This article is a sponsored feature from Mining.com.au partner Group 6 Metals Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.
Group 6 Metals (ASX:G6M) is embarking on a growth strategy to be a powerplay in the whole value chain of Australia’s tungsten market.
It’s a journey that has essentially been more than 30 years in the making.
Located near the town of Grassy on the southeast coast of King Island, Group 6 Metals is developing the Dolphin Tungsten Project — one of the highest-grade deposits in the world and the highest-grade tungsten mine outside of China.
With tungsten production at Dolphin now underway and first concentrate produced, the company expects first export sales in early Q3 CY2023.
Discussing the storied history and outlook of the company, Managing Director and CEO Keith McKnight tells Mining.com.au the journey has been a while in the making. But as he explains, it’s a proud moment for G6M and the King Island community to see the tungsten mine “roar back into life after a 33-year hiatus”.
Based on the current mine plan and production forecast, Group 6 Metals expects to mine a ‘high-grade’ portion of the open-cut mine in about 18 months, which will considerably increase the production output of tungsten trioxide (WO3). McKnight adds that this will also provide additional balance sheet flexibility and the ability to pay down existing debt, fund the development at satellite deposit Bold Head, and potentially pursue acquisition opportunities.
Making waves with Dolphin
“As the Dolphin Tungsten Project is one of the highest-grade deposits in the world, with an average grade of 0.92% over the initial 13-year mine life, its forecast cost of production is expected to be one of lowest in the Western world. This is especially important in a rising cost environment where the cost of production will result in higher commodity prices in general.
This should make the project very robust with attractive margins and also makes it resilient to lower tungsten prices. Ammonium Paratungstate (APT) production costs are increasing around the world, and the Dolphin concentrate prices are referenced against the APT price, which has remained high since achieving a 10-year high in May 2022.
“This should make the project very robust with attractive margins and also makes it resilient to lower tungsten prices”
We believe this is a positive indication that APT producers require higher prices due to rising production costs, which in the longer term should reflect positively on Dolphin’s profitability as we also seek to lower our costs through cost reduction initiatives — one of which is to significantly reduce our diesel-generated power supply to the mine.”
The grades being delivered at Dolphin have put the company on the radar of many third parties seeking to secure its tungsten. McKnight says Group 6 Metals is receiving strong demand outside of existing agreements.
As previously reported by Mining.com.au, the company has secured offtake contracts with third parties whom McKnight describes as ‘very reputable and knowledgeable participants in the tungsten market’ – Wolfram Bergbau Hutten and Traxys. Wolfram is a subsidiary of global high-tech engineering group Sandvik and operates a fully integrated tungsten carbide and oxide-producing operation in Austria, including a long-established mine and APT production plant. Traxys is a global commodity trader committed to working with mines and raw materials purchasers on the entire logistics chain to achieve the best returns for all stakeholders.
“Both contracts will account for the majority of our production during the initial ramp-up, but once we achieve steady production, it is forecast to be an average of c60% over the first 4 years. The company is also engaged with other potential offtake partners as they seek secure tier-one jurisdictions to source their tungsten requirements.”
With interest coming domestically and from abroad, the MD sees a potential opportunity to supply the US regarding its need for strategic stockpiles, as the focus turns to shoring up supplies of the critical mineral in the current geopolitical landscape. As such, Group 6 Metals is ‘very positive’ about the short- and medium-term demand and believes that the Dolphin Tungsten Mine will add much-needed capacity to Western tungsten supply.
As McKnight reiterates, the company is developing the highest-grade tungsten mine outside of China, with an optimised 13-year mine life at Dolphin. McKnight says it closed in 1990 due to sustained low tungsten prices, but demand is now driving the price higher.
As of May 2023, industry sources indicate that the tungsten ammonium Paratungstate (APT) price CIF Rotterdam was US$320-$335 per metric tonne unit. In May 2020, it was just over US$200/mtu.
According to the International Tungsten Industry Association (ITIA), which is a not-for-profit trade association representing the industry worldwide, the metal has many applications. Unlike most base and precious metals, tungsten is largely not smelted due to its high melting point and is instead extracted from concentrate using a series of chemical reactions.
