Australia last month agreed to pay for a telecommunications cable to the Solomon Islands — opening opportunities for a number of ASX-listed companies.

Metallica Minerals (ASX:MLM) and Axiom (ASX:AVQ) are both eyeing the resource-rich country while Vocus (ASX:VOC) has landed the deal to lay the $136.6 million cable.

When the deal was announced in early June, Solomon Islands Prime Minister Rick Houenipwela said the 4000km cable would make it easier for companies to do business in his country.

Right now one of the key constraints to doing business in the Solomons is a lack of decent telecommunications infrastructure.

Australia has a deep history with the Solomons, with about 1500 nationals living there, exports in 2016 hitting $107 million, and banking, legal and accounting firms maintaining outposts mainly in the capital Honiara.

Foreign minister Julie Bishop said the latest business deal over the cable reflected Australia’s commitment to prosperity in the Pacific.

“Boosting connectivity in PNG and Solomon Islands will drive economic growth, and improve governance and security. World Bank research estimates improved internet access and connectivity could grow GDP by more than $US5 billion and create close to 300,000 new jobs in the Pacific by 2040,” she said.

The cable, named the Coral Sea Cable System, is due to be finished by the end of 2019.

Metallica eyes Solomons bauxite

Metallica managing director Simon Slesarewich believes the cable will open opportunities for companies like his in the isolated archipelago.

Metallica has particular reason to be keen on the cable because they have their eye on a bauxite mine on Wagina Island.

Bauxite is the key ingredient in alumina and aluminium.

Metallica is currently doing due diligence on the mine, majority owned by a company called South West Pacific Bauxite (HK) Ltd.

Wagina Island is an island of about 78 sq km located between the Choiseul and Santa Isabel islands in the Choiseul Province of Solomon Islands.

Mr Slesarewich says good projects are hard to come by so companies need to look in new geographies to source new, high quality targets.

The 30 million tonne bauxite resource, first discovered by discovered by CRA (now Rio Tinto) in 1968, is contained within a granted mining lease covering about 45 sq km on the eastern side of Wagina Island.

Conceptual layout of Wagina bauxite project. Graphic: Metallica Minerals.
Conceptual layout of Wagina bauxite project. Graphic: Metallica Minerals.

The resource, which Metallica has been working towards for 18 months, has the potential to deliver a 2 to 3 million tonne a year operation and is conveniently close to a key market — China — which could see bauxite arriving in China just 10 days after being loaded at Wagina.

To put in perspective what Metallica investors can expect, the bauxite mine currently operating on Rennell Island, also in the Solomon archipelago, started production in 2014.

In 2017 they exported 1.53 million tonnes for an average price of $US54.69 per tonne delivered.

With Chinese demand for bauxite ramping up fast, a mine that is reasonably cheap to bring online with possibility for a deep water port just off shore puts Metallica in a good position to fulfil that need.

Government backing for resources
Projects like Metallica’s have the Solomon Islands government’s backing, as mining is a key pillar for economic growth.

The government has recently identified mineral resources as one way to boost revenues in the country.

It has supported the re-opening of the Gold Ridge gold mine last year and in 2016 promised Axiom a “inclusive and transparent process for applications” to develop its Isabel Nickel Project.

After completing exploration activities in 2017, Axiom received development licences for the project in May this year.

Last year the government launched the National Minerals Policy, which is a legal framework for organising regulation, industry oversight, and revenue accountability in the resources sector.
A business-friendly government alongside a new nation-building investment from Australia is creating new opportunities in the Solomon Islands for Aussie businesses willing to look a bit further.

 

This special report is brought to you by Metallica Minerals.

This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice.

If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a disclosure document, a Product Disclosure Statement or an offer document (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.

 

Featured Companies

You might be interested in