King Island Scheelite (ASX:KIS) has released an updated reserve estimate for its Dolphin project on Tasmania. Even though the company has doubled the total amount of tungsten on the project (from 1.05M mtu to 2.29M mtu) at a higher average grade (0.73% WO3 vs 0.55% WO3), we noticed the average strip ratio is now more than three times higher than in the previous estimate.
A strip ratio of 9.7:1 (versus 3.1) indicates King Island Scheelite will have to move much more waste than originally anticipated (30Mt versus 7Mt) and this will very likely increase the company’s initial and sustaining capital expenditures as a higher investment in equipment will be needed whilst the labor cost will also increase.
The King Island project remains an interesting tungsten project (and the reserve (grade) increase is excellent), but we’d like to see some updated economics based on the higher amount of waste that will have to be moved by the company. As of at the end of the third quarter of this calendar year, King Island was running low on cash (with less than A$1M in the bank), so we are expecting the company to raise more cash in the near future.
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Disclosure: The author holds no position in King Island Scheelite. Please see our disclaimer for current positions.
