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.
They say you can’t teach an old dog new tricks, but one company is doing its best to bring an old dolphin back to its former glory.
Group 6 Metals (ASX: G6M) owns and operates the Dolphin Tungsten Project, located near the town of Grassy on the south east coast of King Island in the Bass Strait. Closed in 1992 due to softening prices, work is now underway to redevelop the project’s open pit mine as awareness increases on tungsten’s role as a critical mineral for several key industries.
Host to the highest-grade tungsten deposit of significant size in the western world, the re-developed mine will focus on the production of premium tungsten concentrate, with plans to value-add the product for supply into critical downstream markets.
At full production, the redeveloped mine is expected to produce approximately 2,200 tonnes of tungsten per annum contained within 3,500 tonnes of tungsten concentrate, with first shipment scheduled for Q1 2023.
Tungsten Market Set For Growth
Tungsten is a naturally occurring chemical element which is typically mined from Wolframite or Scheelite ore. In powder form, it exhibits a low degree of thermal expansion and high melting point, with high density. It also possesses properties such as a high degree of rigidity, mechanical strength, and very low vapour pressure.
The metal is primarily used in the mining, construction, and transport sectors, and is also a key input for the defence industry. Its unique nature also allows manufacturers to use it in a wide variety of other industrial applications such as x-ray machines and super alloys.
Because of its hardness, it is widely used in the manufacturing of wear-resistant abrasives and cutting tools and equipment. This application accounts for more than 50% of the industrial consumption of the metal.
Tungsten carbide is also used in military applications, particularly in armour-piercing rounds. This is due to its tensile strength and hardness, along with its eco-friendliness as opposed to environmentally-harmful depleted uranium.
With the defence spending of many nations receiving a major boost in recent times, in particular with current Russian aggression against the Ukraine, the significance of tungsten to the industry is expected to remain strong and increase for the foreseeable future.
G6M has stated that it anticipates the international tungsten market to grow slightly above international average GDP, with APT currently near their highest level in the past 5 years (USD$354/mtu). This is over seven times the price of when Dolphin closed in 1992.
Dolphin – A Globally Significant Tungsten Project
The Dolphin Project contains an existing 2012 JORC compliant reserve and resource which includes Indicated Mineral Reserves of 4.43Mt @ 0.92% WO3 (at 0.2% cut-off for open pit reserve, 0.7% for underground reserve) and Probable Mineral Resources, including the Mineral Reserves, of 9.6Mt @ 0.90% WO3 (at 0.2% cut-off). This is bolstered by the Bold Head Satellite deposit which contributes an additional Indicated and Inferred Resource of 1.76Mt @ 0.91% WO3 (0.4% WO3 cut off).
King Island is positioned mid-way between Victoria and Tasmania and is well serviced by sea and air transport. The main deep-water port on the island is located approximately 1km from the mine site and the airport is less than 30 minutes away by sealed road.
G6M also recently acquired the property and improvements known as Portside Links, which provides direct access from mine to port, along with all potential land requirements for the redevelopment of the mine.
Previous geological investigations had identified over 7km of prospective geology surrounding the Grassy Granite. Numerous high-quality exploration targets also exist in the area surrounding the proposed mine site, including the South Bold Head target, South Dolphin target, and West Dolphin target.
At the time of its closure, approximately 50% of the project’s known resource was yet to be mined. Together with the adjacent Bold Head Mine, Dolphin accounted for 10Mt of tungsten ore output at 0.67% WO3 via both open-cut and underground methods.
Tungsten Gains Recognition as Critical Mineral
Tungsten has been gaining increasing significance thanks to a looming supply chain crisis and the push for reducing reliance on China, which holds more than half of global economic reserves and accounts for around 82% of global output.
“Supply chain concerns arise when the production and supply of Tungsten is dominated by one country which is the case with Tungsten”
China has wielded its power over critical mineral supply chains when trade relations have soured with western partners in recent years, especially the United States and Australia. According to the U.S. Geological Survey’s 2022 Mineral Commodities Summaries report, China’s government has imposed regulations on its tungsten industry designed to limit output and encourage domestic downstream use. This has unsurprisingly placed upward pressure on prices.
Group 6 Metals Executive Chairman Johann Jacobs explains: “Tungsten is an irreplaceable and non-renewable strategic metal which is of critical importance in aerospace, national defence, automobile manufacturing, oil and gas industries. Supply chain concerns arise when the production and supply of Tungsten is dominated by one country which is the case with Tungsten. Therefore, it is important to develop major new Tungsten mines such as the Dolphin Tungsten Mine to guarantee future supply of this critical metal.”
Due to this, Dolphin has been identified by the Australian Federal Government as a Major Critical Mineral Developing Mine as part of its Critical Minerals Strategy published in 2019.
This initiative is designed to provide support that will attract investment, support innovation, and drive infrastructure opportunities.
The metal has also been included in a new list of 50 mineral commodities critical to the United States economy and national security following an extensive multi-agency assessment.
Dolphin Redevelopment Ramps Up
Redevelopment plans for Dolphin, which are fully approved and funded, envisage an open-cut mining operation producing around 400,000 tonnes of ore per annum for the first 8 years, followed by underground mining expected to produce around 300,000 tonnes of ore per annum for an additional 6 years.
Initial work commenced in January 2022, which included stripping and stockpiling of vegetation and topsoil as a precursor to the current bulk earthworks due to finish in March. This will make way for civil works on which the planned processing plant will be constructed.
