Dispatching the first tungsten concentrate shipment from its high-grade Dolphin Mine in July was symbolic for Group 6 Metals (ASX:G6M) for a variety of reasons.
Some 13 tonnes with an average grade of 69% WO3 was loaded and shipped from the Port of Grassy on King Island. This signalled a step towards building cash flow but for Group 6 Metals it meant much more.
Managing Director & Chief Executive Officer Keith McKnight tells Mining.com.au that the July milestone marked a moment in time when the company’s next growth phase also set sail.
“That shipment was significant for us as we look at the next stage for the company. We’ve got a substantial exploration area, but we’re also looking at outside opportunities, opportunities in North America that could make a lot of sense as well and align very well with our strategy of engagement with US supply chains and specifically the US Department of Defense.“
One medium-term objective, McKnight says, is to investigate opportunities to value-add its high-grade product to supply into the upstream tungsten industry.
“We’ve got a substantial exploration area, but we’re also looking at outside opportunities, opportunities in North America that could make a lot of sense as well and align very well with our strategy …”
Another is to pursue potential inorganic growth avenues including project acquisitions. The company has strict criteria when assessing prospective targets – given it’s ‘quite spoiled’ with the Dolphin Mine having a very high-grade deposit, obviously grade is king.
“We’re keen to focus on higher grade deposits, but there’s a lot of factors that come into play when you’re looking at projects such as access to infrastructure, access to markets, et cetera. We’ve identified a few opportunities and are keen to have a look at those as we go forward.
I don’t think there’s a lot of opportunities around, as in acquiring operating tungsten projects or potentially distressed tungsten projects, but if those opportunities do arise, we’ll have a look at them as they come up.
But by the middle of next year we could be in a good position to secure some options or some farm-ins arrangements over some attractive projects that we’re currently looking at.”
The immediate focus over the next 4-6 months includes achieving cash flow positivity, ramping up the plant, achieving steady-state and profitable production, while assessing cost cutting measures. However, Group 6 Metals has downstream processing dreams.
“The bigger prize is to go downstream, maybe not necessarily on King Island, potentially on mainland Tasmania, and look at an APT (ammonium paratungstate) or tungsten oxide /carbide facility. It wouldn’t be an excessively large capital expense, and with the Government support, it would be a great catalyst to bring other tungsten projects into operation here in Australia as well.
There’s a massive opportunity and the reason being I think there’s a brilliant first stage commercial opportunity on King Island and that’s around retreating our tailings. We’re targeting a 70% to 74% recovery that’s going to leave 26% to 30% of that material that’s currently going to tailings that we lose in effect.
“The bigger prize is to go downstream, maybe not necessarily on King Island, potentially on mainland Tasmania, and look at an APT (ammonium paratungstate) or tungsten oxide /carbide facility“
I think there’s a relatively small capital investment, $15 to $18 million Australian dollars. It would be a bolt-on arrangement to the current plant and we could recover that material using atmospheric leaching, and then we boost our recovery and we will produce a higher grade tungsten product which would attract a higher payability factor per tungsten unit. It would either be a sodium tungstate or a calcium tungstate.”
McKnight says this is achievable in the near-term but the benefits will be long-term. Namely because it will significantly increase recoveries and revenue streams, with scope to expand and have exposure across more of the tungsten supply chain.
Initially, ‘obvious’ cost cutting exercises will be implemented. These will include the integration of renewable energy into the company’s power mix. At present, Group 6 operates with 100% diesel. Amid a high diesel price environment this adds significant costs to operations. As such, some 70% of overall diesel use could be displaced, the CEO adds.
“We’ve advanced that, we’re at concept study about to commence approvals. I think that’s probably low hanging fruit if you like to look at some cost cutting. And then really, it’s looking at, as I said, that enhanced metal recovery project where we would treat our tailings and try to increase our recovery and our revenue streams from Dolphin and then potentially look at some acquisitions.”
