Canyon’s Cameroon bauxite behemoth gets a tick of approval

Canyon Resources’ Minim Martap bauxite project in Cameroon has received a big tick of approval in recently initiated stock coverage by Foster Stockbroking.

The attractive economics of Canyon’s (ASX:CAY) Minim Martap – a project with a 1 billion tonne mineral resource at 45.3% aluminium oxide and 2.7% silica dioxide, and reserves of 99Mt at 51.6% aluminium oxide and 2.4% silica dioxide – led to Foster branding it with a speculative buy tag and setting a 12-month price target of 32c.

That’s a 20c premium to the price of the stock on the report’s release, and an attractive increase on the company’s 12-month share price high of 18.5c.

The project’s prefeasibility study released mid-2020 outlined a long-life project with attractive metrics, Foster said in its report.

The study revealed a 20-year mine life at 4.9Mtper annum direct shipping bauxite, with pre-production capital expenditure requirements of US$119 million.

The project would be delivered with an internal rate of return of 38%, giving it a payback period of less than four years.

“[Minim Martap is] a tier one asset comparable to Cape York and Guinea bauxites in quality and size,” the report said.

“Our report shows it possesses one of the highest available alumina and lowest reactive silica of global bauxite projects and mines.

“Both are key parameters for enabling low-cost production of alumina.”

A comparison of bauxite JORC resources showing total silica and alumina grades. Pic: Supplied.

High available alumina and low reactive silica mean potentially greater alumina recovery, low caustic soda consumption, less red mud waste and lower energy consumption for alumina refiners – ticking plenty of boxes when it comes to an increasingly green-conscious marketplace.

The project’s low mine strip ratio of 0.4 and the lack of a need for beneficiation were said to offset a potentially higher transport cost, with CAY estimating the project would sit in the middle of a landed quality adjusted Wood Mackenzie cost curve.

A landed available alumina equivalent cost curve, with Minim Martap in orange. Pic: Supplied.

Rail and port access are expected to be key to a final investment decision for the project, which Foster expects to generate first revenues and earnings by FY24 and net profits after tax of $52 million in FY28 as bauxite prices rise and Guinea bauxite supply growth subsides.

A project of big potential

The Minim Martap and Ngandoual deposits which make up the project were discovered way back in 1958 by the Cameroon Government’s Mines and Geology division.

Canyon was granted the project in 2018, to build on historic exploration work which included that undertaken in partnership between Groupe Pechiney and the government, and Cameroon Alumina Ltd Sarl.

Canyon is expected to receive a mining permit towards the end of the calendar year, after negotiating a mining convention with the government and submitting an application.

The company will also be looking to finalise binding offtake and rail and port access agreements.

Canyon believes the project’s mineral reserve has huge potential for growth. The project sits across some 79 plateaux, and just three of these are included in the current figure. At least 60 of those outside the reserve have yet to be drilled despite similar altitude and characteristics.

The mineral resource for Minim Martap spans 17 plateaux.

Mining of the project is proposed to begin at 4 million tonnes per annum, ramping up to 5Mtpa thereafter, with three of the plateaux the focus for the initial 20-year life of mine.

No drill and blast is required to mine the material at Minim Martap, which would be a shallow, open pit project with no beneficiation needed.

Rail conversations ongoing

Getting the material from Minim Martap to the port at Doula will be key to a final investment decision for Canyon.

Upgrades required to rail infrastructure and other logistical facets will cost US$122 million, a number CAY expects will be funded by a third party.

The company has been in negotiation with a number of parties, including the Cameroon government and port and rail operators in a bid to develop an appropriate project to port model for the infrastructure.

Rail operator Camrail and CAY signed an MoU in November to develop a solution for bauxite haulage to port, and bridge upgrades and track reinforcement work on the rail line to be used by Canyon are around 50% complete.

Earlier this month, the company appointed a highly experienced rail executive – Andre Henry – who adds more than 35 years of rail development and operational leadership to its team.

Canyon also has an MoU with the Port Authority of Doula for the development of port and transhipment infrastructure, including a framework for completing port access, and operating agreements.

This article was developed in collaboration with Canyon Resources, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.