PERTH (miningweekly.com) – A review of the Dolphin tungsten mine, in Tasmania, has increased the project’s expected costs, owner Group 6 Metals said this week.

The company said that a detailed review of costs associated with completing construction activities and the working capital requirements to achieve steady state production, amid concerns of rising costs owing to global inflationary pressures, had been undertken.

The review has identified several areas of cost escalation, however, these increased costs are more than offset by sustained higher ammonium paratungstate (APT) prices and favourable foreign exchange rates.

The project’s startup capital costs have increased from the A$72.7-million to A$92.7-million, with deferred capital increasing from A$56.5-million to A$61.2-million, while life-of-mine capital costs have increased from A$129.2-million to A$153.9-million.

However, the review also resulted in a 24% increase in the Dolphin project’s estimated net present value, increasing from A$241-million to A$300-million, while the internal rate of return has declined from 43% to 38%. The capital pay-back has increased slightly from 2.25 years to just under three years.

“Despite the challenges faced by many mining projects under construction over the last 12 months, primarily due to escalating capital and operating costs, logistical challenges and labour shortages, we are very happy with the progress achieved at Dolphin to date and with the updated project financial metrics,” said Group 6 MD and CEO Keith McKnight.

“The net present value for the project has increased significantly from A$241-million to A$300-million pre-tax after factoring in all of these factors.

“The project is tracking well against schedule, with commissioning of the process plant still expected to be completed by the end of March 2023, as all the major OEM equipment has now been delivered to site to complete the construction of the process plant. In parallel, the mine infrastructure is also progressing well with construction of the tailings storage facility underway and expected to be available in March 2023 when needed for commissioning.

“The market fundamentals for tungsten continue to look increasingly positive. There is an anticipated shortage of tungsten concentrate in 2023 due to increasing demand and limited new supply coming online. The price for APT has remained stable at $335/t to A340/t of tungsten, for much of the last six months and given the current Australian/US dollar exchange rate, is the highest APT price in Australian dollar terms since the mine last operated,” said McKnight.

"While there has been cost escalation in capital and operating costs, by overcoming these challenges the company can take advantage of very favourable market conditions to maximise returns from one of the highest-grade tungsten projects in the western world.”