It was mentioned here in early August that bauxite of all things could end up being the star commodity of 2024.
The humble alumina ore (4-5t of bauxite is required for the 2t of alumina needed for 1t of aluminium) at the time was already riding high with spot prices for Guinea bauxite sitting at $US75/t and the Australian version quoted at US$59.5/t.
Compared with January 2022 prices, the respective prices were 34% and 48% higher. Bauxite has gone higher still, with Guinea bauxite cracking $US100/t and the Australian price expected to follow with a move up to $US85-$US90/t.
The same factors mentioned in early August for bauxite’s moment in the sun are behind the latest price surge, one that is doing no harm to the big end of town producers like Alcoa (NYSE:AA), Rio Tinto (ASX:RIO) and South32 (ASX:S32).
It comes down to China, the world’s biggest aluminium producer, becoming increasingly reliant on imports to feed the fleet of smelters it has built in recent decades.
From importing small amounts at the turn of the century, China’s bauxite imports now account for more than 55% of its needs. It mostly comes from Guinea in West Africa and from Australia.
Shaw & Partners takes up the story:
“Bauxite markets are tight due to strong demand growth from China at a time when supply is constrained.
“Indonesia has implemented export bans, Chinese domestic production is declining and Australian supply is at risk (WA environmental issues, Gove planned closure).
“China has become reliant on supply from Guinea which now accounts for about 70% of China’s bauxite imports.
“The big increase in alumina prices this year would normally have seen Chinese alumina refineries increase production and exports to take advantage of high export prices. A key reason this has not happened is that refineries in China cannot source enough bauxite.”
METRO MINING:
Shaw’s bauxite market commentary was contained in a research note on Metro Mining (ASX:MMI), the only ASX pure bauxite play thanks to its 7mtpa of exports from its Bauxite Hills operation north of Weipa on Cape York Peninsula.
It was mentioned here in early August when it was a 4.7c stock for a market cap of $280 million. It has since moved up to 5.9c for a market cap of $350m, which is as good a gain that can been found across the mining space in the period.
Shaw reckons there is more to come in response to the bauxite price moving higher still, and this week’s debt and royalty restructuring to Metro’s benefit.
It has a 14c price target (12 months) on the stock.
“Although the stock is up about 150% this year, we are surprised that Metro hasn’t been even stronger given the bauxite/alumina price moves. With balance sheet concerns gone, we expect the stock to soar,” Shaws said.
ARROW MINERALS:
Arrow Minerals was another bauxite player mentioned back in August on the strength of its pick up of the advanced Niagara project in Guinea, comfortably the world’s biggest producer.
Brazil’s Vale did some wide-spaced drilling at Niagara back in 2006/07 which was enough for Arrow to be able to release an “exploration target” of 170-340Mt grading 40-46% alumina and 1-4% (the lower the better) re-active silica levels.
It is potentially company-making stuff. The same could be said about Arrow’s Simandou North iron project to the north of Rio Tinto’s and China Inc’s $US26 billion monster Simandou project in the country.
Arrow has been busy with the drill bit of late at Niagara and recent results (such as 7m at 49.4% alumina and 0.7% silica) are reflective of the high-grade and low-silica bauxite for which Guinea is known.
There is a lot more drilling results to come in but there are enough in the can for Arrow to state the right sort of grade and quality bauxite has been intersected over an initial strike length of more than 5km to date.
To meet the benchmark specs for bauxite from Guinea, Arrow would want to be seeing 45% alumina/3% silica-type results. And it has been doing that in the holes reported to date.
As Arrow managing director David Flanagan put it in investor briefing on Thursday, the best of the drill results reported were caviar-equivalent.
“You could just about eat that stuff, you know. It’s like having O-negative that can go anywhere,” Flanagan said.
All of the drill results from the current campaign are expected before the end of the year with a JORC-compliant resource estimate likely in the first quarter of next year, leading into a scoping study by mid-year.
Throw in met testwork results on Simandou North in the first quarter and Arrow will have a lot to talk about as 2025 unfolds.
“Hopefully we’ve got some wonderful numbers to tell everyone about. And everyone gets very excited, and the share price goes up a lot,” Flanagan quipped.
The stock could do with some excitement. It closed on Thursday at 0.2c for a $26.4 million market cap. That’s not a lot for a company with two potential company-making projects on its books.
SPARTAN/RUMBLE:
WA’s Mt Magnet district took the gold honours during the week with Spartan (ASX: SPR) confirming a third high-grade discovery at its Dalgaranga project and Rumble (ASX:RTR) securing Indian backing for a development of open-cut resources at its Western Queen project.
Continuing its practice of naming the high-grade shoots at Dalgaranga after brands of gin, the discovery is called Freak.
Nothing overly freakish about the intersections to date at Freak compared with the nearby Never Never and Pepper discoveries but as Chris Baker at Bridge Street Capital put things, it is a great start.
(Dr) Baker noted that Spartan had previously related the geometry at Never Never and Pepper to a sheet of corrugated iron, with the mineralisation confined to the peaks in the sheet.
“Is Freak the next peak? It looks like it,” Baker said. “Could this lead to more discoveries north and south? If the model continues to work, then there is a reasonable chance.”
He said the discovery was important in that it seems likely to further increase the ounces per vertical metre for the future Never Never/Pepper/Freak underground mine. “More ounces per vertical mete equals more annual ounce potential through the plant,” Baker said.
Spartan popped 8.5c or 6.4% higher to $1.41 on the Freak news. Canaccord maintained its $1.70 price target on the stock.
It said Freak presents as another potential high-grade ore source over and above its current modelling.
As a reminder, its base case is for Dalgaranga – 65km from Mt Magnet – to come back into production at a 1.2Mtpa processing rate for annual production of 174,000oz at an AISC of $A1,532/oz over an initial 10-year life-of-mine.
All of that is of keen interest to the ever acquisitive Ramelius (ASX:RMS) with its 18.3% Spartan stake. Last week it told its shareholders at its annual meeting that its appetite for growth remains strong. It added that the Spartan position represented another “important step in our strategy”.
Spartan’s exploration success has carried it to a market cap of $1.47 billion. Ramelius – it owns the Mt Magnet gold operation – is a $2.3 billion company, so any move for control of Spartan will be challenging.
Meanwhile, Rumble’s distressed stock put on 0.6c to 5c a share for a $45m market cap after announcing plans to team up with Indian mining contractor BGR Mining, through its Australian entities, to mine the open-cut resource of about 80,000oz at its Western Queen project, 110km from Mt Magnet.
It is not the biggest deal around but as there will no investment required by Rumble under a sharing of the cashflow arrangement, it should be a nice earner for Rumble which has more on the go than the Western Queen open cut.
It has just started an exploration program for high-grade Dalgaranga-style gold shoots down plunge from known near surface mineralisation along a 2.7km target strike zone. And then there is Earaheedy project near Wiluna which caused excitement a few years ago.
As it is, Rumble noted that its new Indian friend was also “interested in our Earaheedy zinc-lead-silver project given the size of resource and the potential for it to be a large scale, open pit mining and processing operation in the future”.
Large scale open-pit coal mining is a specialty of BGR in India. And zinc has been looking good of late, with South32 (ASX:S32) recently pointing to forecasts of a 3Mtpa supply deficit in the galvanising metal by 2030.