There’s a few options Group 6 Metals could pursue to launch the enhanced metal recovery project. Toll treating ore concentrate through the plant and supplying to the US strategic stockpile or other buyers of APT ore oxide carbide in Australia or potentially in the US is one.
Another move could be to focus on its own APT production and given Tasmania being an ideal location. Access to infrastructure such as reliable and inexpensive power and water is critical, McKnight says, adding that the island state has it all.
“The good thing about tungsten concentrate is you can move it around relatively easy. It’s a low volume, high value commodity. You can move it around in 24t containers, in bulka bags. So, I think there’s opportunities to grow inorganically. And we’re certainly looking at projects to build on that strategy.”
Tungsten is a critical mineral and has a wider array of applications, including steelmaking, mining, construction, electronics, and defence. Global demand is expected to grow significantly in the coming years, driven by the construction, mining, and defence sectors.
McKnight notes tungsten’s importance has been reconfirmed by the federal government’s recent additional $2 billion commitment to support Australia’s critical mineral projects.
Tungsten is ranked highest for economic development.
“In Australia, we predominantly use tungsten in the form of tungsten carbide and it’s mainly used in drilling, oil and gas drilling, rock cutting, and mining. Tungsten largely cannot be substituted with anything else. There are other applications where it would be the preferred mineral of use, but due to its relative scarcity and high cost, where it can be substituted, people seek to do it. Even if that results in poor performance or poor application, they can still do it.”
Group 6 Metals is keen to work with the government to ensure long-term primary tungsten production in Australia. Its recent engagement with officials has been front and centre as it pursues opportunities for downstream processing to produce higher value tungsten products in the future.
The CEO says tungsten’s time in the spotlight has finally arrived.
“Tungsten’s probably had a bit of a mixed fortune throughout kind of the last few decades, really. It’s a market that’s heavily dominated by China and Russia together, both of them account for 85% plus of world demand. And as such, historically, tungsten has been challenging because it’s a small market, something like 110 to 113,000 tonnes of W metal equivalent per annum, which is relatively small.
With Chinese dominance in the market, there has been an interpretation that the Chinese have a big influence on the APT price which can give some investors some cause for concern. I think that’s changed in the last few years, and for a few good reasons.
I think demand for tungsten is growing and growing significantly. It’s now forecast to be about 113,000 tonnes per annum, a forecast increase of 4.3% for 2023. And a lot of that demand has come from defence, around 28%. Defence has been historically sitting around 8%, and it’s expected to be double digits this year. So, it’s become much more of a strategic metal in that sense because of its use in defence applications.”
McKnight says tungsten demand is increasing due to a growing number of exciting uses starting to emerge.
“There’s tungsten wire in PV cells for solar energy that is steadily growing. It’s seen a significant boost in recent years. There’s tungsten use in the semiconductor industry and there’s also tungsten use in batteries as well. That’s kind of on the horizon and potentially could be commercialised in the next 2 to 3 years. But one of the key reasons, I think why it’s positive for Western producers of tungsten is the APT price.”
Although trading volumes for tungsten products was lower over the first 9 months of 2023 as de-stocking from 2022 continues, the ammonium paratungstate (APT) CIF Rotterdam prices have remained relatively stable at US$300 to US$325 per MTU (metric tonne unit).
This is down from US$355 to US$365 per MTU in May 2022 which was a decade high for tungsten.
Running down tungsten stocks and demand growth in the US is expected to provide positive APT price movement catalysts early in 2024.
The CEO adds: “It’s stabilised just above $300 per MTU, which historically is a high price for the metal and why we think it may remain higher is because APT costs in China have increased, as costs have increased all over the world. A price at around $300 US per MTU price that can be reasonably assumed as one that’s required by Chinese APT producers.”
“I think tungsten has been missed in the rush for clean energy transition minerals“
This price scenario bodes well for Group 6 Metals as its concentrate is referenced to the APT price.
