Latest News Response to shareholders’ queries re resource quality
Dear Shareholders,
We have had several enquiries regarding the quality of the ore in our recent resource statement, particularly enquiring if this quality of ore is of good enough quality that one day may prove to be of economic value.
We would like to preface this response by saying that we have been advised by the ASX that we should not comment about the potential economic value of this discovery at this point until we have produced independent reports on the resource with the required information under the Listing Rules and Corporations Act.
That being said, we would like to comment on the bauxite industry in general, and the following comments relate to the bauxite industry in general how we understand it.
According to The International Committee for Study of Bauxite, Alumina & Aluminium as presented at the recent Bauxite and Alumina Conference in Miami in February 2014, the average Alumina content being processed in refineries in China is gradually decreasing, and as per the following diagram, fell to an average ratio of available Al2O3/reactive SiO2 (A/S Ratio) of just 5:1 in 2012. See the slide as presented by the ICSBAA at that conference. At the same conference, the Beijing General Research Institute presented that the average A:S ratio currently being processed in the Henan District in China is 4.5 to 5, with general falling A:S ratios throughout China. Therefore clearly ore that is of that ratio is used economically in the global market, the only question is the profit margins and how much these refineries are prepared to pay for that ore.
Profit margins in bauxite mines in general are strongly affected by transportation costs, and they often need to even build the railroads and regular roads to transport the material many kilometres to a deep water port, and then the cost of shipping from that port to the largest importer of bauxite being China.
North Queensland is by far the closest port to China than nearly all the major bauxite export provinces around the world outside of Indonesia, and is days closer in shipping than any of the other bauxite regions in Australia such as Western Australia or Tasmania, and now Indonesia who has been the largest exporter to China has now banned its exports of bauxite due to wishing to keep its resources for local alumina processing. So a mine in North Queensland right next to a deep water port suitable for significant exports to China stands to have a significant competitive advantage over nearly all of its peers in what often could be in the rest of the industry prohibitive transport and shipping costs.
Now the question of quality. It is important to remember that export bauxite is a blended feed product. The average grade can be adjusted by raising or lowering the mining cutoff to meet needs, as they do in nearly all bauxite mines around the world. Using the calculation of the resource at South Johnstone as an example, the initial calculation of a cutoff of 20% available Al2O3 and 10% reactive silica on low temperature processing, was chosen to produce an average of 25.2% avail Al2O3 and 6.9% rx SiO2 in anticipation of being just a few kilometres from a deep water port in North Queensland (which should be relatively extremely low transportation and export shipping costs to China), plus we are anticipating an increase in bauxite grade with beneficiation and higher temperature processing, so we believe that it is likely for even this current resource to end up being within the range of 4-5 A:S., which obviously will only be known for certain with the further planned exploration programme and lab test work being undertaken now.
Furthermore, if ever need be in the future (say due to specific client demand or increased costs), we can always boost the average grade by raising the cutoff levels. On this note, it needs to be understood that drilling and lab results received from one sample within the resource (reported in the last announcement) returned an available alumina of 31.7% available alumina and 1.9% reactive silica at a low temperature pre beneficiation processing, which is on all accounts a grade that is used extensively in refineries around the world. This is an A:S ratio of over 16!
How much of the resource will prove to be of that grade will only be known by further drilling which would greatly further improve the potential price and attractivity of this ore for the international export market.
We are also hopeful based on our exploration target that with further exploration we will locate significantly more bauxite than what has already been identified, although we do need to comment that this is not a certainty until proven, although we have significant confidence based on our understanding of the geology that our recently announced 300 Mt exploration target is a solid exploration target.
Again, the above is only a guide to the general bauxite market, and why we are so excited about pursuing exploration and development of this project, and is not a comment that should imply any current known economic viability of this project until the further studies have been undertaken in accordance with the JORC Code 2012.
We thank all that have approached us with this enquiry and please feel free to contact us further if you have any further questions.
Sholom Feldman
Executive Director
QBL Price at posting:
2.2¢ Sentiment: None Disclosure: Unspecified
