Financial modelling of King Island Scheelite’s (ASX: KIS) Dolphin open cut tungsten project in Tasmania’s King Island has revealed the company is advancing the right project at the right time, with operating costs predicted to be among the lowest of global tungsten miners.
Economic analysis has revealed the project has a base net present value of $153 million and internal rate of return of 46%.
The financial modelling was based on an assumed operating cost of $127 per metric tonne unit of tungsten produced, as calculated by independent consultants.
Meanwhile, capital expenditure was estimated at $65 million, with a forecast 2.75-year payback.
“The impressive indicative economics reiterate that we have chosen to develop the right project with the right commodity in the right place and time,” King Island chief executive officer Johann Jacobs said.
“The King Island Scheelite team has actively progressed and de-risked the 100%-owned Dolphin tungsten project, both technically and commercially,” Mr Jacobs explained.
Advancing the Dolphin tungsten project
Taking into account the lead time for some equipment, King Island predicts commissioning of the Dolphin open pit mine and processing plant could take about 15 months after the company has secured financing.
If financing is achieved in the latter half of 2019, King Island anticipates its first shipment of tungsten could be achieved in the last quarter of 2020 or the first quarter of 2021.
Dolphin is one of the world’s richest tungsten deposits with a resource of 9.6Mt at 0.9% tungsten oxide, including a reserve of 3.14Mt at 0.73% tungsten oxide.
The mine was operated between 1917 and 1990 before it was closed due to prevailing low tungsten prices at the time.
During this time, 10Mt of tungsten was produced from both open cut and underground operations.
Initially, an eight-year open pit operation has been proposed, but King Island is also looking at going underground, which could extend the life to about 20 years.
King Island plans to ship around 2,000t of pure tungsten (3,500t of concentrate) from the mine each year to refining facilities worldwide.
As the company gears up to develop the project, King Island has locked in an offtake agreement with European tungsten powder supplier Wolfram Bergbau und Hutten AG, which will take about 20% of the mine’s proposed production annually over four years.
“Having recently secured the first of what we anticipate to be a number of multi-year offtake agreements, and with flexibility in the operating site, adjacent port links and a supportive local community, we now look forward to achieving frequent operational milestones as we proceed to tungsten production anticipated in 2020,” Mr Jacobs said.