Aspiring tungsten miner King Island Scheelite (ASX: KIS) is benefitting from the Australian Government’s move to reduce reliance on China for critical minerals, with tungsten facing a looming supply chain crisis and classified as critical to many industries that are vital to national security.
The company’s wholly own Dolphin tungsten project on Tasmania’s King Island received strong endorsement from authorities last week after the Tasmanian Government provided the company with a $10 million loan package.
Payable over 10-years, the loan will provide financial support for King Island’s Dolphin redevelopment plans.
This government backing provides a clear signal to other financial institutions about the project’s critical standing and solid fundamentals.
King Island believes the government’s financial endorsement will facilitate its current funding negotiations for getting Dolphin up and running.
Tungsten is key to many industries
Commenting on the global tungsten market, King Island executive chairman Johann Jacobs said the metal was “strategically significant” and a “key input” to industries that are vital to national security.
Tungsten and its alloys are among the hardest of all metals.
Its major end use is in cemented carbides where the hardness is ideal for cutting applications and wear-resistant materials.
Tungsten carbides are used in metal working, mining, oil drilling and construction industries. The metal and its alloys are also incorporated in electrodes, filaments, wires, welding and as components in electrical, heating, light and the aeronautical industry.
Chemical forms of the metal are also used in catalysts and pain pigments.
As a result of its use in crucial applications for national security, tungsten has been classified as critical in the European Union, the United Kingdom and the United States.
This is due to its economic importance and susceptibility to supply disruption.
Similar to other metals, China dominates tungsten production – accounting for about 82% of all global output. The country also has more than half of world’s economic resources.
China has wielded its power over critical mineral supply chains when trade relations have become strained with Western countries – particularly the US and Australia in recent years.
Mr Jacobs noted that the US was especially vulnerable regarding tungsten with no current operating mines in the country. Additionally, the US is the world’s largest tungsten importer – spending about US$84 million on procuring the metal in 2019.
This vulnerability has prompted governments to invest in critical minerals within their own back yards or make deals with allied trade partners.
Tungsten is among the latest minerals to shine under the crucial mineral spotlight – following rare earth elements and uranium in recent months.
King Island positions itself to benefit from looming supply issues
Australia hosts the second largest economic tungsten resources worldwide, but its share is only about 10% compared to China’s 50%.
However, despite the world’s second largest economic tungsten resources, production in Australia has been negligible.
King Island is well-positioned to capitalise on the tungsten situation with its Dolphin project.
A revised feasibility study was released in December last year revealing the project had an updated net present value of $241 million and a 43% pre-tax internal rate of return.
Start-up capital for the proposed mine is estimated at $72.7 million with a 2.25-year payback period.
Underpinning the study was a probable ore reserve of 4.43 million tonnes at 0.92% tungsten trioxide for 4.08 million metric tonne units.
The study assumes a 14-year operation that would generate earnings before interest tax depreciation and amortisation of $635.7 million.
This is based on 3.26Mmtu of scheelite in concentrate over 14 years.
“We see a close alignment between the company’s development objectives, the Tasmanian Government’s interest in maintaining and growing both Tasmanian jobs and export revenue, and the strategic objectives of the Australian Government as implemented by Austrade and the Critical Mineral Facilitation Office,” Mr Jacobs said.