G6M tungsten project

Group 6 Metals proving ‘grade is king’ as it takes global tungsten reins

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.

In mining, a common proverb is that ‘grade is king’.

This ubiquitous saying infers that above all else, higher grades of ore is what underpins the economics and potential commercialisation of a mining operation.

Yet in challenging and uncertain economic times such as those the global market is currently facing, some may argue that cash, not the mineral in the ground, is king.

Group 6 Metals (ASX:G6M) is blessed with both. As of 31 March, G6M had almost $21 million cash at hand and $32.5 million in undrawn debt facilities.

In what could be viewed as a trifecta, the company also happens to own and operate the strategic and historic Dolphin Tungsten Project located on the south east coast of King Island in the Bass Strait. It was mothballed 30 years ago due to softening prices, but work is now underway to redevelop the open pit mine.

It’s an important project. Tungsten has been classified as a critical mineral by most governments around the world, including Australia, and Dolphin is one of the highest grade tungsten deposits in the Western world with an average grade of 0.9% WO3.

The rare metal is recognised as a critical mineral due to its unique properties, economic importance, and limited sources of supply. In fact, tungsten is so scarce that total global reserves are estimated to be just 7 million tonnes, which is equivalent to about 100 years of consumption.

“Recent geopolitical developments and the critical importance of tungsten for economic development has elevated tungsten and the Dolphin Project as an attractive investment opportunity”

G6M is making inroads to be a global player in this unique space and a major supplier competing with dominant producers in China, which has the lion’s share of global supply.

Chief Executive Officer Keith McKnight notes: “While historically tungsten projects have been difficult to fund due to concerns about the dominance of the China in the tungsten supply market, the recent geopolitical developments and the critical importance of tungsten for economic development has elevated tungsten and the Dolphin Project as an attractive investment opportunity.

While Dolphin is not immune from the current escalating cost environment, due to its very high grade it is expected to operate at the lower end of the cost curve when compared to its peers.”

G6M has released a construction update for Dolphin, reporting that it remains on time, on budget, and remains on track to produce first concentrate in Q1 2023.

McKnight reports that the Dolphin Project will produce 3,500 tonnes of WO3 concentrate per annum once it reaches nameplate capacity, which is about 2% of global tungsten demand based on 2021 world consumption data. This equates to some 12% of world demand if you exclude Chinese supply, which means Dolphin will be a major supplier of WO3 concentrate to the Western markets over the initial 14-year mine life of the project.

This is especially exciting when you consider tungsten projects such as Hemerdon (UK) and La Parilla (Spain) have recently announced that they are suspending development and operations respectively due to escalating costs, removing supply from the market at a time when Dolphin will be entering the market.”

Dolphin project to make waves

The 2012 JORC compliant Dolphin Tungsten Project is located on Tasmania’s King Island and has a current Resource of 9.6 million tonnes at an average grade of 0.9% WO3, which includes an open cut Reserve of 2.9mt at 0.76% WO3 and underground Reserve of 1.5mt @ 1.24% WO3. The Dolphin Reserves will underwrite an initial mine life of 14 years with significant Resource potential at Bold Head and surrounding exploration area. The ore is amenable to simple gravity separation, producing a high-grade WO3 concentrate with low deleterious elements.

It’s a significant deposit in a country well-endowed with critical minerals. Australia holds some of the world’s largest recoverable resources of several critical minerals, including tungsten, cobalt, lithium, manganese, and vanadium.

Interestingly, the bulk of tungsten-bearing deposits occur in Western Australia, the Northern Territory, and along the Eastern Coast of Australia, and while the country has an 11% share of world resources of the metal, production is minor.

China, on the other hand, holds about 51% of the world market share of tungsten and accounts for about 82% of global production. Russia is another major supplier, producing about 3% of world demand.

With one nation dominating, the market dynamics are such that the government in China has been threatening supply and ageing mines have been closing throughout Europe. The recent conflict in Ukraine has led to many Western buyers of concentrate terminating contracts with Russia.

As such, with the geopolitical tensions that exist with both China and Russia, Australia is well-placed to take the lead in fulfilling the global demand for tungsten. And leading the way in Australia is G6M with its world-class Dolphin project.

The project has direct private access to the Grassy Port which has capacity to export WO3 concentrate to markets in Europe and US via Melbourne. The company has entered into Take or Pay Offtake agreements with Wolfram Bergbau und Hütten AG, which is a world-leading supplier of high-quality tungsten powders, and Traxys, which is a well-known commodity trader of metals, commodities, and alloys.”

A hard metal – difficult to find but extremely useful

Tungsten is extremely hard, ranking at about 8-9 on the Mohs scale, which is a qualitative ordinal scale from 1 to 10 characterising scratch resistance of various minerals through the ability of harder material to scratch softer material.

While it is not typically sold as a raw ore and is generally chemically extracted from crushed ore and a partially refined product, such as ammonium paratungstate (APT), the Dolphin process is not a chemical process. The concentrate from Dolphin undergoes further chemical refining to produce APT, which is the most common raw material for all other tungsten products.

While there are more than 30 known tungsten-bearing minerals, wolframite and scheelite are the most important ores for extraction. In mining, one or both minerals are extracted from the ore and concentrated. The Dolphin deposit is scheelite.

According to the International Tungsten Industry Association (ITIA), tungsten makes an important contribution to the world economy and has wide-scale applications where hardness, high-density, high-wear, and high-temperature resistance are required, such as in mining, construction, energy generation, electronics, aerospace, and defence sectors.

The Russia-Ukraine conflict is having a strengthening effect on consumption from the defence sector in particular, with many governments announcing increased military spending. Demand from the defence industry alone is expected to increase by about 24%.

Yet tungsten whilst scarce has a plethora of applications and is also used in lighting technology, electronics, power engineering, coating and joining technology, the automotive industry, medical technology, and even in sports and jewellery.

In the household, tungsten is used in light bulbs, fluorescent tubes, HID lamps, smartphones, TV sets, magnetrons for microwave ovens, as well as for the small balls of a ballpoint pen, among other uses.

As of June 2022, industry sources indicate that the Tungsten APT Price CIF Rotterdam is US$344-$350 per metric tonne unit. Analysts forecast higher tungsten prices in the near-term with a potential supply deficit on the cards and a dire need to boost tungsten exploration outside China.

For G6M, conditions are ripe for the company to show global markets that supply need not only have to come from labile China.

Redevelopment plans for Dolphin are now fully approved and funded and will see an open-cut mining operation producing about 400,000 tonnes per annum of ore for the first 8 years, followed by underground mining expected to produce some 300,000tpa of ore for an additional 6 years.

Grade may be king but the Dolphin project is looking to make G6M the Tsar of tungsten.

The company’s share price has risen from $0.150 in late March to $0.215 on 11 July riding on a wave of a series of positive announcements relating to Dolphin.

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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.