PERTH (miningweekly.com) – Minerals developer WPG Resources has opted not to acquire a 25% joint venture interest in the Giffen Well magnetite iron project, in South Australia, electing to let its right expire rather than make a A$5-million investment.

WPG told shareholders on Tuesday that despite the encouraging results of the prefeasibility study into the Giffen Well project, which indicated that the project could produce some five-million tons a year of high-grade magnetite concentrate, the current market uncertainties meant that the risk profile of the project was too high, unless the asset could be acquired on more attractive terms.

“That has not been forthcoming despite extensive negotiations with the owner,” WPG said.

The company noted that as a result, and taking into account the highly constrained capital environment facing the mining sector, WPG had taken the decision not to pursue its option.

“The mining sector is adjusting to a capital-constrained environment now,” said WPG executive chairperson Bob Duffin.

“There is a very limited pool of investors willing to fund the estimated A$40-million required to complete the project's bankable feasibility study (BFS), let alone those willing to fund the A$1.5-billion capital expenditure required to bring the project into production.”

Duffin noted that WPG’s cash balance at the end of March was sufficient to fund the exercise of the option, but a capital raising would have been necessary to raise additional funds to make progress on the BFS.

“I am mindful of the dilutionary impact of share issues at a time of low share prices,” he added.

WPG said that it would, instead focus on other objectives.

In parallel with its work on the Giffen Well project, WPG had been reviewing other opportunities before it, saying on Tuesday that it would now put more emphasis on this programme.

“WPG is now accelerating its programme reviewing new project investment opportunities,” Duffin said.

He added that the company’s strong cash position would assist it in pursuing good investment opportunities, as well as to participate in divestments by majors and companies under external administration.