The study would likely provide baseline capital costs of mining the bauxite as well as the operating costs. The project has an initial inferred resource of 30 million tonnes of bauxite with a much larger Exploration Target of circa 300 million tonnes.
The Resource estimate forms the basis of the Scoping Study by an independent consultant.
The study would detail, among other variables an estimate of transport costs from South Johnstone to the deepwater Port of Mourilyan and port and shipping costs and suitability.
Notably, infrastructure options would include the availability of services and resources, power and water supply and alternatives for site access for product handling.
Land access will be reviewed. Environmental criteria as well as local and regional social and political impacts will be considered.
Upcoming Drill program
Interestingly, a drill program is planned to begin in the next few weeks at South Johnstone which is designed to infill drill within the JORC Inferred Resource areas.
This will aim to upgrade the JORC classification of the resource via a shallow drill program within the Inferred Resource; an area of around 10 square kilometres.
The company could look to carve out higher grade portions of the resource area, which given looming demand for bauxite in 2014/15 could be a fast road to development and mining.
In a statement, the company said it was in discussions with relevant port authority, which would be assumed to be the Port of Mourilyan.
Given favourable developments in the bauxite market, the scope of potential third parties interested in off take had been widened.
Apart from the ongoing, and likely to remain, export ban implemented by the Indonesian Government, the Government of India is also reported to be increasing the export tax on bauxite from 10% to 20%.
So there are plenty of share price catalysts for QBL. A robust Scoping Study would provide a platform for South Johnstone to gain end user favour and financing as well as put the project on a fast track to development.
The near-ness of the project to an existing deepwater Port at Mourilyan with potential capacity, just circa 20 kilometres but perhaps as close to 15 or 16 kilometres from parts of the project places the project in a different league.
With the average alumina content in bauxite decreasing and the alumina to silica ration (A/S Ratio) falling, this would be highly positive for new project discoveries like South Johnstone with robust study results.
The inescapable feature of the bauxite market and forces at work (including Indonesia, India) is that China must likely expand its horizon for bauxite -and soon.
Some Chinese refiners are known to be getting nervous with stockpiles running down (5-10 months left). Which is likely to increase prices CIF China in 2015.
This bodes well for QBL with its South Johnstone project. It also has an effective "long dated option" in the back pocket with the acquisition of a 50% share of a significant portion of a known gibbsitic bauxite province in the Nullamana region of Inverell in northern New South Wales. A neighbouring project has an inferred and indicated resource of 38 million tonnes of bauxite.
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