bauxite economics, page-2

Hi Topsy

There is no quoted "market" bauxite price. This is because only a small percentage of the world bauxite production is actually traded. Most of the bauxite mined around the world is used to feed alumina plants owned in the same interests as the miners. The bauxite/Alumina/aluminium industry is mainly vertically intergrated. That is because the major aluminium producers are also the alumina refiners and the bauxite miners. The traded commodities are alumina and aluminium. There is also technical reasons to do with bauxite grade and type of alumina process plant used that limits trading bauxite. Historically what bauxite that has been sold has sold between USD20 and USD 80 per tonne with an average in the mid USD 20's. Because Bauxite is a large volume/low value commodity its mining and marketing is really a logistics business.

I am probably getting a little out of touch with the bauxite/alumina business as I retired some years ago, so DYOR

Nextport.

Because bauxite is mostly a feedstock for the alumina plants operated by the same interests, the price of bauxite is the sum of the cost of mining and transport to the alumina plans. If bauxite is sold to a third party the price is normally related to the current alumina market price. It would be discounted by cost of refining the bauxite taking into account the amount caustic required and the caustic price.

The production cost of Alumina is about USD100/tonne. The more efficicient plants can produce it for USD 70/tonne. The crap plants operating on crap bauxite would cost anything up to USD 200/tonne. The Alcoa and BHP Billiton plants that use the Darling Range bauxite can produce alumina for around USD80/90 tonne.

The capital cost of building an alumina plant is about USD 1100 - USD 1500 per tonne of operating capacity. The size of the plant needs to be at least capable of producing 1 million tonne of Alumina per year to be efficient.

With regard to BAU. They will not make money from selling Bauxite. They will make money from selling Alumina. Building an Alumina plant is in their long term plan.