Time to right-size the project: MMI originally planned to fast...

Time to right-size the project: MMI originally planned to fast track Bauxite Hills under
the less onerous EA permitting process generally applied to bulk mining projects <2Mtpa
in QLD. The impediment of a full EIS has set the project back 10 months, but this affords
the Company time to evaluation higher production options (4-5Mtpa) and time to
negotiate a potential partnership with neighbour Gulf Alumina. Gulf’s Mining Lease (ML)
bisects MMI’s project area and has comparable bauxite Resources. Importantly, the ML
contains key infrastructure including a wharf on the Skardon River, an established haul
road to the wharf, a camp and airstrip. A partnership could significantly reduce capex
under a joint development scenario
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Our valuation does not account for expanded production options at this stage

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When provided with MMI average expected specifications, CM forecast the prices tabled below for the Bauxite Hills product. These prices are more conservative than those used in the PFS and are based on a revised study by CM Group.

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Offtake

Xinfa, who hold a 6% stake in MMI and a Board seat, may opt for a larger offtake contract. It is a private unlisted company and the second largest importer of bauxite into China behind Weiqiao Aluminum and Electricity Co. Xinfa’s annual bauxite consumption is estimated at 25Mt, with approximately 15Mt of this is sourced from the seaborne market.
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Evaluating an expanded production case

MMI stated that it is exploring an expanded production scenario of 4-5Mtpa. This level of production should be achievable with lower capital intensity. A staged development case, commencing production at 2Mtpa, is also an option. The Company is yet to decide what level of study to initiate, but indicatively believes that a revised PFS could be delivered within several weeks and a revised BFS in ~3 months. Argonaut sees several advantages with higher production including:

• Economies of scale with lower capital intensity and unit costs

• Greater appeal to off-take partners with ability to contribute a larger proportion of customer refinery blends

• Greater appeal to strategic investors and financiers with significant cashflow (expected to be >$100mpa)

• Greater presence in the Australasian market

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Increasing mine output should be highly achievable due to the shallow, low strip and large lateral extent of the Bauxite Hills Resource. As the projects infrastructure has few moving parts (crushing, screening and conveying), increased product handling would require only minor infrastructure up-scaling (i.e. wider conveyor systems and a larger gearbox).

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Benefits of partnering with Gulf Alumina

Gulf Alumina holds a wedge shaped Mining Lease between MMI’s three Mining Lease Applications (MLs 20676, 20688 and 20689 in Figure 1). Argonaut believes with a longer lead time to development, the Company now has time to thoroughly explore and negotiate a partnership with Gulf Alumina. Under a partnership scenario, MMI could utilise existing infrastructure (barge loadout, camp, airstrip and haul roads) to reduce development capital. The combined Resource would significantly increase mine life and support higher annual production. Argonaut believes there is potential for a combined operation producing up to 10Mtpa.