food for thought

Over the past 5 years, China’s bauxite import requirements have grown almost 500%. To maintain self-sufficiency in primary aluminium, China will need to meet its rising bauxite demand, and even allowing for increases in domestic production, import requirements are set to rise further. 80% of China’s bauxite imports currently come from Indonesia. However, in recent times a potential crunch point has arisen and comes into effect next year when the official policy is for exports from Indonesia to be banned.

The bottom line is that this has now placed Ord in a very opportune position. In particular, its bauxite resource in the Laos Bolaven Plateau continues to be advanced under SARCO (ORD 49%and NFC China 51%). Further, studies for mining and refinery construction in place and in the next few months Lao government agreement is expected to be in place to build a refinery onsite and/or export treated bauxite using a slurry pipeline.

Laos is closer to China than other bauxite and alumina supplying countries. The resource is 226 million tons of good quality bauxite, with low 2-3 % silica content. It would rank second to Alumina Ltd (ASX: AWC) one of the largest in the world. Importantly, it is amenable to open cut low cost mining with a long life. Value will be further added by refining the bauxite to alumina nearby (initially 600,000 tonnes capacity annually, expanding to 1,200,000 annually).

Laos has a stable government that’s a shareholder in SARCO and keen to mine and refine its bauxite resources. SARCO has interest in a large non-developed area in the Bolaven Plateau, which may well increase the existing JORC 200% plus.

Critically, a secure, long life and competitively priced supply of electricity is vital to maintaining a competitive edge in the aluminium industry. Here, SARCO has another winner with an abundance of cheap hydroelectric power nearby, as well as access to roads and water.

One final thought, I recall last year the value of Ord’s Lao Project was conservatively estimated by astute followers on this board massively many times more than today’s share price. Since, the project continues to be progressed and from where I sit nothing’s changed, other than a much larger demand from China.