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Hazelwood Resources looks to specialty alloys for Asian growth

Hazelwood Resources (ASX:HAZ) has revealed that sales from the latest production run from its ATC ferrotungsten plant in Vietnam resulted in consistently profitable margins in line with budget.

A change of name to ATC Alloys Limited and manufacturing in tungsten and other specialty alloys in Vietnam is also part of a 2016 course chartered by executive chairman Mark Warren.

The January 2016 production run at the ATC ferrotungsten operation in Vietnam was completed on 31 January 2016, with customer shipments continuing in the first week of February.

The customer shipments were to satisfy long term contracts signed with blue-chip Japanese customers.

The Company had flagged received increased sales commitments for the month of January 2016 production and the production run was increased to cover the additional quantity of product and to provide some contract manufacture for others.

The next production run is planned for March 2016 as the Vietnam operation is currently closed for the Lunar New Year holidays.

Volatile markets

As befitting most commodities at present tungsten markets have been volatile, but the spread between tungsten concentrate as a feedstock for the plant and ferrotungsten prices has remained relatively consistent, leading to consistently profitable margins in line with budget.

Lower commodity prices for tungsten concentrates has seen Hazelwood's feedstock to product price spread remain relatively unaffected.

Long-term demand for ferrotungsten has however contracted and the deferral for a few months by one of the company's customers is evidence of this softer market.

ATC have been producing lower annual quantities for some time now in response to the current reduced demand for ferrotungsten.

In the case of primary production of concentrates however supply response has been slower and as a consequence it there could be a supply response with a tightening of concentrate supply at some point with a possible price rebound.

The current concentrate prices are attractive to ATC but at below the cost of production for many miners and concentrators.

Sales agent Wogen Resources Ltd are developing plans for further sales where appropriate margins can be maintained.

Sales

Long term contracts with Japanese customers are currently due for renewal.

One contract has been rolled over for a 12 month period and one contract has been extended for a further 2 months while the final contract for renewal has been deferred for 3 to 4 months.

Asian growth plans

The company's Change Plan will look to a consolidation of its shares, after reducing group overheads and costs and a change of company name to ATC Alloys Limited to reflect a wider growth strategy.

ATC Alloys Limited will be an Asian focussed manufacturing company wider in scope than the current focus which is on the continuous improvement of our Vietnam operation.

Hazelwood's executive chairman Mark Warren is intending Hazelwood to have a number of business streams that include manufacturing in tungsten and other specialty alloys that have similarly broad application and advanced uses in a modern society.

Vietnam is fast becoming a preferred operations base for companies looking to set up overseas manufacturing facilities.

Multi-billion dollar foreign investment has been growing at a compound annual growth rate of over 19% and the majority of this investment is in manufacturing.

Warren commented: "We see our strategic establishment in Vietnam as a stepping-stone into the region, a region where there will be continued growth opportunities in the manufacture of specialty alloys for global consumption.

"This will see increasingly that, international investors will embrace and reward the competitive advantages that well established profitable operations have to offer as an investment destination."

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