The Urquhart Bauxite Project is located 5 km southwest of Weipa on the west coast of Queensland’s Cape York Peninsula, a region renowned for its extensive deposits of high-quality pisolitic bauxite. The project consists of two bauxite plateaux, known as Area A and Area B, which are wholly contained within the granted Mining Lease.
The Queensland state government granted the Mining Lease for the project in January 2018, and the federal government approved the development of the Project in accordance with the Environmental Protection and Biodiversity Conservation Act 1999 in August 2017. The federal government has appropriately conditioned the development and those conditions are in line with the Company’s expectations.
The company has recently entered into a binding access agreement with the stakeholder in relation to the 15km haul road connecting the proposed Urquhart bauxite project to existing port infrastructure at Hey Point, which is the final government approval required before construction on the project can begin. As part of the haul road access agreement, a new section 316 (s316) Mining Lease application was required to reflect the updated conditions of the access agreement. All necessary requirements for the granting of the Mining Lease have been completed. Once the haul road approval is received the period to bring Urqhuart into production will be just 4 – 6 weeks dependant on the wet season.
The Project’s JORC (2012) Resource estimate was updated in November 2016, following a drilling program 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 dry screening. Further investigation of the potential of this transitional material will be completed when mining is underway.
Following the updated JORC (2012) Resource estimate, a Pre-Feasibility Study (PFS) was completed highlighting that the development of the Urquhart Bauxite Project had the potential to deliver strong financial returns for minimal capital expenditure. The Pre-Feasibility Study was updated in September 2018. By utilising a contractor model that transferred risk and capital away from the Company, Metallica is able to maximising returns to shareholders. The contract executed with LCR Group Pty Ltd (LCR) delivers on this strategy with costs in line with assumptions contained within the PFS.
The PFS and updated PFS were 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 (FOB) USD price of bauxite received utilising the Life of Mine (LOM) schedule produced by IMC.
The barging and associated infrastructure remains in place with Green Coast Resources re-commencing shipping ore from Hey Point in August 2018. The Mining and Haulage Contract has been extended with LCR and is in line with the cost estimates in the PFS.
In October 2017, the Company appointed Bigbites Ltd (Bigbites), a specialist bauxite marketing company based in Hong Kong, as its Marketing Agent for sales of bauxite from the Company’s Urquhart Bauxite project in far north Queensland.
Bigbites is an associate of The CM Group (CM), the world’s leading provider of bauxite market intelligence. Established in 1999, CM has been generating industry-leading analyses of the global bauxite market for over 15 years. The company has an unrivalled understanding of bauxite trade, especially in China, where it has offices in Beijing and Chengdu. CM has been associated with the world’s major aluminium producers, including Rio Tinto Alcan, Alumina Ltd, Alcoa, South32, Norsk Hydro and Vedanta, providing them with a range of strategic bauxite industry and market analysis services.
In working with Company, Bigbites will provide expert advice on the bauxite market and will undertake marketing and sales exclusively for the Urquhart Bauxite project material.
Developments in the global bauxite market over the year continued to support the Company’s view that the outlook for pricing and demand remains robust.
Domestic bauxite supply in China continued to be impacted by government crackdowns on illegal mining and environmental inspections. Combined with the effects of declining ore grades at many domestic mines, these measures by the Chinese government are expected to lead to a significant increase in import volumes over the next 18-24 months.
CM is forecasting that Chinese demand for bauxite will increase by 65-70 million tonnes per annum over the next five to seven years as a result of declining domestic production, and new alumina refining capacity being built in the country, with approximately 60% of this new demand met by imported bauxite.