Water Shortages Challenge EQ Resources as It Pursues Growth and Acquisitions

Operational Milestones at Saloro and Mt Carbine

EQ Resources Limited (EQR) delivered a standout performance in the December 2024 quarter, highlighted by record tungsten concentrate production at its Saloro operation in Spain. The mine produced 33,249 metric ton units (mtu) of WO3 concentrate, marking a 19% increase over the prior quarter and a 44% jump since the March 2024 quarter following EQR's acquisition of Saloro earlier in the year. November alone saw a monthly production record of 11,534 mtu.

Meanwhile, the Mt Carbine operation in Far North Queensland transitioned to an owner-operated mining model, resulting in a 4% increase in total tonnes mined to 573,000 tonnes. The focus was on accelerated waste stripping to access high-grade ore in the Iolanthe vein system, though concentrate production was temporarily impacted by water supply constraints due to below-average rainfall.

Strategic Acquisitions and Funding Strengthen Growth Outlook

In a significant corporate development, EQR signed a binding Heads of Agreement to acquire 100% of Tungsten Metals Group Ltd (TMG), which operates the largest ferrotungsten plant outside China, located in Vietnam. This acquisition is expected to diversify and vertically integrate EQR's tungsten supply chain, tapping into a ferrotungsten market that has outperformed ammonium paratungstate prices by approximately 19% over the past 18 months.

To support its expansion, EQR secured A$7.9 million in funding through a successful A$4.9 million share placement and a A$3 million convertible note with Square Resources. The backing from institutional investors, including Oaktree Capital Management, underscores confidence in EQR's strategic direction.

Offtake Agreements and Market Positioning

Further cementing its market position, EQR executed a five-year, A$30 million tungsten concentrate off-take agreement with US-based Elmet Technologies. This partnership includes collaboration on US government funding initiatives aimed at strengthening critical mineral supply chains, particularly in light of recent US regulatory measures restricting tungsten sourcing from China and Russia.

The company’s unhedged exposure to USD pricing has been advantageous amid rising tungsten prices, with mid-APT prices climbing to approximately US$330 per mtu by December 2024. The strategic alignment with Elmet and the planned acquisition of TMG position EQR to capture value across the tungsten and ferrotungsten markets.

Operational Challenges and Forward Outlook

Despite the strong production at Saloro, Mt Carbine faced operational headwinds due to low rainfall impacting water supply for processing. The gravity plant was temporarily shut down in December but resumed operations in January 2025 following modest rainfall. The company is advancing plans to double processing capacity in 2025, with new equipment already on site.

Safety remains a core focus, with both Saloro and Mt Carbine reporting improvements in total recordable injury rates, reflecting enhanced safety culture and rigorous monitoring.

Looking ahead, EQR is optimistic about sustaining positive operating cash flows, particularly as waste stripping at Mt Carbine concludes and higher-grade ore extraction begins. The company is actively negotiating contract renewals and exploring additional financing options to support its growth trajectory.