A detailed review of the Dolphin tungsten mine redevelopment on Tasmania’s King Island has forecast more robust returns for owner Group 6 Metals.
The review was conducted amid concerns of rising costs due to global inflation and was focused on capital expenditure needed to complete construction activities and operating expenditure requirements to achieve steady state production.
Returns included a 24% increase in net present value from $241 million to $300 million (pre-tax at an 8% discount rate) and improved revenues due to sustained high prices for ammonium paratungstate (APT) and favourable foreign exchange rates.
The increases have been offset by higher capital and operating expenditures, largely due to a jump in the cost of materials, spare parts, mine and process plant consumables and fuel.
The internal rate of return (pre-tax) reduced from 43% to 38% while the years to capital payback increased slightly from 2.25 to 2.53.
Design enhancements
Group 6 has implemented several design enhancements to improve the construction, operation and reliability of the Dolphin mine and process plant operation.
These included changes to the tailings storage facility, tailings pumping system, explosives storage and civil structural design.
There have also been several scope changes relating to the Gekko processing plant contract including a change in mining fleet, the provision of a dedicated diesel power station, the modification of site electrical configuration, the addition of a front-end loader for material handling and the purchase of additional mobile equipment and spares.
Other factors influencing project economics include ongoing rental costs due to delays in the delivery of mining equipment, as well as additional contractor costs due to labour shortages.
Ongoing economic challenges
Managing director Keith McKnight said the company was happy with the updated project financial metrics despite ongoing economic challenges.
“While there has been an escalation in capital and operating costs, by overcoming these challenges we can take advantage of very favourable market conditions to maximise returns from one of the highest-grade tungsten projects in the western world,” he said.
“There will be a shortage of tungsten concentrate in 2023 due to increasing demand and limited new supply but the APT price has remained stable for much of the last six months and is at its highest since the mine last operated … the market fundamentals are increasingly positive.”