In November 2021, Gekko Systems was awarded the contract for the design, procurement, construction, and commissioning of the plant and related facilities. G6M notes that it has been working with Gekko over a three-year period, and together they have developed a flowsheet following extensive test work at the ALS laboratory in Burnie, Tasmania.
Offtake Agreements Locked In
G6M holds a series of key offtake agreements that will account for 70% of total output when production recommences.
“The Dolphin Tungsten Project will produce concentrate of approximately 63% which is important to our customers and downstream processors, as higher-grade concentrates result in lower processing costs.”
In April 2019, a deal was secured for the supply of tungsten concentrate to Wolfram Bergbau und Hutten AG, a wholly-owned subsidiary of Sandvik AB, an international engineering group working within the mining and rock excavation, metal cutting, and materials technology sectors.
The Wolfram Agreement accounts for delivery of 140,000 metric tonne units or 1,400 tonnes of WO3 concentrate, over a four-year period. This equates to the export of approximately 2,200 tonnes of concentrate, produced by the redeveloped Dolphin Mine over that period. The Wolfram Agreement represents around 20% of the annual production of the redeveloped Dolphin Mine.
“The Dolphin Tungsten Project will produce concentrate of approximately 63% which is important to our customers and downstream processors”
In September 2021 an additional offtake agreement was executed with Traxys Group, a leading international physical commodity trader and merchant in the metals and natural resources sectors. The agreement would include the supply of 330,000 metric tonne units of tungsten trioxide, delivered at a rate of 90,000 mtu per annum.
ESG Front And Centre
G6M has stated that it is committed to redeveloping the Dolphin Project in a way that has the least impact on the environment. Importantly, the company is aiming to produce high-quality concentrate at the project which will be low in deleterious elements.
“Common contaminants found in Tungsten ore bodies are Uranium and Thorium. Allowable levels of radiation for import of Tungsten concentrates into Europe are far below the naturally occurring levels in many commercially available concentrates and require significant additional processing to eliminate them. Ore from the Dolphin Tungsten Mine is free of these contaminants producing a more attractive concentrate product for downstream processors.”
Conservation on King Island is of high importance and remains pivotal to all redevelopment activities. Approval conditions under the Environmental Protection Notice for Dolphin require that several detailed environmental management and monitoring plans are approved for implementation to protect the local flora and fauna on site and within surrounding areas.
G6M has committed 33.7 hectares of land as Conservation Covenant area on its mine site at Grassy, which will protect important tracts of Blue Gum eucalyptus forest that provide nesting sites and habitat for some of King Island’s threatened species.
The company has also received government backing, with the Tasmanian State Government offering a $10 million commercial loan payable over 10 years to help progress Dolphin’s redevelopment, plus a $2 million grant to Hydro Tasmania for infrastructure upgrades on King Island.
Importantly, a significant amount of power will be generated by green renewable energy, lowering the mine’s overall carbon footprint.
In turn, G6M is committed to working with the local community on King Island, recognising that the mine will play a large part in its economic, environmental, and social development.
The project is expected to generate 90 full-time equivalent jobs during construction, along with an additional 65 ongoing full-time equivalent jobs on King Island when fully operational.
“Group 6 Metals is committed to the redevelopment and long-term operation of the Dolphin Tungsten Mine in a responsible and sustainable manner in accordance with its regulatory approvals and management plans. This will ensure minimum impact to the surrounding landscape and protection of native wildlife, while providing jobs and economic opportunities for the people of King Island.”
Experienced Team Drives Dolphin Towards Production
G6M Directors Johann Jacobs (B.Acc) MBL and Chris Ellis (BSc) have held senior executive management roles in the development of the Wilpinjong, Stratford, Wambo, Millennium, Cairn Hill and Mindarie mines plus associated processing plants and infrastructure.
Both have extensive experience in resource commodity trading and developed extensive networks of end users and traders and have successfully concluded offtake agreements for 70% of the planned tungsten concentrate output from Dolphin.
Director Greg Hancock (BA Econs) has over 25 years of capital markets experience in both Australia and the UK with close links to the investment banking community.
The executive management team reports to the board and is headed by CEO Keith McKnight (B.Eng -Mech) who has over 22 years of construction and mining project delivery and management experience in Australia and overseas.
He is joined by CFO Megan McPherson (B.Com, CA) who has more than 20 years of commercial and public company practice experience across multiple jurisdictions.
General Manager Chas Murcott (BEng – Mining) brings over 28 years of experience in senior project and mine manager roles in Tasmania and Indonesia, and holds a 1st Class Mine Managers Certificate of Competency.
“Group 6 Metals has a very experienced executive team with a proven track record in developing and operating mines. The Directors have significant technical, financial, markets and public company management experience to guide the Company through its progression from developer to mine operator. Having recently added high quality experienced executives to support the existing management team, the Company is now well placed to deliver on its key milestones for the redevelopment of the Dolphin Tungsten Project.”
Moving Forward in 2022
G6M is set for a big 2022 as it progresses redevelopment at Dolphin in readiness for production in early 2023.
The coming month will see an array of works coming through the pipeline including the completion of process plant earthworks in March, plus the commencement of both tailings storage facility earthworks and process plant civil and concrete works in April.
“As construction activities ramp at the Dolphin Tungsten Mine, we enter a new and exciting period for the Company as we seek to recommence mining at this high-grade tungsten deposit at time with high prices and significantly increasing demand. The management team and staff are working very hard to ensure we meet our planned first concentrate delivery in less than 12 months.”