King Island Scheelite (ASX: KIS) has secured an offtake agreement with privately-owned global physical commodity trader Traxys Group for tungsten concentrate from its redeveloped Dolphin project in Tasmania.
The agreement is for the supply of 90,000 metric tonne units of tungsten trioxide per annum (equating to 10 kilograms), averaging 7,500mtu per month.
It will commence once the Dolphin processing plant on King Island has been commissioned and will continue until 330,000mtu tungsten trioxide contained has been delivered to Traxys.
The price King Island Scheelite will receive each month under the Traxys deal will be a function of prevailing prices for ammonium para tungstate as quoted in industry journals, which is industry practice.
The price is currently quoted as US$315/mtu delivered Rotterdam, increasing approximately 35% since the start of the year despite the impact of COVID‐19 on the automotive and aviation sectors.
The increase reflects strong demand for hard metal tools, higher freight levels and delayed shipping schedules, which is forecast to remain strong as other tungsten‐consuming industry sectors continue to recover.
In current pricing conditions and using current exchange rates, King Island Scheelite could expect to earn sales revenue over the life of the Traxys agreement of approximately $100 million.
Maiden offtake deal
The Traxys contract complements a maiden offtake deal inked in April 2019 between King Island Scheelite and European tungsten powder supplier Wolfram Bergbau und Hutten AG.
Under the terms of that agreement, King Island will deliver 140,000mtu (or 1,400t) of tungsten oxide to Wolfram over a four year period.
It equates to the export of about 2,200t of concentrate produced by Dolphin over that period or about 550t per year, which is close to one-fifth of the mine’s proposed annual concentrate production of 3,100t.
Volumes supplied under both offtake agreements represent approximately 70% of annual expected production output from the Dolphin project.
King Island Scheelite has announced the termination of an offtake agreement signed with physical commodity trader Kalon Resources last September.
The deal involved the supply of 1,500tpa of tungsten concentrate over an initial three year period.
It was subject to the achievement of certain financial milestones by the end of August; however, these were not met and King Island Scheelite exercised its right to serve notice of termination, effective 10 November.
King Island Scheelite is not required to pay any fees or other penalties as a result of its decision.