Fosters have just released this note late yesterday. Thought I’d share as things are about to start heating up over the course of the next few months: Subject: FW: Watching Brief – CAY –
Aspiring high-grade bauxite producer 8 March 2021 Watching Brief – CAY – Aspiring high-grade bauxite producer The writer, Foster Stockbroking and associated entities, and Cranport Pty Ltd do not own CAY securities. Refer to end of email for details.
Foster Stockbroking provides corporate and capital markets advice to CAY for which it will receive fees. Ca look nyon Resources Ltd (CAY, $0.105, mkt cap $66M) Canyon Resources (CAY) owns the Minim Martap bauxite project in Cameroon, West Africa.
The project contains JORC Resources of 1.0bt bauxite at grade 45.2% alumina (Al2O3), including a high-grade component of 484Mt at 48.8% Al2O3. The company had cash of $7.9M and nil debt at end December 2020.Product specification yields 52% total Al2O3. Minim Martap’s product specification compares favourably with current product in the market, its alumina grade sitting at the upper echelon of bauxite development projects.
Most seaborne bauxite – such as from Guinea and Australia – lies within the range of 42% to 50% alumina grade. Low reactive silica. Besides high grade alumina, Minim Martap possesses low reactive silica of 1.4%, at the bottom end of the 1% to 6% range for comparable producers, making it satisfactory for refineries to process.
High grade means less environmental impact. The high grade of Minim Martap bauxite means less energy, heat, and caustic soda consumption are required for digestion during the Bayer process to produce alumina, and less waste is discharged, the latter typically known as red mud.
The increasing focus on, desire for, and regulatory push for both cleaner metals production and raw material sources does position Minim Martap as an attractive bauxite producer for alumina refiners and further downstream for aluminium producers (e.g. “green aluminium”). China is the world’s largest alumina and aluminium producer and leads the consumption of bauxite.
World bauxite consumption in 2021 is forecast to rise 3.8% in 2021 (Australian Department Industry, Science, Energy & Resources) driven by new alumina refinery capacity in China and India and aluminium demand in construction, automotive, and durable goods. China bauxite supply has been hampered by quality and quantity, with environmental restrictions retarding growth in domestic bauxite supply.Diversity of supply required. Global seaborne bauxite production is 160Mtpa, with Guinea accounting for largest share with 80Mtpa.
The potential development of Minim Martap would diversify supply risk away from Guinea. China is the major importer with 100Mtpa, of which 50% is sourced from Guinea.PFS highlights major production potential. CAY released a PFS on Minim Martap in 2020, showing JORC Reserves of 97.3Mt at 51.1% Al2O3 supporting a low strip mine for 20 year life with production of 4.9Mtpa DSO bauxite. Capex was US$120M and C1 costs US$35/t. NPV10post-tax was US$291M yielding an IRR of 37% and payback of 4.2 years, based on average realised price of US$51.2/t over 20 years. NPV/Capex is attractive at 2.4x. Five year tax and royalty holidays are assumed.
Existing infrastructure eases capex burden. An operating rail line runs adjacent from Minim Martap to Cameroon’s Douala Port, with both rail and port having spare capacity for the project.
CAY has in place MoUs with both the Port of Douala and Camrail (national rail operator) for haulage of 5Mtpa of bauxite. A potential Stage 2 development envisages utilising the deep water port of Kiribi which would engender higher volumes and lower unit costs.Major milestones in CY2021 to be catalysts for share price.
CAY aims to submit its Mining Licence application in 2Q CY2021, and expects an updated JORC Resource and ESIA also in the 2Q.
The DFS is scheduled to be released in 3Q CY2021 with grant of mining permit also anticipated in 3Q 2021, including Mining Convention agreement with Government. Binding offtake, port, and rail agreements along with FID are targeted by end of CY2021.
It certainly shapes as a momentous year for the company and one for investors to closely monitor. Watching Brief provides select highlights of company news and announcements, which mostly focuses on stocks for which Foster Stockbroking does not provide research coverage. Mark Fichera D: +61 2 9993 8162E:
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