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This 1.3c goldfish holds a whopping 7,180km2 of bauxite projects that have the very real potential to transform it into a whale. Queensland Bauxite (ASX:QBL) has, over the past several months, been working away behind the scenes, building towards results that could catapult a $4 million microcap into Australian mining folklore.
This 1.3c goldfish holds a whopping 7,180km2 of bauxite projects that have the very real potential to transform it into a whale.
QBL’s South Johnstone project in particular looks like a company maker. In November last year, QBL revealed the discovery of an entire bauxite field.
QBL’s drilling and XRF testing showed that half of the 61 shallow holes were enriched in alumina and depleted in silica, pointing to a bauxitisation event.
And now, after years of effort and millions spent, QBL are set to reveal exactly what it has up its sleeve.
Have a look at the drill hole locations below - QBL have turned this bauxite field into a block of Swiss cheese.
The red diamonds are QBL drill holes from the recently completed drilling, and the yellow diamonds are historic holes. There is an Exploration Target of 200 – 250 million tonnes of bauxite.
If Big Bauxite is there, QBL will have found it.
QBL’s ENGINE ROOM
QBL is unique in the microcap mining space because of what it has under the hood.
A few savvy investors have cottoned on to the number and sheer size of its DSO bauxite targets. South Johnstone is where QBL have been drilling, and it’s just 18 kilometres from a deep water shipping port:
A few more are aware that this resource is backed by over $4 million in readily available cash.
But what most don’t know, is that QBL’s Founder and Executive Chairperson, Pnina Feldman, is kind of a big deal.
Our unparalleled investigative team has uncovered a startling fact. Pnina Feldman is none other than mining magnate Joseph Gutnick’s sister.
How’s that for a sentiment changer!
Pnina Feldman was also the first woman ever in Australia to publicly list a mining company.
This company was known as Diamond Rose, and it took Mrs Feldman into the BRW top 200 rich list in the first year of listing.
Diamond Rose soon acquired the Guanaco Gold mine in Chile from Kinross Gold Corp, and was then taken over by a South American group of investors now known as Austral Gold (ASX:AGD) Pnina then founded Australian Gold Investments which became QBL after the acquisition of bauxite assets in North Queensland.
She is also chairperson of unlisted Plateau Bauxite, so she obviously knows her way around a bauxite mine.
She has successfully negotiated numerous joint ventures with major companies including BHP Billiton and De Beers, which is a powerful cartel that dominates the diamond mining, diamond trading and diamond manufacturing sectors.
Pnina is the sort of mining heavyweight you would expect to see at a billion dollar conglomerate.
Instead, she has chosen to remain with QBL – because there is nothing more satisfying than growing a microcap mineral explorer into a mid-tier producer.
OVERFLOWING WITH MINING INDUSTRY MOVERS AND SHAKERS
It’s not just Joseph Gutnick’s sister that has us impressed. QBL has multiple figureheads with the experience, nous and industry connections to actually make things happen.
Sholom Feldman – Executive Director
Sholom co-founded QBL and was instrumental in the purchase of the Guanaco Gold-Copper Mine in Chile from Kinross for Diamond Rose.
He went on to negotiate the purchase of Kinross’ portfolio of Australian gold assets, and the sale to Murchison Metals (ASX:MMX) of the Rocklea iron ore project.
Russell Williams – Non Executive Director
Russell is a qualified mechanical engineer with over 30 years’ experience, specifically in the bauxite and alumina industry, in various roles for the multi-billion dollar Alcoa Inc.
In his final three years with Alcoa, Russell was responsible for all activity at an Alcoa operation that ships over 13 million tonnes of bauxite per year.
Prior to this role, Russell was involved in all aspects of bauxite production for Alcoa, from exploration through to project development and production.
He managed the West Australian Bauxite mining operations at the Huntly Mine which in 1999 was producing 11 million tonnes of bauxite per year, and now produces over 23 million tonnes.
He then oversaw of all of Alcoa’s global mining activity in Brazil, Jamaica and Suriname, and was behind the initial development of the Juruti bauxite mine in Brazil which was commissioned two years ago and now ships 4 million tonnes of bauxite per year.
His experience will come in very handy at QBL, and you don’t have someone like that on your team unless you are 100% serious about creating a legitimate mining operation.
