Urquhart Bauxite

The Urquhart Bauxite Project (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 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 Project will be delivered to export vessels via the nearby Hey Point loadout facility, located 15km from the 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 the Project. In October 2016 Metallica congratulated GCR for becoming the first independent company to export bauxite from Cape York since 1963. The ability to tranship bauxite into ocean going export vessels utilising the Hey Point barge loading facility validates Metallica’s decision to choose the low capital cost and established facilities at Hey Point

The Project’s JORC (2012) Resource estimate was updated in November 2016, following a drilling program that was completed in August 2016. The total Mineral Resource increased by 26% to 9.5Mt, with 6.9Mt being in the Measured and Indicated categories. An additional 8.5Mt of lower grade transitional material, over and above the 9.5Mt, has been identified for potential beneficiation through simple dry screening. Further investigation of the potential of this transitional material will be completed when mining is underway.

Following on from the updated JORC (2012) Resource estimate, a Pre-Feasibility Study (PFS) was completed, showing that the development of the Project had the potential to deliver strong financial returns for minimal capital expenditure, utilising a contractor model that shifted risk and capital on to contractors, thereby maximising returns to shareholders. The contract executed with LCR Group delivers on this strategy with costs being in line with assumptions contained within the PFS.

The PFS was independently prepared by Brisbane-based international consultancy, IMC Mining Pty Ltd (IMC), which also completed the update of the JORC (2012) Resource estimate. London-based independent metals analyst, CRU International, estimated the Free On Board USD price of bauxite received utilising the Life of Mine schedule produced by IMC.

The completion of the PFS allows for a maiden JORC (2012) Reserves Statement contained within Mining Lease Application 100044. The barging and associated infrastructure remains in place, whilst LCR Group has confirmed the availability of equipment and critical personal to meet the JV’s production plans. Production will only occur during the dry season (April through December inclusive), thereby reducing expensive Infrastructure that would be required to manage bauxite product during the monsoon period.

Both the Queensland and Commonwealth governments have approved the Mining Lease and efforts are now focussed on obtaining the final approval that will see the haul road linking the Project to the Hey Point barge loading facility.

photo 1

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. In Indonesia, the government recently lifted the ban on bauxite exports that had been implemented from 2014 to 2016. The removal of the export ban is likely to be a stimulus for increased bauxite production in Indonesia and the world as a whole.

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.