Seeking Alpha

Proactive Investor's  Instablog

Proactive Investor
Send Message
Proactiveinvestors is a leading multimedia news organization, investor portal and events management business with offices in New York, Sydney, Toronto and London. Proactiveinvestors operates five financial websites in four languages providing breaking news, comment and analysis on hundreds of... More
My company:
Proactiveinvestors
My blog:
Proactiveinvestors
  • Queensland Bauxite Joins Race To Supply Depleting Asian Markets 0 comments
    Jun 12, 2014 7:38 PM

    Queensland Bauxite (ASX:QBL) has just increased the odds of becoming a bauxite producer after exploration results from a tiny section of its South Johnstone project in Queensland defined a bauxite JORC initial resource.

    Results received to date are from only 2.3% of the 400km2 of tenement area at South Johnstone; a 30 million tonne bauxite resource has been defined already.

    The previous exploration target has been surpassed providing large upside in possible bauxite resources based on geological expectations.

    This looks to be a small tip of a very large iceberg. On current results the geological target looks likely to be sitting at higher than a previous exploration target of 250 million tonnes at the project.

    The company is pointing to 300 million tonnes out of an area of 1 billion tonnes that could host bauxite. Who really knows at this point how high it could go given that is most likely beyond the company's geological assumptions at this point.

    Which is still likely to miss the main point.

    As the project is situated just 16 kilometres west of the deep water port of Mourilyan in North Queensland,Queensland Bauxite could carve out a near term bauxite export mining operation for many years to come to fill the yawning gap after Indonesia closed the door on exports of unprocessed ores including bauxite.

    With its reserves dwindling and importation from Indonesia blocked, one of the key concerns of the aluminium industry is where China is going to get its bauxite from.

    Which probably means that China has supplies of bauxite for a year but after that, it's game on and advantage to a company like Queensland Bauxite to hurry to fill out exploration and develop South Johnstone.

    To boot, there is a narrow gauge railway which runs through the tenement to the port of Mourilyan and a network of bitumen and gravel roads within the tenement that lead to the port.

    From discussions the company has had with Mourilyan Port there should be capacity to ship millions of tonnes of bauxite annually through the port.

    The discovery lies outside of any environmentally restricted areas.

    Mining

    It would likely look to ship raw bauxite, which is a relatively easy mining proposition. The process for mining bauxite is not complex.

    So with a simple quarrying operation expected to be sufficient for the export of the surface mineralisation Capex and Opex costs would be very low.

    Bauxite export prices have been recently reported at around $60 per tonne with surface deposit bauxite mining reported to cost around $10 per tonne in addition to transportation and port costs.

    Hence even an operation that mined and shipped 1-5 million tonnes per annum through Mourilyan Port would pour revenues of $40 million to $200 million into the company based on current prices and healthy profit margins.

    And given likely demand - that could be a strong proposition.

    Which for a company valued at $12 million is a game changer.

    In terms of the drill results, results returned an available alumina grade, extracted by low temperature alkali leach processing, of 25.3% available alumina (range 20-31.7%).

    But we would expect to see alumina levels to increase by up to 9-10% to the total available alumina at high temperature processing based on samples previously tested from South Johnstone.

    Significantly, further testing could see pre-beneficiation available alumina grades in the current samples of up to a high of around 40% with average reactive silica of 6.8%. Which is a little higher.

    Unlike ores from base metals, the grade of most bauxite found through mining is acceptable.

    Further Testing

    Queensland Bauxite has submitted a selection of samples for further analysis to determine the percentage available alumina grade improvements expected at higher temperatures, and to determine potential beneficiation from multi-screening of the bauxite.

    These results will be eagerly waited upon.

    More Drilling

    Look for a more extensive drilling programme to further define the size, grade and resource at South Johnstone.

    We would be surprised if there is not soon interest from Asian off takers in the project given the boxes it ticks.

    Analysis

    The confirmation of the historical model at South Johnstone was a necessary first step. There will be those expecting a larger initial resource but this should be put in context of results received from less than 3% of the tenement. It is a starting point. As well, even the current resource and (assuming) a fraction of the exploration target is converted as a resource, would still result in a significant bauxite export operation.

    It would also miss the salient highly favourable project economics and capacity for a small company to fill a vacuum (thanks to Indonesia) that moves South Johnstone onto a fast track to a near term DSO mining and export operation.

    The race is on for Queensland Bauxite to supply China (and other Asian markets) to catch the rising tide if they put their skates on. With $4 million in cash even the recent kick in the share price does not incorporate the value defined in this project. Let alone its coal assets.

    The potential interest from off takers we expect to be strong. As while there is bauxite generally in abundance in Australia, stumbling blocks for many include deleterious elements, environmental issues, distance to port and costs to develop and produce. Which are not issues for South Johnstone.

    In all, the results and other favourable characteristics support the thesis that South Johnstone has arrived as a bauxite project. Queensland Bauxite is at the very start of a journey that could see it transformed into a significant bauxite producer in a short space of time.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

Back To Proactive Investor's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.