All the signs point to good times for bauxite as Metallica heads towards production
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Special report: Metallica Minerals is closing in on bauxite production at a time when several factors are weighing on supply and driving up prices.
Bauxite is the only raw material used in the commercial production of alumina, which can then be turned into aluminium metal.
To make one tonne of aluminium, it requires about four to five tonnes of dried bauxite.
But supply is drying up and Asia’s powerhouse, China, is looking for new sources.
Early in July Malaysia extended its ban on bauxite mining indefinitely.
“Offsetting new exports from Indonesia is the action of the recently installed Malaysian government to reinstate its ban on bauxite mining for an indefinite period,” managing director Simon Slesarewich said.
“This is coupled with continued civil unrest in Guinea that has impacted bauxite exports.”
At the same time, China is continuing its crackdown on illegal and environmentally damaging operations, which is impacting its own supply.
Chinese industry sources forecast that reforms to the open pit mining sector in Shandong, Henan, Shanxi and Xinjiang will boost bauxite prices in the short term, according to S&P Global Platts.
China is running short
China sources half its bauxite from domestic sources and imports the rest.
“Combined with the effects of declining ore grades at many domestic mines, these measures by the Chinese government are expected to lead to a significant increase in import volumes over the next 18 to 24 months,” Mr Slesarewich said.
China imported around 7.3 million tonnes of bauxite in May, up 17 per cent month-on-month and equating to an annual rate of about 87 million tonnes, reports researcher CM Group.
Chinese demand for bauxite will increase by a further 65 to 70 million tonnes per year over the next five to seven years, CM predicts.
This is due to new alumina refining capacity being built in the country, with about 60 per cent of this new demand to be met by imported bauxite.
China has been trying to strike a $10 billion deal to mine bauxite in Ghana, but is facing environmental pushback over where it wants to mine – a forest reserve in Ghana’s east.
Countries like Kazakhstan, Tajikistan, Bahrain, India and Indonesia are also all looking to ramp up alumina and/or aluminium production.
There is also increasing opposition to bauxite mining in the Semnan Province of Iran, with environmentalists demanding the closure of the Tash mine.
Filling the supply gap
In a 50-50 joint venture with a private Chinese company, Metallica is developing the Urquhart bauxite deposit, which was discovered in late 2014 on the Cape York Peninsula in far north Queensland.
The project is located 5km southwest of Weipa on the west coast of the Cape York Peninsula, a region renowned for its extensive deposits of high quality pisolitic bauxite.
Weipa is a globally recognised bauxite province favoured by Chinese aluminium producers because of its compatibility with the country’s refineries.
After receiving the mining lease in January, Metallica is now seeking final government approval that will allow the construction of a 15km haul road from the project site to the nearby port of Hey Point.
Once the company has the haul road approval in hand it will take just four to six weeks to bring Urquhart – which is estimated to cost Metallica just over $1 million to build – into production.
“Haul road approval talks for Urquhart bauxite project have been substantially elevated within the Queensland state government,” Mr Slesarewich said.
The project is fully funded, with Metallica having around $6.1 million in cash and a $2 million undrawn credit facility at the end of the June quarter.
This special report is brought to you by Metallica Minerals.
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