Tungsten has a lot of military applications, and in the US, in particular, is considered a critical mineral, hence the MD’s interest in the region. As China has a dominant position in the global tungsten supply chain, the House Armed Services Committee (HASC) wants to ensure the supply of critical minerals needed in the defence department away from China, and tungsten is among them.
The MD explains that unlike many in the market, Group 6 Metals is well-positioned to capitalise on the current competitive landscape. He notes that several new tungsten mines were proposed to restart production in 2023, such as the Hemerdon Mine in the UK and one of the largest tungsten mines in the world, Sangdong in South Korea, but have faced hurdles.
“Due to its high grade, the Dolphin project is expected to land on the lower end of the cost curves…”
“These projects have been challenged by the rising cost environment and as such, have been delayed. Therefore, at a time when some buyers of tungsten are seeking to buy tungsten from Western producers, additional supply has been constrained by delays to these projects.
At the same time, demand is expected to continue to grow, driven mainly by the construction, energy, and defence sectors, with consumption from defence expected to double over the next 3-5 years. Due to its high grade, the Dolphin project is expected to land on the lower end of the cost curves, which places the company very favourably against its peers in meeting this demand.”
Investigating a Bold move
McKnight says Group 6 Metals is better positioned than most, as it has the capacity to add value through a range of development options.
While firmly focused on ramping up the Dolphin Mine to a steady state profitable operation this year, the company is keen to continue developing regional opportunities such as the Bold Head resources and the substantial exploration area surrounding the mine, including the Investigator prospect, which was drilling earlier this year.
Just this week the company announced a maiden mineral reserve at the Bold Head resource, which contains 1.6 million tonnes at 0.91% WO3 and is located 2km north of the existing Dolphin process plant. Bold Head historically operated as an underground operation for 18 months.
McKnight explains: “The proposed operation under the Prefeasibility consists of mining the open-cut high-grade remnant before going back into the old underground mine. The mine is scheduled to produce approximately 100,000 tonnes per annum over 4.5 years, which is expected to provide additional throughput to the Dolphin Processing Plant, increasing WO3 output ahead of the commencement and transition to the Dolphin underground mining operation.
The company is also advancing due diligence with Fortescue Future Industries (FFI) for the development of a renewable energy option to displace the diesel power generation currently on site, which will decarbonise the current operation, significantly reducing energy costs, and providing additional power for future operating requirements such as downstream processing at the Dolphin Mine.”
On 26 June 2023, the company reported the inclusion of the Bold Head Mine to the reserve inventory and projected mine life of the Dolphin Tungsten Mine. Bold Head is a satellite deposit located 2km north of the Dolphin process plant and has similar geology and mineralogy to the larger Dolphin mine.
The Bold Head reserve is 2012 JORC-compliant, and a Prefeasibility Study (PFS) involving the processing of its ore through the Dolphin plant later in the mine life provides the company with EBITDA of $56.5 million, NPV of $14.4 million, and an IRR of 51%.
McKnight says future work including geotechnical and resource extension drilling and Definitive Feasibility Studies (DFS) is planned.
In terms of the downstream processing plans, Group 6 Metals would like to lead the way on downstream processing to align with the Critical Minerals Office’s recently released critical minerals strategy — Australia should be producing tungsten products further up the value chain and can produce its own tungsten products important for Australian industries such as construction, mining, and defence.
Emerging leader in downstream processing
Just how mature is the downstream sector for tungsten?
The MD says downstream processing of tungsten is relatively mature around the world and typically involves producing APT as the main form from which most tungsten end products are produced.
“Historically the Dolphin Mine further beneficiated tungsten concentrate to produce Calcium Tungstate or ‘Synthetic Scheelite”. This is the next logical step for the Dolphin Tungsten Mine which would increase recovery of tungsten at the mine, producing a higher-value product for a wider market.
“This is the next logical step for the Dolphin Tungsten Mine which would increase recovery of tungsten at the mine, producing a higher-value product for a wider market”
With the Dolphin mine coming back into production, it will make G6M one of the largest producers of Tungsten in Australia. EQ Resources are about to restart open-cut mining at Mt Carbine which, when in operation, will make Australia a significant producer of Tungsten.
