THE INSIDE STORY: Australian Bauxite Limited (ASX: ABX) recently commenced mining activity at the company’s Bald Hill bauxite mine in northern Tasmania.
Reaching such a stage for any mining company from the small end of town in the present environment is no small feat, especially when you throw achieving such a significant milestone on schedule and below budget into the mix.
Bald Hill is the company’s first of its ‘Eastern Australian Bauxite Province’ projects to be commissioned.
Some people may be surprised to learn that the Bald Hill mine is the first bauxite mine to be developed on the Apple Isle.
The same people will be just as surprised to learn that Bald Hill is, in fact, the first bauxite mine to be developed in Australia in over 35 years.
With operations kicking off at Bald Hill in December 2014, ABX has seamlessly made the transition from mine developer to producer.
“In 2006 our exploration efforts led us to the discovery of gibbsite-rich bauxite in Eastern Australia – similar to bauxite exported from Indonesia,” Australian Bauxite CEO and managing director Ian Levy told The Resources Roadhouse.
“We embarked on our Initial Public Offering to list on the ASX in 2009 only 3 weeks after Indonesia passed laws banning bauxite exports from 2014.
“Throughout this entire time our aim was to start a project by the second half of 2014, which we managed to achieve with the project starting 9 December 2014.”
Mining of two bauxite pits at Bald Hill carried out by ABX during January 2015 has already stockpiled thousands of tonnes of ore.
“We are now producing final product bauxite and from the get go we were ahead of schedule,” Levy said.
“We are making good progress and our shipping schedule commences in the second quarter 2015, as we build up large product stockpiles, sufficient for daily rail deliveries and monthly shipments.
“From there we will enlarge the daily rail shipments down to the port to build-up large enough tonnages for the largest ships we will be using at about 60,000 tonnes.
“Our plan is to bring into Tasmania – through Bell Bay Port north of Launceston – the largest ships that have ever been used in the state – initially on a monthly basis, then twice-monthly.”
ABX plans to ship around 0.5 million tonnes of bauxite in its 1st year and increase that figure to two million tonnes per annum in 2017-2018 by opening up additional bauxite operations at Fingal Rail and DL-130.
The company is determined to contribute to Australia’s well-deserved reputation as the world’s largest miner of bauxite.
The wide brown land has produced a great deal of the bright red commodity, pumping out 32 per cent of global production in 2011 alone.
In its Australia’s Identified Mineral Resources 2012 report, Geoscience Australia said bauxite resources at Weipa in Queensland and Gove in the Northern Territory rank amongst the world’s highest grade deposits.
The report also named major deposits located in Western Australia – being in the Darling Range, the Mitchell Plateau and at Cape Bougainville, of which the latter two have not been developed.
According to Geoscience Australia the bauxite mines in the Darling Range have the world’s lowest grade bauxite ore mined on a commercial scale (around 27 to 30 per cent aluminium oxide), which despite the low grades, accounted for 23 per cent of 2011 global alumina production and is amongst the lowest cost producer of alumina, mainly because it is gibbsite-bauxite, like ABX’s.
Historically all of this bauxite had been used in vertically integrated business strategies all the way through from the mining of the bauxite through to it refined by in-house alumina plants. There was no market price for bauxite and no possibility of seaborne bauxite trade.
Then, China emerged as a dominant player in the aluminium industry moving from zero percentage of the world’s production to 55 per cent in the space of 16 years.
To expedite this, China built facilities based on imported gibbsite-bauxite – mainly from Indonesia, which worked well enough until Indonesia banned bauxite exports on 12 January 2014.
“China used its own domestic bauxite for just over half of its production, but the coastal producers, particularly in Shandong and Henan Province, built low temperature alumina plants similar to those in Western Australia,” Levy said.
“To feed these plants China relied on imported low-temperature gibbsite type bauxite from Indonesia.”
In anticipation of the ban China has reportedly stockpiled 12 month’s supply of bauxite, which is thought to be mostly low-quality and lower than official figures suggest, however pundits suggest it should be able to last for most of 2015.
The bauxite ABX is producing from Bald Hill in Tasmania is similar to that sold by traditional bauxite suppliers, Indonesia and India, in that it is gibbsite-rich bauxite.
This places it in the premium-priced category, as ‘low-temperature’ gibbsite-rich bauxite, often called THA or trihydrate bauxite, and enables the Chinese plants to fully-benefit from the cost benefits of the low-temperature refining process.
ABX bauxite is also valued for its low silica content, which is a major contaminant problem for bauxite suppliers.
“At the moment it appears everything seems to be going our way,” Levy said.
“When we published our business plan in 2012, we had built into it a weakening Australian exchange rate – to as low as US85 cents – and an increasing bauxite price in the order of $70 per tonne CIF China, both are currently better than that estimate.
“So overall we picked the market pretty much right and we’re even getting an unexpected added benefit from all-time low shipping costs nowadays.
“Now we need to ramp up production as fast as we can to capitalise on this once-in-a-lifetime market opportunity.”
ABX’s Australian bauxite vision reaches far beyond the shores of Tasmania to encapsulate, what the company describes as its Eastern Australian Bauxite Province.
ABX’s portfolio consists of 37 fully-owned bauxite tenements in Queensland, New South Wales and Tasmania covering 5,029 square kilometres.
The company’s selection criteria includes: good quality, gibbsite-rich, low silica bauxite; near infrastructure connected to export ports (eg. ABX’s DL 130 deposits in northern Tasmania are within 75km of the Bell Bay Export Port); and free of socio-environmental constraints.
As well as Bald Hill, the company has also reported Mineral Resources at Inverell and Guyra in northern NSW, Taralga in southern NSW, Binjour in central QLD with total JORC resources exceeding 116 million tonnes.
All of these bauxite deposits are favourably located for direct shipping of bauxite to both local and export customers.
“The Binjour project in Queensland is still the company’s flagship,” Levy stressed.
“It is probably the best bauxite investment in the Pacific Basin that isn’t already owned by one of the major mining companies.
“However it does have a much higher capital cost at $150 million and we will be exploring there around the middle of the year.
“All I can say at this stage is – watch this space – it is a major project.
“We completed a raising in November 2014 of $3.75 million, much of which was specifically designated for the exploration at Binjour – it’s all looking good.”
Australian Bauxite Limited (ASX: ABZ)
…The Short Story
131 Macquarie Street
Sydney NSW 2000
Ph: +61 2 9251 7177
Fax: +61 2 9251 7500
Ian Levy, Paul Lennon, Ken Boundy