Urquhart Bauxite

The Urquhart bauxite project is situated adjacent to the HMS project and is some 5km southwest of Weipa on Queensland’s Cape York Peninsula. Western Cape York is world–renowned for its extensive deposits of high–quality, export grade pisolitic bauxite.

A Heads of Agreement (HoA) was executed by Metallica early in April 2016 with Green Coast Resources Pty Ltd (GCR), the owner and operator of the nearby Hey Point bauxite project, for bauxite logistic services and trans shipping access. This agreement significantly de–risks the Urquhart bauxite project and delivers both a very low start–up capital requirement and a compressed start–up schedule. Under the agreement, direct shipping bauxite (DSB) from the Urquhart bauxite project will be delivered to export vessels via the recently approved nearby Hey Point load–out facility, located only 15k m from the Urquhart bauxite project.

Through the HoA and the provision of a Short–Term Loan to GCR, Metallica has been able to lock in a logistics solution for Urquhart bauxite product. The parties will look to finalise by November 2016, the contract for the transhipping service and access. If a contract is not entered into by that time, GCR is still bound to provide the transhipping services and access to Metallica under the loan agreement, with a cap applied to the rate charged to Metallica. The purpose of the Loan was to assist GCR itself in achieving that company’s maiden bauxite shipment which occurred on 19 October 2016.

The Urquhart bauxite JV has also lodged and progressed Mining Lease Application (MLA) 100044 comprising 1,378 Ha covering the Urquhart bauxite resource (Area A and Area B).

A detailed drill program was completed in August 2016 that is expected to result in an increase in the resource category confidence and will underpin further studies that are predicted to verify the previously completed Options Study, undertaken internally by Metallica earlier this year, to progress the project as a new Cape York DSB mine and export operation.

To date, drilling results, coupled with the completed geological modelling, confirm that the majority of the Urquhart bauxite resource is suitable for DSB. The potential production of DSB expedites permitting and development of the project due to the relatively simple mining–truck–barge operation with consequentially low capital and operating costs. DSB is planned to be produced at an average production rate of 1.5–2.0 Mtpa.

The project’s high–quality export–grade Weipa type bauxite has a high total alumina content (>50% Al2O3), which is sought after in the seaborne bauxite market. In May 2015, the JV announced a maiden JORC–compliant Inferred bauxite mineral resource for the Urquhart bauxite project. Additional details of the bauxite estimate are provided in Table 1.

In Area A, available alumina (AAl) and reactive silica (RSi) were selectively sampled for intervals below a threshold of 15% SiO2 or above 48% Al2O3. This represents the lower half of the bauxite horizon defined in Area A.

photo 1

Subsequently, this lower section was modelled as a separate domain where the assays for AAl and RSi were available. In comparison, Area B has generally higher SiO2 and a much smaller and less continuous lower bauxite domain. It has similar chemistry, but currently no AAl or RSi assay results are available to conclusively determine the overall quality of Area B. Estimates for the lower bauxite horizon as a higher grade subset of the 45% Al2O3 cut–off resource in Table 1 are provided in Table 2 at an effective cut–off grade of 15% SiO2.

The JV holds extensive regional bauxite and HMS tenements along the 300 km sandy coastal belt between Weipa and the tip of Cape York Peninsula.

Bauxite Outlook

Bauxite demand forecast for at least the foreseeable future is expected to be very strong. This should be reflected in rising bauxite prices to levels well above the average bauxite price in recent years. The export opportunity will be selling bauxite to Chinese alumina companies and also traders now that a major portion of China imported bauxite supply has been taken from the market due to Indonesia’s export ban in early 2014.

An independent bauxite market analysis forecast estimates China’s bauxite import requirements to rise to 65-75Mtpa (dry) by 2020, this is up from 40Mtpa (dry) in 2014.