Ormonde headache as work on Spanish mine is stepped up
Battered mineral explorer Ormonde Mining may face a fresh challenge before its potentially lucrative tungsten mine in north west Spain enters the production phase next year amid concerns over the financial health of its off take partner Noble Group.
The struggling global commodities house, listed in Singapore, is the sole buyer of the tungsten concentrate from the Meath-based miner's flagship Barruecopardo Tungsten Project in Salamanca. US private equity giant Oaktree Capital owns the majority of Ormonde's mine. The opportunist hoovered up 70pc in 2015 - when the commodities rout was in full swing - in exchange for a €90m lifeline that at the time helped fend off an unwelcome takeover bid.
After emerging from that saga, Ormonde looks set for another headache.
Last month Noble was plunged into an existential battle for survival after a profit warning, downgrades to its already junk-rated debt and the retreat of a prospective white knight investor, the Chinese state-backed conglomerate, Sincohem, sent its shares and bond prices into free fall.
Morgan Stanley and Moeils were ushered in to hatch a recovery plan but confidence continues to ebb in the Hong Kong-headquarterd firm, amid reports its debt is trading at fresh lows.
The Irish Independent understands Ormonde has sought and received assurances its binding contract with Noble remains unscathed by the crisis enveloping the trading house.
Sources familiar with the Irish mining minnow emphasised that even if problems did arise, there would be little difficulty in re-allocating the off take agreement due to a constrained supply of tungsten globally.
End users of tungsten, one of the hardest of metals and crucial to heavy industry, are keen to break China's grip on the market. The country controls 80pc of the world's supply, and export restrictions in the recent years have encouraged suppliers to seek alternative sources.
Last week Ormonde announced it had moved into an accelerated construction phase on the Barruecopardo project and said its chief executive, Steve Nicol, had relinquished his role as managing director in order to concentrate on the mine's development.
The Salamanca mine is held by Ormonde's, Saloro SLU, and Mr Nicol has now been appointed managing director of that entity and project manager for Barruecopardo.
The company confirmed that after a number of earlier delays, production would begin "in the third quarter of 2018" following a commitment by its partner to the "final stages of the equipment supply and construction contracts". The statement made no mention of Noble.
Barruecopardo is expected to account for 12pc of non-Chinese supply once production is under way.