G6M

Group 6 Metals in a league of its own as Dolphin Tungsten Mine moves towards production

This is the first in a two-part feature series.

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.

The name Group 6 Metals (ASX:G6M) honours tungsten as the company’s first commodity project under development.

Tungsten is a member of ‘Group 6’ of the periodic table along with chromium and molybdenum, as well as being a critical mineral and a geopolitically strategic resource.

Yet emerging tungsten producer Group 6 Metals cannot be grouped in with others – it is increasingly looking to be in a league of its own.

Throughout 2022, G6M (previously known as King Island Scheelite) has progressed works on its flagship Dolphin Tungsten Mine on King Island in Tasmania, where it remains on track to achieve first tungsten concentrate production in Q1 2023.

At the helm, CEO Keith McKnight, who was recently also appointed as managing director, has had a vision to be a global supplier of the rare metal outside of China.

According to McKnight, as of today, more than 75% of all primary tungsten worldwide comes from China, which gives rise to concerns around supply security and may lead to increased demand from Western suppliers to preserve supply diversification. 

Furthermore, he says, it should also be considered that most Chinese mines have been in operation for many years and their costs are increasing much faster than other places in the world. This provides an opportunity for new Western mines to enter the market when higher prices will be supported.

“Near-term, Western supply of tungsten concentrate looks tight due to several factors”

McKnight adds: “Near-term, Western supply of tungsten concentrate looks tight due to several factors. Existing suppliers in Europe are under cost pressure due to energy prices with operations at some mines currently suspended. Combine this with anticipated delays to new production that was expected to come online in early 2023, it means the Dolphin Tungsten Project is coming into production at a very opportune time.” 

In 2023, G6M intends to undertake a technical feasibility study for downstream processing of the Dolphin tungsten concentrate. The CEO notes that the process could be easily integrated to accept concentrate from the current process plant under construction. It would also be able to accept scrap metal which could be received from the primary industry in Australia. 

Due to the increasing costs of chemical treatment in Europe and the US, it will become more economical to produce calcium tungstate or sodium tungstate in custom designed plants at the mine site. 

The birth and growth of Dolphin 

Historically, high-quality calcium tungstate or “synthetic scheelite” was produced at the Dolphin Tungsten Mine and has many technical and economic advantages such as – higher recovery, removal of deleterious elements, wider market appeal, and higher sale prices. The first step in downstream processing of all tungsten concentrates is an alkaline leach process, which requires substantial amounts of heat energy (low pressure steam). 

The CEO notes: “As part of G6M’s ongoing renewable energy project it is also investigating co-generation technologies to produce heat and electrical energy from the same fuel source at a scale that would allow the first stage downstream processing to be economically viable as well as increasing overall  tungsten recovery from the Dolphin mine. As a company we firmly believe that Australian mining companies need to extract maximum value for our critical mineral resources and G6M intends to engage with industry and government stakeholders to progress significantly towards this objective in 2023.

“As a company we firmly believe that Australian mining companies need to extract maximum value for our critical mineral resources and G6M intends to engage with industry and government stakeholders”   

We are currently evaluating the potential of the existing resource at Bold Head, which is located approximately 3km to the north of the Dolphin Mine. It previously operated as an underground for 18 months in the early 1970s. It has a resource of 1.6Mt @ 0.92% WO3, and pending an economic feasibility assessment, it is possible that this could be restarted as a satellite open pit/underground operation, supplementing feed ore from the Dolphin open pit to increase the overall output from the process plant.”

The company also has plans to conduct regional exploration at the Investigator prospect located about 6km west of the Dolphin pit in early January. G6M had success when it last drilled at Investigator in 2018, having identified ‘high-grade’ mineralisation with one hole intersecting 3.3m at 1.7% WO3. The intersection is geologically significant as it confirms the high-grade tenor of mineralisation at 3 separate locations on the periphery of the Grassy Granodiorite (Dolphin, Bold Head and Investigator) which upgrades the overall exploration potential of this large, mineralised intrusion. 

Pending the success of future drilling campaigns, the company would seek to delineate an economic reserve, which would extend the life of mine beyond the current 14 years.

Dolphin’s journey so far

The Dolphin Tungsten Mine is one of the ‘highest-grade’ tungsten deposits outside of China. The project has direct private access to the Port of Grassy, King Island, through which it will export tungsten concentrate to its major offtake partners in Europe. 

Construction activities at the Dolphin Tungsten Mine are progressing well with highlights including completion of the civil works and a significant increase in mechanical equipment installation activities.

With most of the OEM equipment delivered to site, the Gekko Systems team will progress the works for the remainder of the year in preparation for commissioning in early 2023.

