Group 6 Metals launches $20m placement to fund Dolphin tungsten mine redevelopment

Emerging producer Group 6 Metals (ASX: G6M) has received binding commitments totalling more than $20 million to fund the redevelopment of its flagship Dolphin tungsten mine on Tasmania’s King Island.

New and existing investors have supported the capital raising via a placement of 117 million new shares at $0.17 each, representing an 11.4% discount to the 15-day volume weighted average price.

Approximately $8 million has been raised from the company’s top four shareholders, and includes $2.5 million which will be subject to foreign investment review board (FIRB) approval.

Managing director Keith McKnight, chairman Johann Jacobs and executive director Chris Ellis are expected to participate in the placement, subject to shareholder approval.

Following the placement, Group 6 will offer existing eligible shareholders the opportunity to participate in a non-underwritten purchase plan capped at $3 million and offered at the same share price.

PAC Partners Securities, Jett Capital Advisors and Canaccord Genuity (Australia) have been appointed joint lead managers to the placement.

Use of funds

Funds from both raisings will be used for capital expenditure requirements (approximately $7 million), pre-production costs ($6 million) and general working capital (up to $10 million) at the Dolphin mine site.

Mr McKnight said he was pleased with the response received.

“We are delighted to have secured the support of new and existing investors as we move closer to a major milestone in our history,” he said.

“These commitments are a strong endorsement of progress made at the Dolphin mine, which will enter the final stages of construction in the coming months.”

Financial certainty

The funds are expected to provide financial certainty for the project in light of a forecast shortage of tungsten concentrate supply due to increasing demand.

“Despite industry-wide challenges such as escalations in capital and operating costs, our team has worked tirelessly to ensure this project remains on schedule for the first quarter of the new year,” he said.

“Market fundamentals continue to be very positive and we look set to become a significant supplier of tungsten at a very favourable time.”

Robust returns

A recent review of the Dolphin mine redevelopment forecast the possibility of more robust returns for Group 6.

The review was conducted amid concerns of rising costs due to global inflation.

It 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 and improved revenues due to sustained high prices for ammonium paratungstate (APT) and favourable foreign exchange rates.