Dr Robert Coenraads – Principal Project Geologist
Robert is a qualified geologist, geophysicist and gemologist with over 30 years’ experience in global exploration and mining.
He has written four internationally published books on geology and has also penned 40 scientific papers and numerous independent and company reports.
BAUXITE: THE NEXT HOT COMMODITY
Bauxite ore is refined into alumina, which is then refined further into aluminium.
It takes four to seven tons of bauxite to make just one ton of aluminium. But are aluminium prices really surging?
Doesn’t sound quite right does it...
But it’s all here in this chart from the London Metals Exchange:
This indicates that aluminium prices, and thus bauxite prices, are likely to continue their ascent into the foreseeable future.
Last year, China garnered over 65% of its bauxite it needs from Indonesia, which equates to almost 50 million tonnes. So, when China became aware of Indonesia’s plan to ban bauxite exports, it stockpiled a veritable war chest of the stuff.
China’s stockpile is already dwindling, and may be completely exhausted over the next 12 months.
Bauxite: Will Australia fill Indonesia’s shoes?
Until recently, Indonesia was the main supplier of bauxite to China, accounting for around 65% of overall supply last year.
But in an attempt to create jobs by encouraging producers to build refineries on mainland Indonesia, the government enforced a ban on mineral ore exports in January.
That’s a big concern to China - the world’s biggest consumer of aluminium. But don’t just take our word for it that bauxite is set to follow in nickels footsteps.
Wood Mackenzie is a global metals and mining research and consultancy group founded way back in 1973.
Head of Metals and Mining Research, Julian Kettle had this to say in early May: “With China's alumina demand set to increase so sharply, there will be huge implications for bauxite demand.
We estimate China will need access to as much as 240Mt of bauxite by 2030 and as it only produced 72Mt domestically in 2013, huge uncertainty remains over the import versus domestic supply mix."
If you’re keen read more on bauxite from Wood Mackenzie you can do so here:
Chinese bauxite imports from Guinea are costing more than A$100/tonne CIF. While the current price in US dollars has risen strongly to US$60 a tonne. The evidence is overwhelming – bauxite demand is outstripping supply, and prices are headed further north.
CHARGING COMMODITY VALUE AND EXPLORATION RESULTS COLLIDE
When a commodity trend changes from cold to hot, and eagerly anticipated drilling results combine, the effect on a share price can be something to behold.
You may have watched in awe at the share prices of some ASX nickel explorers recently.
Nickel is one of the other metals affected by the Indonesian export ban, and prices began to lift soon after the ban was announced.
The price of bauxite has taken a little longer to respond, because warehoused stockpiles were greater.
But now that these stockpiles are in decline, and Chinese hoarding has begun, bauxite and aluminium prices are gathering some serious steam.
If QBL’s results are positive, current shareholders could be served with windfall profits.
QBL’s RAPID RISE 2010/11
Below you can see some very interesting price movements in the QBL share price, beginning in late June, 2010.
What could cause such a sudden and ongoing market reaction?
Guess what...
It was the acquisition of the very same bauxite projects that QBL will be releasing follow up exploration results from in just days.
Right where that blue dot is, on the 25th June 2010, QBL announced its intention to acquire 80% of the South Johnstone bauxite province in Queensland from Volcan Holdings, a NASDAQ listed company.
The historic exploration drilling reported by Carpentaria Exploration Pty Ltd provides a high level of confidence of proving up the exploration target.
Results providing levels of alumina relative to silica will be the key. To date it looks extremely promising.
It would also acquire 80% of the Ravenshoe, Ravenshoe East and Atherton bauxite projects:
You can see just how close the projects are to shipping ports and rail, especially South Johnstone.
In fact, a railway runs directly through the tenement to the Mourilyan deep water port, which is capable of berthing 40 kilo tonne vessels, along with a network of roads.
And as luck would have it there two alumina refineries, and an aluminium smelter, just down the coast at Gladstone!
This graph sums up the acquisition highlights nicely:
It’s easy to understand why Mr Market got so excited.
If bauxite prices continue to rise and every indication is that they will, and if QBL’s imminent results from South Johnstone are good, and there is no reason to think they won’t be.
