The federal government thinks floating bauxite would make a good investment, agreeing to loan Metro Mining (ASX:MMI) $47.5m to realise its ambitions of doing just that.

Metro is currently finalising the design of a floating terminal on the Skardon River in northwestern Cape York that can load larger, ungeared ocean-going vessels — the main component of the planned Bauxite Hill mine stage two expansion project.

The money to build the terminal is coming from the Northern Australia Infrastructure Facility (NAIF).

Finalising the design of the terminal is the precursor to Metro making a final decision on the stage two expansion, which will increase production to 6 million wet tonnes.

Minister for Resources and Northern Australia Matt Canavan said the $47.5m loan offer would be the first NAIF investment for Cape York and would support economic and social development.

“This infrastructure project will allow Metro Mining to load larger vessels, part of its broader plan to expand to 6 million metric tonnes per annum by 2021,” he said.

“More than $500m in public benefit has also been forecast to be generated over the life of the mine to 2037.”

The new infrastructure is also expected to increase the total workforce to more than 300, up from 246 people.

The NAIF has so far committed $1.4 billion to projects across northern Australia,

These are forecast to create more than 4,000 jobs and deliver $3 billion in public benefit to Northern Australia.

Bauxite Hills is a direct shipping ore (DSO) operation with current reserves of 109.5 million tonnes and is expected to produce 4 million tonnes of bauxite in 2020.

DSO refers to minerals that require only simple crushing before they are exported, which keeps costs low.

The stage two expansion will increase production to 6 million tonnes and is expected to lower life-of-mine operating costs by about 18 per cent.