ABx Group is examining its options to monetise the company’s bauxite projects - the biggest gibbsite-type bauxite deposits in eastern Australia - to capitalise on increasing bauxite prices and supply shortages.
The company is in talks about potential offtake deals, direct investment and asset purchases and is also updating its resource figures and mine studies to support the earliest possible start to production – possibly this year.
Bauxite is a precursor ore in the production of alumina, which is then smelted into pure aluminium metal. Gibbsite, an aluminium hydroxide mineral, is one of the main components of bauxite and is the principal natural source of aluminium.
ABx’s gibbsitic metallurgical bauxite is favoured by alumina refineries that operate at low temperatures, many of which are situated in China.
World prices for bauxite have increased over the past two to three years due to supply disruptions in Guinea. The West African nation has the world’s biggest deposits. The Boké region is particularly noted for the relatively high gibbsite content of its bauxite deposits, coupled with a low incidence of undesirable boehmite, reactive silica and organic impurities.
According to the United States Geological Survey, Guinea produced 88 million tonnes of bauxite in 2023, making it the second biggest bauxite producer globally, just behind Australia’s 89.5mt. Third-ranked China turned out about 84mt of bauxite. Brazil was in fourth place with 28.1mt, followed by India at 20.9mt and Indonesia at 18mt.
Guinea holds the world's biggest bauxite reserves, estimated at 6.7 billion tonnes, while Australia’s total reserves endowment is about half that figure at 3.2bt. China’s reserves are about 644mt.
The global bauxite dynamic appears to be changing. In October last year, the alumina price spiked 6.4 per cent on the Shanghai Stock Exchange in the wake of supply disruptions in Guinea and reduced ore grades and production in China.
ABx says the price of Guinea bauxite at a minimum grade of 45 per cent aluminium oxide (including cost, insurance and freight) to China increased by almost 60 per cent in less than four months - from US$74 per tonne (A$116/t) on September 19, 2024, to US$118/t (A$186/t) on January 13, this year.
The company sees a growing opportunity for its two principal metallurgical grade bauxite resources - its 37mt Binjour project in Queensland and its 37.9mt Taralga project in New South Wales, with alumina contents of 36.2 and 39.2 weight per cent, respectively.
The Binjour project is 200 kilometres by road southwest of the port of Bundaberg. ABx considers part of the resource will likely be suitable to produce as direct shipping ore, with no beneficiation required.
The company has completed all mining, port and transhipping studies for Binjour, has significantly advanced its mine lease application and it is now looking at how quickly it can bring the project into production. Production could start this year.
It has signed an MoU with Gladstone Ports Corporation to investigate bulk exporting of bauxite from the Port of Bundaberg.
The MoU gives it access to a vacant block owned by the port authority to evaluate its suitability for bulk storage and loading of large bulk carrier ships, including stockpiling bauxite of various grades from the mine-site, blending it to specification and transhipping it to bulk carrier vessels up to 150,000 tonnes within the port boundaries.
The Taralga project is about 200km inland from the coastal town of Port Kembla, 103km south of Sydney.
An independent engineer’s pre-feasibility study in 2012 concluded it was feasible to transport bauxite from the site by road and rail but delays in an expansion of Port Kembla’s outer harbour proved to be an obstacle to the project at the time.
ABx is now reassessing Taralga in light of recent logistics improvements at Port Kembla, which means the company could now deliver bauxite onto ships.
The company also has a significant but lower-grade bauxite resource in Tasmania, which will primarily be used to augment cement to reduce the carbon footprint of conventional ordinary Portland cement production.
In September 2023, ABx signed an agreement with Adelaide Brighton Cement Limited (ABCL) to supply cement-grade bauxite to ABCL’s Birkenhead cement manufacturing operation in South Australia. The agreement remains in place and forecasts that ABx will supply between 90,000t and 120,000t of bauxite over five years.
ABx has two significant strategically located bauxite resources with advanced high grade and metallurgically favourable resources on hand which are well-suited to many low-temperature refineries.
The company is evaluating options for its projects and is in discussions with various parties about offtake agreements, direct investment and asset purchases.
It has established a data room to permit assessment of the projects by interested parties and will continue to assess its options.
While current bauxite supply shortages could be temporary, the two key bauxite projects, which are both capable of being brought quickly into production, offer ABx unique opportunities to create long-term shareholder value.
These opportunities could become even more significant if outright bauxite export bans are implemented by any of the major suppliers that could result in a major price hike.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Doug Bright
