This Australian company is named after its main project, which is to develop a tungsten mine on King Island, situated on King Island in Tasmania - Australia. Chief Executive Officer Simon Bird spoke to us and gave a presentation on the project at the recent ITIA Annual General Meeting in Austria.
King Island Scheelite Ltd (KIS) is listed on the Australian Stock Exchange with a $10 million market capitalization. Its main shareholder, Hunan Nonferrous Metals Corporation of China with a 7% interest, is an equal joint venture partner in the Dolphin project on King Island. A separate Balfour exploration project in North West Tasmania is a joint venture with Pleiades Resources Pty., with KIS holding a 70% interest there.
Tungsten on King Island
Tungsten has been mined on King Island since 1917, with 6.46 million tonnes of ore, with a grade of 0.53% WO3 being produced up to the closure of the mine in 1990. The closure occurred due to oversupply of tungsten at the time causing the price to fall to $50 per metric ton unit (MTU), with most of the mine infrastructure removed and the site rehabilitated. Many other mines closed around the same time.
The King Island Scheelite Dolphin project is near the town of Grassy, which was a company-owned town when the mine was operational. The project was acquired by GTN Resources NL in 2005; the company subsequently changing to its present name. The joint venture with Hunan was formed in 2007 to progress the mine redevelopment, largely resulting from increasing demand for tungsten causing improved prices that reached US$190 per MTU for 65% concentrate by mid-2010.
The whole resource, comprising the Dolphin and Bold Head deposits, amounts to 11,413,000 tonnes that contain 101,300 tonnes of WO3. The plan is to reopen Dolphin’s underground mine and develop a processing facility that can produce around 3,300 tonnes of WO3 each year. Simon Bird says: “We expect to be the biggest employer on King Island and the mine will create about 100 jobs.”
Core samples
More than 600 holes have been drilled on the former underground working to depths of up to 295 meters. Based on historical drilling data, geographical sections and mine infrastructure plans, the resource estimate is for 8.94 million tonnes of scheelite ore grading 0.92% tungsten for 82,600 tonnes of WO3 at a 0.25% WO3 cut off or 61,350 tonnes WO3 at a 0.70% WO3 cut off. The reserve estimate is 1.63 million tonnes grading 1.30% WO3 for 21,150 tonnes of WO3 at a 0.70% WO3 cut off.
Prior to starting on development, various studies and commitments were undertaken to ensure the project has minimal impact on the environment. A Development Proposal and Environmental Management Plan was produced and approved. This sets out how fauna and flora will be protected, dust and noise emissions will be minimized, water quality managed and cultural heritage items safeguarded.
Immediate Aim
The immediate aim is to drain the water from the mine and rehabilitate the decline, which should take around six months. Construction of the plant and the necessary infrastructure should last approximately eighteen months. The capital cost of the program is estimated at $90 million, with around $45 million of this taken up with rebuilding the processing plant. However, all key approvals and funding are organized, so progress should not be impeded. “There’s no reason why, if we are to get going now, that we shouldn’t be ready by the end of 2012,” comments Simon.
Once the mine is up and running, the expectation is to extract around 300,000 tonnes per annum with a yield of 3,300 tonnes after processing. At an average price of US$190 per MTU for 65% concentrate, this should give revenues of $460 million and net present value of $40 million, an internal rate of return of 22%.
A doubling of the Dolphin resource may be achieved later by accessing further tonnes below the original workings. The aim is to demonstrate the down-plunge extension with development drilling that will cost around $0.5 million. Geographical mapping has indicated there is the potential for an additional two million high-grade tonnes. None of this is included in the current feasibility model since there has so far been little or no drilling beyond the old working.
Reopening the Bold Head mine, two kilometers to the North of Dolphin, will provide access to a further resource, although on a smaller scale. However, this is further ahead since access and approvals are pending, although no issues are expected.
Balfour Project
The separate Balfour project in North West Tasmania is in an area of historic mineralization. Tin and tungsten have been mined at Specimen Hill while copper and gold have been mined at Roaring 41 South.
Balfour Management Pty Ltd, a wholly owned subsidiary of KIS, is managing the project on behalf of the two joint venture partners. It began a drilling program at Specimen Hill in late 2009 to assess the extent of mineralization. The four holes that resulted intersected numerous mineralized veins.
A ground survey and airborne survey were followed by a second phase of exploration that began in June 2010. This phase involved two preliminary diamond drill holes at Roaring 41 South. The first of these intersected magnetite, copper and gold mineralization while the second hole intersected copper and gold mineralization. According to Simon Bird, these preliminary results support magnetite-hosted copper-gold mineralization in Proterozoic sedimentary rocks at the site.
The main focus for the company at the moment is on the Dolphin project and Simon is keen to ensure they achieve the set target dates. He says: “One of the big challenges for me is to make sure our joint venture partner’s objectives are still in line with ours and that is not only developing the mine but the timeframe in which to develop it.”
Simon is, however, convinced of the potential of the company and its projects. “For investors in KIS, I think it’s two-fold. One is to take comfort that we can get this project up and running. Secondly, there’s the future potential of extending the ore body down plunge.”
Subsequent to this interview it was decided to “terminate the joint venture with Hunan”. Our readers will be learning more on this in a later article.
For additional information:
http://kingislandscheelite.com.au
Simon Bird
Chief Executive Officer
King Island Scheelite Limited
Level 9, 1 York Street
Sydney NSW 2000
phone (02) 8622 1400
fax (02) 8622 1401
email simon.bird@kingislandscheelite.com.au