Ten Bagger: John Forwood looks for ways to play the bauxite boom

Welcome to Ten-Bagger, where Lowell Resources Fund chief investment officer John Forwood gives us his take on a sector of the ASX resources market full of value.

This month, John tells us about how bauxite prices are bringing attention back to ASX stocks.

The stunning rise of the bauxite and alumina markets is training the attention of some of Australia’s top fund managers on the little covered commodity.

According to Shanghai Metals Market, Guinea bauxite prices – a premium product thanks to their low levels of silica – are trading at US$92/t, rising sharply since the Guinean Government suspended exports by a UAE owned bauxite miner in early October.

SMM’s Australian bauxite sales are at around US$70/t, 60% up since May.

There are but a handful of bauxite names on the ASX and just six, albeit mostly large, mines operated in Australia primarily owned by the likes of majors Rio Tinto (ASX:RIO) , Alcoa Corporation (ASX:AAI) and South32 (ASX:S32).

One miner, Queensland based Metro Mining (ASX:MMI), has arguably been the biggest beneficiary of the charge in bauxite prices.

Though contract terms mean it doesn’t see all the spot price gains, the now $350m capped producer has seen its shares lift 215% YTD and has seen realised pricing up 14% YoY at its 7Mtpa Bauxite Hills project near Weipa.

The miner recently extended offtake contracts with Chinese customers Xinfa Aluminium Group and a trading business of Chalco, the world’s largest alumina and aluminium producer.

Lowell Resources Fund chief investment officer John Forwood says bauxite has become the top performing metal market in 2024.

“The bauxite price has really been tightening up hugely with the issues in Guinea in terms of export permits,” Forwood said.

“More broadly, demand for bauxite has been very strong. It’s been a bit like iron ore, the Chinese suppliers have got a lower and lower grade, hence China is importing more bauxite all the time.

“Demand for seaborne bauxite has been growing and the price has been ticking up tremendously, it’s at record highs again this week.

“It’s probably the most positive metal market, and alumina and aluminium prices are high as well so it’s flowing right through to the end product.”

Ways to play

As noted above, one aspect of the bauxite market is the producers tend to be large players with diversified portfolios or vertical integration.

But there are a handful of juniors whose focus is squarely placed on the alumina feedstock.

One in the Lowell portfolio is Arrow Minerals (ASX:AMD), which has seen former Atlas Iron boss David Flanagan take his expertise to Guinea chasing both iron ore adjacent to Simandou, the world’s biggest high grade iron ore development, and a bauxite asset previously explored by mining giant Vale.

Arrow is currently planning a 20:1 share consolidation to improve its capital structure and rolled out a string of assays at grades in line with Guinean product specifications at the Niagara project.

The explorer says it has now intercepted bauxite over an aggregate strike length of over 5km, with its latest results from 32 holes in a maiden drilling program including highlights like 7m at 49.4% alumina and 0.7% silica from surface and 6m at 48.3% Al2O3, 2.6% SiO2 from surface.

Guinean bauxite, around 32% of global consumption and 73% of Chinese imports, is typically found in flat orebodies over a thickness of 1-10m with grades of 45-46% alumina and silica levels of around 3%.

Arrow’s exploration target, poster earlier this year ahead of drilling, came in at 170-340Mt at 40-46% alumina and 1-4% silica.

Another 90 holes are due to be reported in December, with a scoping study planned as soon as H1 2025.

“We’re invested in Arrow, and they’ve been returning some nice drilling results and there’s big targets there” Forwood said.

“That’s the stage that we’re looking at.”

Forwood also suggested we could see bauxite stocks return to the IPO market in 2025 after years playing second fiddle to floats focused on rare earths, lithium, gold and copper.

“It’s a good time to be preparing an IPO for bauxite,” he said.

He pointed to VBX, an unlisted company boasting the Wuudagu bauxite project 15km west of the Kimberley town of Kalumburu, as a potential candidate.

VBX claims to have a resource and reserve defined to underpin its first 10 years of operation.

A 2021 environmental scoping document filed with the WA EPA suggested the project would produce 6Mtpa.

At Stockhead, we tell it like it is. While Indiana Resources was a Stockhead advertiser at the time of writing, it did not sponsor this article.

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