Australia will then become a reliable secure supply of tungsten, an important strategic mineral, and presents an excellent opportunity to pursue downstream processing capability to meet Australia’s and its Western partners’ needs for tungsten products critical to many important industries such as mining, construction, technology, clean energy transition and defence.”
To be a leader in Australia in downstream processing that aligns with the Critical Minerals Office’s strategy, McKnight says Group 6 Metals is assessing a range of options.
The company continues to engage with the Critical Minerals Office and federal government departments to understand how it can better align itself with the critical minerals strategy, specifically in relation to tungsten. Due to the relatively lower volumes of tungsten consumed globally per annum,- when compared with other commodities – and Australia’s increasing importance in Western supply chains – the company believes the timing is right to pursue a downstream process for tungsten in Australia.
The MD tells Mining.com.au that the strategic importance of tungsten for replenishing US strategic stockpiles, in particular, and providing reliable supply to Australia and its allies cannot be understated.
“The Biden administration announced on February 8, 2022, that it would start building up stockpiles for critical minerals, including tungsten. The announcement was made as part of the administration’s broader effort to secure the US supply chain for critical minerals. Tungsten is a critical mineral that is used in a wide variety of applications, including steelmaking, electronics, and defence. The US is currently reliant on imports for about 80% of its tungsten needs.
The Biden administration’s announcement is a step towards reducing the US reliance on foreign sources of tungsten. While nothing formal has been confirmed, should the US strategic stockpile commence restocking of its strategic stockpile of tungsten, G6M will be in an excellent position to supply that material should Australia be deemed a domestic supplier under the recently announced Compact.”
Ubiquitous nature of tungsten
The MD says the US is trying to secure supply due to the many applications of tungsten, not least of which are its uses in military and defence. Tungsten is known for its exceptional strength and melting point and is a vital component in the manufacturing of wind turbines. However it’s the defence sector that is helping to drive the metal’s demand.
In defence, tungsten is used in armour-piercing ammunition, tank shells, and other military applications. The energy sector uses tungsten in oil and gas drilling, as well as in the production of nuclear power plants. The clean energy transition needs tungsten as it is used in the manufacture of wind turbines to strengthen blades and also in high-wear parts such as the gearbox.
In manufacturing, tungsten is used in the production of cemented carbides, which are used in cutting tools, drill bits, and other wear-resistant applications. Tungsten is also used in the production of electronic components, such as X-ray tubes and microwave generators, and it has more recently been proposed for use in battery technology (Nyobolt).
McKnight adds: “Tungsten is also a very rare mineral, with only a few countries producing significant amounts. This makes it a strategically important mineral, as any disruption to the supply of tungsten could have a significant impact on essential industries.”
He says with such a storied history, the company is now focused on the future.
“The mine has a long association with King Island, having started operations in 1917, and was a significant driver of the local economy right up until it closed in 1990. There have been challenges along the way in figuring out the best development approach, but long-serving directors Johann Jacobs and Chris Ellis never stopped believing in the potential of the Dolphin Tungsten Mine, which is one of the highest-grade deposits outside of China.
Having started construction in January 2022, the period that followed has been challenging for construction projects, due to high inflationary pressures and constrained logistics and labour market. The site team has shown great resilience and flexibility to react to the challenges and keep forging ahead. With commissioning nearing completion, the team is firmly focused on ramp-up and optimising the performance of the mine and process plant in the lead-up to steady-state commercial operation.”
“With commissioning nearing completion, the team is firmly focused on ramp-up and optimising the performance of the mine and process plant…”
Group 6 Metals, previously known as King Island Scheelite, is an Australian resources exploration and development company whose name honours tungsten as its first commodity project. Tungsten is a member of group 6 of the periodic table along with chromium, molybdenum, and seaborgium, as well as being a critical mineral and a geopolitically strategic resource.
The company is focused on its 100% owned Dolphin Tungsten Mine located on King Island, Tasmania. Initially, the focus is on producing a ‘high-grade’ of tungsten concentrate, although plans are to value-add the concentrate for supply into the upstream tungsten industry.
Write to Adam Orlando at Mining.com.au
Images: Group 6 Metals Ltd