORC resource.
The company's market valuation of $6.76 million is light when considering the strong partner, discussions already underway with potential partners and offtakers, and a DFS on its way to completion.
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