MINER Group 6 Metals is facing higher costs from its lead engineering, procurement, and construction contractor, Gekko Systems Pty Ltd.
“Costs relate to project-specific and market conditions impacting logistics, materials and installation costs, including inflation, shipping and transport, foreign currency exchange rates and labour constraints,” the company reported to the ASX.
“The extent of the newly anticipated construction costs is up to $7.5 million, constituting about 14 per cent of the value of the EPC contract the company signed with Gekko Systems in November 2021, or 8 per cent of the overall project CAPEX budget.
“The company will carry out a detailed assessment on these costs as a matter of priority.
“In the meantime, Group 6 Metals and Gekko are taking joint action to mitigate these anticipated cost increases while optimising the safety, schedule and successful re-development of the Dolphin Tungsten Mine.
“The parties are also in discussions regarding options to limit the impact of these anticipated cost increases on the company’s cashflow while the plant is being commissioned and ramping up to nameplate production.
“While these newly anticipated construction costs are unfortunate, in today’s high inflationary environment for construction projects they are difficult to mitigate against.
The company remains committed to the successful completion and commissioning of the Dolphin Tungsten Mine which has an initial 14-year mine life underpinned by reserves, with significant regional exploration upside which the company will restart drilling on next week.
G6M sought to raise A$20 million in capital through a share placement fund, due to a review that indicated that its in-construction Dolphin tungsten project, was going to cost more than expected.
“In light of the above, the company has elected to extend the closing date for the SPP until February 1 which will afford shareholders who have made an application for shares under the SPP time to amend or withdraw their application. A supplementary prospectus for the SPP will also be released by the company in the coming days.
“Construction of the processing plant for the DTM continues to progress well against schedule for completion, commissioning and first production of concentrates in early 2023,” the company said.