Bauxite plays for juniors

Bauxite plays for juniors

BAUXITE is looking like an interesting little niche play in the ASX resource sector with a number of juniors moving into position to hopefully prosper.

• Michael Quinn
• 31 Aug 2016
• 8:26
• Feature

Two such juniors, Metallica Minerals and Iron Mountain Mining were out on the promotion hustings last week when they presented at the Mining 2016 Resources Convention in Brisbane.

Iron Mountain has re-emerged out of iron ore-induced hibernation and headed to the Solomon Islands where it’s completing due diligence on the scrip-based acquisition of the Nendo bauxite project.

Non-exec director Brett Smith told the Mining 2016 Resources Convention in Brisbane that the prospects for bauxite were looking promising, with alumina refineries reportedly becoming concerned about bauxite supplies and major producer Rio said to have referred to it as ‘the new iron ore’.

Coincidentally Nendo was found by Rio forerunner CRA back in 1969.

While it is early days for Iron Mountain, the signs seem positive from what Smith says.

The bauxite found at Nendo was indicated to be of very good quality (including low silica) with testwork continuing.
The locals are also said to be very much behind a mining development, and given some of the history of the Solomon Islands, this is critical.

More advanced is Metallica Minerals and its Urquhart bauxite project over the road (or more accurately over the river), from Weipa in north Queensland.

Regarding the macro outlook, Metallica’s CEO Simon Slesarewich pointed to China’s largest alumina refineries being designed to accept low temp bauxite – versus China predominantly producing high temperature bauxite.

“Bauxite has decoupled from the alumina and aluminium pricing as new refining and smelting capacity is not integrated with dedicated mining operations,” Slesarewich said.

“Low temperature bauxite market undersupplied in the short, medium and long term.”

Slesarewich sees Urquhart as a dead simple mining opportunity that should come into production in the first half of 2017, with modest capital needed given the ideal logistics.

A mining lease has been applied for and the Commonwealth government has confirmed no requirement for a full scale environmental impact statement because of its modest scale.

An earlier mooted development in the neck of the woods by Metro Mining (called Bauxite Hills) is understood to have stalled when authorities informed Metro such a full-scale environmental process was required given the size of the resource and hence timeframe of possible operations.

Metro is now working on its EIS for Bauxite Hills and is aiming to be in production in the second half of 2018.

While that is some way off, Metro’s Bauxite Hills’ numbers probably illustrate why other companies have entered the space.

That because after spending about $40 million in capex, Bauxite Hills could generate earnings of about $133 million per annum for 13 years.

Metro was capitalised this week at over $A60 million, while Metallica was at about $A8 million and early stage Iron Mountain was valued at about $5.4 million – though the latter’s stock price is up 400% since the start of April!