Group 6 Metals swimming ahead with Dolphin Mine amid a strengthening tungsten market

This is the second 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.

Group 6 Metals (ASX:G6M) is progressing works on its flagship Dolphin Tungsten Mine on King Island in Tasmania, where it remains on schedule to achieve first tungsten concentrate production in Q1 2023.

In part-one of this series, CEO and Managing Director Keith McKnight detailed how G6M is working to be a major player in the burgeoning tungsten market.

As previously noted, currently more than 75% of all primary tungsten globally comes from China, which gives rise to concerns around supply security and may lead to increase demand from Western suppliers to preserve supply diversification. 

G6M is in a prime position to capitalise on the growing demand for the rare metal. In 2023, G6M expects to commission the process plant in anticipation for first concentrate production. 

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.

“Tungsten is an economically and strategically important mineral, due to its wide range of industrial applications critical to economic prosperity”

The CEO says with China’s dominance in the sector, it’s imperative Dolphin comes online sooner rather than later.

McKnight notes: “Tungsten is an economically and strategically important mineral, due to its wide range of industrial applications critical to economic prosperity, and its growing consumption in the defence sector. With China’s dominance in the tungsten market, it is becoming increasingly more apparent that we must secure the supply of this critical mineral to mitigate any potential supply interruptions in the future.”    

Tungsten

Swimming ahead despite challenges

Moving into 2023, the CEO reiterates that the main objective for the early part of the year to capitalise on this, is to complete the construction works in anticipation for commission works. 

“The process plant will be commissioned through February and March in anticipation for first concentrate production in late March. In parallel to that the mining team will be preparing to commence drill and blasting in early March. The site teams will be bedding down operations and ramping up the operations through Q2 and we will also commence concentrate sales under our offtake agreements.”

While the future for G6M looks incredibly bright, McKnight says it would be remiss of him not to concede that ongoing challenges also lie ahead.

He says high fuel and explosives costs, and tight labour availability are expected to continue in 2023 as the Dolphin mine ramps up to nameplate production. Regarding high fuel costs, the company is looking at ways to reduce its consumption of diesel on the island. 

“The company has completed a technical scoping study on a renewable power station and has some preliminary engagement with an internationally recognised renewable power and hydrogen developer about a potential partnership to supply cheaper renewable energy which would considerably reduce the power costs for the existing operation but would also provide a commercially attractive power supply option for downstream processing.  

The company is committed to retaining and attracting high skilled personnel to reside on King Island and to work on the Dolphin Tungsten Mine. The company has implemented skilled training programs to provide skilled training for people who are new to mining and is offering attractive incentive packages for people to reside on King Island.”

Strengthening tungsten market 

The value of tungsten concentrate, as referenced by the price of ammonium paratungstate (APT) traded on international markets, continued to hold firm during the quarter. As of the end September 2022, industry sources indicate that the Tungsten APT Price CIF Rotterdam is US$335-$340/mtu (metric tonne unit). 

Tungsten concentrates from the Dolphin Tungsten Mine will be sold in USD. After the end of the quarter there was a slight decrease in the APT Price CIF Rotterdam to US$335-U$340, but this has been more than offset by the strengthening of the US dollar.

So, what’s in store for the tungsten market for 2023?

The CEO explains: “To predict what is in store for 2023, it is important to look back at what has happened over the past 12 months or more. Tungsten prices rebounded strongly on the back of the economic recovery that followed the Covid-19 pandemic with demand for Tungsten increasing by 7% in 2021 and forecast to increase by a further 10% in 2022. This occurred because some industries significantly increased output to catch up production losses during the pandemic. This is especially evident in the aviation industry as major aircraft manufacturers Boeing and Airbus significantly increase production volume over the following 3-5 years.

“Tungsten prices rebounded strongly on the back of the economic recovery that followed the Covid-19 pandemic”

Also evident in the oil and gas industry as prices for oil and gas increased significantly because of the Ukraine conflict, which has triggered a boom in drilling as countries seek energy independence, especially evident in the US. There is near record deployment of drilling rigs which is having a big impact on tungsten demand and this trend is expected to continue beyond 2023.

Demand from the defence sector has increased substantially in 2022 and that trend is expected to continue into 2023 and beyond as geo-political tension escalates around the world and countries announce increased spending on defence.

These factors have helped to maintain a stable tungsten price over the year, reaching a decade high price of $355 per mtu WO3 in May, and currently at $330-338. The small decline in price is due producers running down inventories into the end of year which will lead to re-stocking again in early 2023. There has also been an increase in the Chinese FOB prices which is seen as a positive indication for prices as Chinese attempts to kick start its economy on the back of loosening its Covid restrictions in the near-term.”

The European market has been relatively static over its summer months, with activity slower to resume than previous years. This is mainly due to concerns about the impact of rising energy prices on economic activity, with market participants waiting longer to understand how this will play out.

Some hard metal tungsten companies are working to reduce inventories into the end of the year and will therefore place less orders for raw materials like tungsten carbide. G6M expects this seasonal behaviour to be compensated for through additional demand created at the beginning of next year. 

By contrast, China has seen gradual increases in APT prices since mid-July. This has been driven mainly by higher production costs, environmental restrictions and the global energy crunch, which has supported concentrate prices. Chinese suppliers have indicated that higher offers for tungsten concentrate are supported by a number of factors, warmer temperatures reducing power consumption, less output and potential for higher demand ahead of the upcoming twice-a-decade National Congress.

China is implementing stimulus measures such as interest rate cuts to spur economic activity. It is encouraging bank lending in a bid to offset a slowdown in its economy, the effects of Covid lockdowns and a distressed property market. This could be further supported by more stimulus following the National Congress.

Longer term positive trends for tungsten

In 2023, NATO will also consider whether to lift the target spend 2% of output on defence for NATO members. In response to Russia’s annexation of the Crimea peninsula in 2014, NATO leaders pledged to reverse the trend of declining defence budgets, with members agreeing to spend at least 2% of economic output on defence from 2024, which will increase the demand for tungsten from the defence sector.

Strategic stockpiles held by countries such as the US are being depleted and the trend is expected to move towards re-stocking in the future which will further support increasing demand for Tungsten.

McKnight says there are some exciting new uses for tungsten under development, one of which is the use of tungsten in batteries. One UK based company, Nyobolt, is pioneering battery technology that achieves ultra-fast charging and higher power density using tungsten.

Group 6 Metals in league of its own

Group 6 Metals is an Australian resources exploration and development company whose name honours tungsten as Group 6 Metals’ first commodity project under development.

The company is focused on the redevelopment of its 100% owned Dolphin Mine located on King Island, Tasmania. Initially the focus is on producing a high grade of tungsten concentrate, however, G6M plans to value-add the product for supply into the upstream tungsten industry even amid challenging times.

Despite these challenges, the project is tracking well against its target of producing first concentrate in March 2023″

As previously mentioned, rising fuel and explosives costs, and a tight labour market are hurdles for the company to overcome.

Yet G6M remains determined to power through them.

McKnight adds: “Despite these challenges, the project is tracking well against its target of producing first concentrate in March 2023, allowing the company to take advantage of the anticipated strong market conditions for tungsten next year.”

Write to Adam Orlando at Mining.com.au

Images: Group 6 Metals Ltd & iStock
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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.