Metallica gains exclusive access to advanced, low-cost bauxite mine in Solomon Islands
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Special Report: Metallica Minerals has struck a strategic deal that gives it exclusivity over a bauxite project in the Solomon Islands.
The company (ASX:MLM) has agreed to provide a $120,000 secured loan to South West Pacific Bauxite (HK) Ltd in exchange for an option to carry out exclusive due diligence over the Wagina bauxite project ahead of a potential transaction.
Metallica’s initial assessment of Wagina suggests that the project is an advanced long-life, low-cost asset that has the potential to deliver significant long-term value for shareholders.
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.
The 30 million tonne bauxite resource is contained within a granted mining lease covering about 45 sq km on the eastern side of Wagina Island.
Marketing deal already in place
Solomon Bauxite Ltd, a subsidiary of South West Pacific Bauxite, previously secured a marketing agreement with Hong Kong-based trading house Noble Group.
In return for the rights to market Wagina bauxite, Noble is required to assist in sourcing funding for the project.
The Wagina project, which was discovered by CRA (now Rio Tinto) in 1968, has been the subject of significant internal studies by the current owner, South West Pacific Bauxite.
The studies envisage a mining operation producing 2 to 3 million tonnes of bauxite each year for more than 10 years.
The Wagina project has many similarities, including bauxite quality, to the Direct Shipping Ore (DSO) bauxite operation on Rennell Island, also in the Solomon Islands.
DSO requires only simple screening before it is exported, making it likely to be a low cost producer.
Rennell started exporting bauxite to China in 2014, and in 2017 exported 1.53 million tonnes, receiving up to $US54.69 ($71.10) per tonne delivered.
The Solomon Islands is closer to the lucrative Chinese market than other emerging bauxite jurisdictions.
Shipments from the Solomon Islands take just 10 days to reach the Chinese market, compared to 33 days from Guinea in West Africa, which is another emerging global source of bauxite.
Metallica is on the cusp of becoming a bauxite producer after little more than three years of hard work.
After receiving the mining lease for its Urquhart bauxite project on Queensland’s Cape York Peninsula in January, Metallica is now only waiting on approval to construct a haul road from the project site to the nearby port of Hey Point.
Once it has the haul road approval in hand it will take just four to six weeks to bring Urquhart into production.
At the same time, Metallica has been pursuing growth options that will enable it to increase its production profile to its targeted 5 to 7 million tonnes per annum over three to five years.
“This project has the ability to significantly extend our current reserve life and lift the production profile beyond what Urquhart will deliver when it comes online,” chief executive Simon Slesarewich said.
“Similar to Urquhart, Wagina has the potential to be developed at a relatively low capital cost and in a manner that could deliver outstanding returns.
“We have been selective with growth opportunities and we intend to be thorough in our due diligence on Wagina as the Solomon Islands is a new jurisdiction for the company.”
This special report is brought to you by Metallica Minerals.
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