Metallica Minerals is on the cusp of executing a project it’s been working on for the past three years — and the company is pretty excited.

The last 12 months have been transformational for the Urquhart Bauxite Project at Queensland’s Cape York Peninsula, a mine Metallica is planning to launch for less than $2 million.

Urquhart, a 50-50 joint venture with private Chinese company Ozore Resources, started out as just one of several different projects Metallica has pursued.

Over time the explorer has winnowed these down to bauxite, a project that will transform it into a producer.

In January, Metallica (ASX:MLM) received the all-important Mining Lease for Urquhart from the reinstalled Palaszczuk government.

The final step is to get permission to build a road connecting the Urquhart project with the port facilities at Hey Point.

And of course, get to that all-important first cashflow this year. The mine is predicted to be able to swing into product within four to six weeks of launch.

Under the PFS, the Urquhart project is expected to produce 6.5 million tonnes of saleable bauxite for almost $300 million in revenue and at a total operating margin of around $12 a tonne.

This delivers a pre-tax Net Present Value of $78.4 million and would allow a payback period of just five months.

Transformational year

Metallica has already ensured it has plenty of cash to bring the mine into production.

The $11 million sale of scandium, cobalt, nickel project SCONI to Australian Mines (ASX:AUZ) in December was a good financial shot in the arm, with the company receiving $4.5 million so far of the total.

Metallica is contemplating using some of its cash pool to acquire either operating or advanced development projects, preferably in the bauxite space and requiring less capital investment than SCONI which won’t be producing initial cash flows for some years.

Metallica Minerals’ shares over the last six months.

In May, they secured Brisbane-based contractor LCR Group to provide mining and haulage services for the project, and a short while later received the go-ahead for Urquhart from both the Traditional Owners and the federal government.

Metallica also owns the Esmeralda graphite project, the Cape Flattery silica sands project, the Urquhart Point mineral sands project and an exploration licence for Cape York.

These are on hold while the company focuses on the Urquhart bauxite project, however.

Strong in China

Chairman Peter Turnbull says the bauxite market is strong this year, partly helped by China cracking down on illegal and environmentally damaging mining practices at home.

“These factors have led to record Chinese bauxite imports in recent months and the opening of new provincial markets in the country,” he told shareholders.

Bauxite is the main source of aluminium, a market which has been consistently on the rise since late 2015.

Aluminium prices surged in August and again in December last year, when they hit a 52-week peak.

In October last year, China’s biggest state-run aluminum producer expected consumption to rise by 9-10 per cent in 2017, buoyed by downstream demand.

Metallica said in its latest quarterly report that it continues to be encouraged by developments in global bauxite markets, and particularly in China, where bauxite import volumes for the month of December were estimated at a record high of approximately 7 million tonnes.

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