Bauxite heroes

A quiet achiever amid the ferrous gloom

• Tim Boreham Criterion
• The Australian
• April 18, 2015 12:00AM

Bauxite heroes

Amid the resources gloom it’s hard to fathom that one commodity has gained 20 per cent this year and is trading at five-year highs.

The quiet achiever is bauxite, the aluminium precursor ingredient that has benefited from Indonesia’s ban on exporting raw materials.

For Metro Mining (MMI, 8,5c), it’s an opportune time to envisage a new mine, the only other recent one being Australian Bauxite (ABX, 33c) and its short-life project in Tassie.

“We seem to be in a segment with a little bit of life,’’ says chief Metro Simon Finnis.

Metro’s baby is its Bauxite Hills project on Cape York, near Rio Tinto’s bounteous Weipa assets.

With a 61.5 million-tonne indicated and inferred resource, the direct shipping project is envisaged as a 2 million-tonnes-a-year venture over a 21-year life.
A recent pre-feasibility study costed the project at a modest $27 million, with a net present value of $197m. Should the forecast net earnings of $38m materialise, Bauxite Hills would pay for itself in just over a year.

Finnis says the company hopes to fund the project with a mix of debt and equity, with likely contribution from an offtake partner. On that note, deep and meaningful talks have been held with China’s Xinfa. “They are negotiating like buggery,’’ Finnis says.

Metro has $5.5m in the bank, which is nice but still suggests Metro will go to the well for share capital at a half-decent opportunity. Metro has some decent deep pockets on its register, including coal king Jim Gorman, who made his fortune flogging coal assets alongside the late Ken Talbot.

Down the road, Metallica Metals (MLM, 6c) has also confirmed that its so-called Area A deposit at Urquhart Point is suitable for a direct-shipping operation. But Metallica’s priority now is to commission its zircon and rutile mine at the site.

Metro shares have doubled over the past month but we still believe it is a spec buy for those jaded with all the ferrous gloom.