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Tuesday, July 12, 2005

By Nicole Mordant

VANCOUVER, British Columbia (Reuters) - A new, independent study shows that Tiberon Minerals Ltd.'s planned tungsten mine in Vietnam can produce more metal more cheaply than originally thought, but the capital cost of developing the large project has also risen by almost a tenth.

Tiberon's Nui Phao venture, located 80 km (50 miles) northwest of Hanoi, is one of the world's biggest and lowest-cost projects for the metal whose price has tripled this year because of shortages in China, the globe's main supplier.

Tungsten is used in light bulb filaments and to harden steel for items like cutting tools.

The project is slated for start-up in 2007 and an analyst said the key question was what would happen to tungsten prices between now and then.

"China is the big unknown factor here because the Chinese have in the past killed the market," said Jim Mustard, an analyst at Haywood Securities in Vancouver, British Columbia.

"Anecdotal evidence that I'm seeing out of China points the finger at projects that are likely to restart in that interim period."

Tiberon, a small Toronto-based miner, has sewn up a supply contract with Osram Sylvania, one of the world's largest lighting manufacturers, for at least 44 percent of Nui Phao's tungsten concentrate output for the first five years.

The contract has a floor price but Mustard said the final price that Tiberon gets for its tungsten concentrate "will depend on the current market at the time of the settlement."

Ammonium paratungstate, or APT, the most widely traded tungsten product, was last quoted at $270/$300 per metric tonunit. It started the year at $90 per mtu but has rocketed as mass industrialization in China upped demand and power shortages there shut tungsten processing plants.

FINAL FEASIBILITY STUDY

Tiberon said on Tuesday a final feasibility study on Nui Phao, completed this month, indicates it can produce 4,689 tonnes of tungsten a year, almost 9 percent more than an interim report projected in January.

Operating costs at the project, which will also produce fluorspar, bismuth, copper and gold, have fallen by 4 percent to $7.59 per tonof ore.

But the cost of building the open-pit mine has risen to $230 million from a previous estimate of $211 million because of inflation and the extra equipment needed to get more metal out of the ground.

Tiberon's shares briefly rose by nearly 5 percent after the release of the study by consultants Aker Kvaerner. But by early afternoon they were off their highs at C$2.66 on the Toronto Stock Exchange, a gain of 2 percent or 5 Canadian cents.

Mario Caron, Tiberon's chief executive, said that because the firm already had a supply deal with Osram Sylvania, which has the option to buy all of Nui Phao's output, he was not perturbed by recent news that rival North American Tungsten Corp. plans to restart its Cantung mine.

The Cantung mine in Canada's Northwest Territories, due to reopen in August, was the western world's biggest tungsten mine before it was idled in 2003.

"(Because of our offtake agreement), we will not have to go to the market and undercut prices to place our material. We don't see any difficulty in selling our material with respect to new production coming on stream," Caron said.

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