“So, we get the benefit of that more consistent, higher APT price. I think tungsten has been missed in the rush for clean energy transition minerals. It’s got a wide range of diverse industrial applications. It’s ranked highest for economic development as a critical mineral, and I think supply security and reliability is becoming ever more important. And that’s evidenced by the engagement we’ve had from potential US purchasers of concentrate over the last 6 months or so that are coming our way.”
In a recent visit to Sydney during the IMARC conference McKnight met with the Department of Defence and the Department of Energy to engage directly with the government.
Ultimately the company wants to secure some long-term supply deals into the US strategic stockpile, or even securing supplies in the ground. Group 6 is open to how that is achieved.
“What that would do for us, is it would bring more investment – there are specific funds out there that invest only in US defence supply chains and I think it just brings more confidence to the mineral overall because historically tungsten has been know there’s only 2 mines that have come online outside of China this year.”
Those are the Dolphin Mine and the Mount Carbine in Northern Queensland, which are legacy mines.
The CEO says continuing to restart legacy mines is not a sustainable approach to securing long-term western global supply. That means there has to be more exploration in tungsten.
He adds the only way companies will commit exploration dollars to the metal is having confidence in future supply chains.
“Maybe there’s a potential opportunity for us to partner with a US downstream processor of tungsten and supply higher value tungsten products to that stockpile …”
“The US strategic stockpile for tungsten is probably the lowest it’s been in a decade. They had been tendering for selling material from that stockpile – that has stopped now. And all indications, and conversations that we’ve had is that they’re going to start recommencing restocking that stockpile.
Maybe there’s a potential opportunity for us to partner with a US downstream processor of tungsten and supply higher value tungsten products to that stockpile, not just concentrate and look, historically, this project has supplied the US strategic stockpile. Some US customers have told us that they’ve procured material from the US strategic stockpile and it had been identified as having come from the Dolphin Mine.
There is a history of this project supplying the US strategic stockpile. So, we hope that we can re-establish that relationship and commence supplying tungsten materials which I think they recognise now that they need to rebuild their stockpiles again.”
Tungsten’s market fundamentals are changing rapidly. Western supply could displace Chinese supply in the market, which is preferred by many companies but they do not have those options.
This paradigm shift means Group 6 Metals is well-positioned to capitalise on any near and longer term opportunities.
“For us specifically, Dolphin is high-grade, lower on the cost curve and in a jurisdiction that our allies want to deal with in Tasmania and Australia. You have to look at recent developments in US legislation as well, if Australia becomes a domestic supplier for tungsten, you could see a scenario where US companies could invest in Australian tungsten projects in downstream processing.
Previously known as King Island Scheelite, Group 6 Metals is an Australian resources exploration, development, and production company whose name honours tungsten as it is a member of Group 6 of the periodic table along with chromium and molybdenum.
The company has received binding commitments from 4 of its major shareholders to provide an $8 million bridge finance facility as production ramps up at the Dolphin Tungsten Mine located on King Island, Tasmania.
The parties providing the facility are Abex, CJRE Maritime, Elphinstone Holdings, and D.A.CH.S Capital.
Securing commitments for the bridge finance facility comes at a critical time for Group 6 Metals. The company recently appointed a highly qualified process plant manager and the site team is working towards increasing the production rate from higher-grade ore, completing the defect rectification work, and ramping up production to capitalise on the growing demand for tungsten.
“I think if you’re seeking to invest in tungsten, you’ve got to have a strong belief in the thematic of longer term demand and the importance of securing Western supplies. Group 6 Metals, where it is at currently, it’s got the highest grade deposit of any other Western project either brought into operation recently or proposed to be brought into operation.
We’ve got a fully developed, brand new process plant. We’ve got a high-grade concentrate on the market demand side of things; I think the conversation is really about this continuing thematic around securing supply.”
Write to Adam Orlando at Mining.com.au
Images: Group 6 Metals & Mining.com.au