Then we think it’s possible for QBL to re-test its 2011 highs of over 25c, which would be a 20 bagger from current share prices.
If you take a line through another bauxite company, Australian Bauxite (ASX:ABZ) with its share price of 21c, then QBL has that potential.
QBL’s Exploration Target of 200-250m/t at South Johnstone alone is bigger than ABZ’s total bauxite resource base.
FMG had gained control of a big mineral field and began extracting DSO iron. QBL have gained control of another big mineral field, and plan to extract and sell another bulk commodity - DSO bauxite.
FMG suffered major infrastructure challenges in its early days, with no access to rail, and a long distance to the coast or a shipping port.
On the other hand, QBL has a railway running directly through its South Johnstone project, which is just 16km from the coast, and an existing deepwater port.
Obviously a lot of years, a lot of hard work and some luck went into transforming FMG the penny stock into FMG the blue chip.
But FMG showed that it is possible, and QBL has the management team, the project, the infrastructure and the cash to make a flying start.
NOT JUST A ONE TRICK BAUXITE PONY
QBL isn’t just a bauxite company.
In fact they hold options over coal projects in Mozambique of sufficient quality to support a new IPO.
And these projects are literally surrounded by coal licences held by Rio Tinto, ENRC and Jindal.
QBL previously signed an agreement for the right to earn up to 51% of Regius Coal, which controls 7 coal projects in Mozambique.
QBL has the option for an expenditure of $750,000 prior to October 2014 to earn a 35% shareholding, and can gain another 16% via additional expenditure of $1.2 million by April 2016.
The coal isn’t just a dormant sideshow either – QBL is actively progressing and advancing these substantial coal assets. Field exploration programs are underway as we write.
The Mozambican coal region, where the Regius portfolio is situated, is one of the largest underdeveloped coal basins on the planet.
Due to its strong prospectivity and large-scale discoveries, most major coal licences have already been snapped up by major mining houses such as Rio and Jindal.
Discovered coal deposits held by other companies in the Mozambique basins total 22 billion tonnes of thermal and metallurgical coking coal.
Access to the big Asian markets is made easy via multiple existing and proposed shipping ports and railways. An ongoing upgrade of Sena Railway line will move it to a 20Mtpa capacity by 2020.
The Sena rail line runs straight through QBL’s 4070 license, and license 4169 lies just 50 kilometres away.
Infrastructure developments currently being undertaken by Vale and ENRC for a new railway and port to Macuse should be complete within the next 3-5 years.
How valuable could these coal licenses become?
Well, in June 2010, Riversdale Mining signed an agreement with Wuhan Iron and Steel to jointly develop Riversdale's Zambeze coal reserves in Mozambique, one of the world's largest undeveloped coking coal areas.
Where QBL has its coal licenses.
What happened to Riversdale? Try this for size; it was bought out at $16.00 a share. Which shows how valuable the coal is in Mozambique and to QBL.
When it comes to bulk commodities like iron, coal, and bauxite, infrastructure is the key that turns big resources into big dollars.
QBL - LOW RISK / HIGH REWARD
It’s a genuinely rare occasion to find a cash-backed, microcap company, with big name management.
It’s even rarer to find one that’s soon to release watershed follow up exploration results in a commodity that’s about to attract some serious attention.
We’d be surprised if there were already no serious interest from Chinese or Asian bauxite buyers.
Last week investors had a taste of how fast the QBL share price could rise with the bauxite results due.
Then QBL said: it was "currently in advanced negotiations on progressing" a project opportunity. This could mean a new project acquisition.
Don’t forget there are also QBL’s world class coal assets where another batch of exploration results is due in the not too distant future. Think Riversdale Mining and its buyout.
QBL has all that, and a gold project in Western Australia, wrapped up within a measly $4 million market capitalisation and $4 million in cash. They know how to run a tight ship at QBL!
In the unlikely event that bauxite results from South Johnstone are disappointing, downside is limited due to QBL’s bulging bank account, coal assets and possible acquisition.
If results are as strong as anticipated, it’s blue sky and big profits for investors.
Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX “Small and Mid-cap” stocks with distribution in Australia, UK, North America and Hong Kong / China.
QBL Price at posting:
2.7¢ Sentiment: None Disclosure: Not Held