G6M has also made substantial progress on the installation of the crushing, screening and material handling equipment and associated supporting structures, with mechanical installation substantially complete and electrical installation commenced. The main process building is mostly complete, and installation of internal equipment has commenced.

Installation of diversion and base drains is also complete, and construction has started at the Tailing Storage Facility (TSF).

A dedicated power station is on track to provide power for commissioning works to commence in January 2023. Drilling at the Investigator prospects, located 6km west of Dolphin, are going to plan and progressing with drilling activities now underway.

Achieving major milestones

As the CEO explains, this progress has been achieved amid a challenging global and economic environment.

McKnight adds: It has been a year of significant progress for the company as it steadily progressed through its key milestones for the year following the completion of the project funding package in October last year. Construction started in late January followed by the official commencement of construction ceremony in late February which was well attended by all project stakeholders. 

We have steadily progressed through the process plant civil works during the winter months and our EPC contractor Gekko Systems commenced mechanical erection works in June 2022. The weather conditions on King Island during the winter period can be very challenging, especially for logistics and working on ground works but the team persisted and maintained steady progress. 

While the process plant has been progressing, the G6M team have been working on the mining and processing plant support infrastructure in parallel so we are in position to commence process ore through the plant in March 2023. This is the major milestone everyone is working hard towards, and we are on track to achieve this.”

2023 opportunities – exploration & downstream processing

While 2022 has been hectic for G6M, next year also looks like an incredibly busy and lucrative one for the emerging tungsten producer.

The company is well-funded to pursue growth opportunities in 2023.

On 28 November, G6M reported it received strong support for its equity raising, securing binding commitments from new and existing investors in excess of its targeted placement to raise $20 million.

The capital will be deployed primarily to fund ongoing construction and operating activities at the Dolphin Tungsten Mine. 

The success of the recent capital raise is an endorsement of the quality of the Dolphin Tungsten Project”

McKnight says: The success of the recent capital raise is an endorsement of the quality of the Dolphin Tungsten Project, and an acknowledgement by investors of the progress made at the project despite very challenging construction conditions over the last 12 months.” 

Despite these challenges, the project is tracking within its target of producing first concentrate in Q1 2023, allowing G6M to take advantage of the anticipated strong market conditions for Tungsten in 2023. 

Capital creating certainty 

McKnight says the equity raising provides funding certainty for the company at a critical time in its development. 

The CEO adds, the funds raised will be spent on capital expenditure, establishment of the mining and process plant operations prior to reaching steady state production and to provide working capital for the company. 

“There has been capital cost escalation and scope changes since the board approved the redevelopment of the Dolphin Tungsten Mine in October last year. Cost increases associated with process plant civil works, tailings storage facility and electrical switchgear have increased the cost of the capital works. 

The company has also implemented some enhancements to improve the robustness of the operations such as dedicated diesel power station, ability to store more materials for blasting, improved tailings pumping and increased inventory of spares, all of which will improve the reliability of the plant.” 

“The company has also implemented some enhancements to improve the robustness of the operations”

The CEO adds that aforesaid cost increases associated with process plant civil works, tailings storage facility and electrical switchgear have increased the cost of the capital works. However, the company has implemented some enhancements to improve the robustness of the operations, such as dedicated diesel power station, ability to store more materials for blasting, improved tailings pumping and increased inventory of spares, all of which will improve the reliability of the plant.  

McKnight explains that despite these industry-wide challenges faced by construction projects, such as escalations in capital and operating costs, G6M’s team has worked tirelessly to ensure the project remains on schedule. 

The company recently updated the project financial metrics in this environment, significantly increasing the net present value (NPV) from $241 million to $300 million pre-tax.

Following a comprehensive review of the Dolphin Tungsten Mine project economics published in December 2020, G6M updated results highlight an increase of the NPV of 24%, (pre-tax at 8% discount rate). The company also noted at the time that sustained high ammonium paratungstate (APT) prices and favourable foreign exchange conditions mean prices for Dolphin tungsten concentrate are currently at an all-time high.

Pricing for APT, which is the benchmark used to derive concentrate pricing, is based on US$329/mtu between 2023 to 2026, thereafter prices are kept constant at US$340/mtu.

Moving into 2023, the CEO notes that the main objective for the early part of the year is to complete the construction works in anticipation for commission works commencing in February 2023. 

As McKnight explains in part-two of this series, next year, the market can expect G6M to commission the process plant through February and March in anticipation for first concentrate production in late March. 

In parallel, the company’s mining team will be preparing to start drill and blasting in early March. The site teams will be bedding down operations and ramping up the operations through Q2 2023, and the company expects to start concentrate sales under its offtake agreements.

Write to Adam Orlando at Mining.com.au

Images: Group 6 Metals Ltd
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Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.