PERTH (miningweekly.com) – Tungsten developer Group 6 Metals has flagged another cost increase at its wholly owned Dolphin mine, in Tasmania.

The company in October last year updated the project economics, increasing the startup capital cost from the A$72.7-million previously estimated 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.

Group 6 Metals on Monday told shareholders that construction of the processing plant for the Dolphin mine was continuing to progress to schedule, with commissioning and first concentrate production targeted for early this year.

However, the lead engineering, procurement and construction (EPC) contractor, Gekko Systems, has told the company that constraints have led to higher-than-expected costs in the execution of the EPC contract. These constraints relate to project-specific and market conditions impacting logistics, materials and installation costs, including inflation, shipping and transport, foreign currency exchange rates and labour constraints.

The company said that the extent of the newly anticipated construction costs is up to A$7.5-million, constituting approximately 14% of the value of the EPC contract the company signed with Gekko Systems in November 2021, or 8% of the overall project’s budget.

Group 6 Metals said that it would carry out a detailed assessment on these costs as a matter of priority. In the meantime, the two companies are taking joint action to mitigate these anticipated cost increases while optimising the safety, schedule and successful re-development of the Dolphin mine.

The companies are also in discussions regarding options to limit the impact of these anticipated cost increases on Group 6 Metals’ cashflow while the plant is being commissioned and ramping up to nameplate production.

Despite the cost increases, Group 6 Metals assured shareholders on Monday that the company was committed to the completion and commissioning of the Dolphin mine, with the project expected to have an initial 14-year mine life at a processing capacity of 400 000 t/y.