Metro Min­ing

Metro Min­ing is con­tin­u­ing its suc­cess­ful ramp up of Baux­ite Hills mine, bol­stered by strong alu­mina prices and high Chi­nese de­mand.

The Australian Mining Review - - NEWS - AMY BLOM

METRO Min­ing is shap­ing up to fin­ish the year on a strong note fol­low­ing a num­ber of ma­jor suc­cesses com­ing out of its flag­ship Baux­ite Hills mine in QLD.

The miner be­gan first pro­duc­tion at Baux­ite Hills in April, 10 months after con­struc­tion com­menced, with most con­struc­tion tak­ing place in just five months.

First ship­ment left the Port of Skar­don in early May.

Then in Au­gust, Metro was named the lead­ing emerg­ing com­pany at the 2018 Dig­gers and Deal­ers Min­ing Fo­rum.

At the time, Metro Min­ing manag­ing di­rec­tor Si­mon Fin­nis said the award was a sig­nif­i­cant achieve­ment for the com­pany.

“Most im­por­tantly, the award ac­knowl­edges the ef­fort of our mine-site and sup­port team,” Mr Fin­nis said.

“The mine was con­structed in near record-break­ing time and com­mence­ment of op­er­a­tions, and quick ramp up, has in­volved con­sid­er­able ded­i­ca­tion, and of course hard work.”

By Septem­ber, Metro Min­ing an­nounced it had al­ready shipped its first one mil­lion tonnes of baux­ite with a to­tal of 17 ship­ments.

The mil­lionth tonne of baux­ite was loaded aboard the bulk car­rier Isa Olden­dorff as part of a 60,000 tonne ship­ment bound for Metro’s foun­da­tion cus­tomer Xinfa Group.

Xinfa was one of China’s largest in­te­grated alu­minium com­pa­nies with sig­nif­i­cant re­fin­ing and smelt­ing op­er­a­tions.

Metro had a four year bind­ing off-take agree­ment to sup­ply Xinfa with 1mt this year, fol­lowed by 2mtpa for each of the next three years.

Sales Fi­nalised

In Septem­ber, Metro Min­ing also an­nounced it had fully sold for planned 2018 pro­duc­tion, hav­ing signed a con­tract with China’s State-owned State Power In­vest­ment Cor­po­ra­tion Alu­minium and Elec­tric Power In­vest­ment Co (SPIC).

The con­tract was for 300,000 wet met­ric tonnes (wmt) of baux­ite to be de­liv­ered by the end of the year, fol­low­ing a trial ves­sel pre­vi­ously de­liv­ered to SPIC.

Mr Fin­nis said he was de­lighted to have fi­nalised a new off­take agree­ment with SPIC, which had the ca­pac­ity to be an­other long-term off-take part­ner, and to have suc­cess­fully sold all of Metro’s planned 2018 pro­duc­tion.

“This year’s ship­ments will be made to five dif­fer­ent Chi­nese cus­tomers, con­firm­ing strong de­mand for Metro baux­ite in China,” Mr Fin­nis said.

“We are ex­pe­ri­enc­ing par­tic­u­lar in­ter­est from re­finer­ies lo­cated in the in­land prov­inces where sup­ply of do­mes­tic baux­ite has been hin­dered by re­cent mine clo­sures and en­vi­ron­men­tal au­dits.

“We are ex­pe­ri­enc­ing par­tic­u­lar in­ter­est from re­finer­ies lo­cated in the in­land prov­inces where sup­ply of do­mes­tic baux­ite has been hin­dered by re­cent mine clo­sures and en­vi­ron­men­tal au­dits.”

“Our prod­uct spec­i­fi­ca­tions are well suited to their pro­cess­ing re­quire­ments.”

China re­cently be­gan a crack­down on il­le­gal baux­ite min­ing, while main­tain­ing a fo­cus on im­prov­ing lo­cal en­vi­ron­men­tal con­di­tions.

The crack­down has seen do­mes­tic min­ers un­able to use dy­na­mite blast­ing for ex­tract­ing ore and, in some cases they have been banned from us­ing pneu­matic drilling.

Un­der these cir­cum­stances, in­land re­fin­ers’ prof­its fell sig­nif­i­cantly, with some re­finer­ies re­port­edly clos­ing ca­pac­ity in re­sponse.

Sev­eral Chi­nese re­fin­ers have since been ac­tively seek­ing im­ported baux­ite or look­ing to test sam­ples of im­ported baux­ite; the raw ma­te­rial used to make alu­minium.

While Guinea re­mained China’s largest baux­ite sup­plier, the sit­u­a­tion has proven a boon for Aus­tralian op­er­a­tors in­clud­ing Metro Min­ing, which an­tic­i­pated steady and con­tin­ued de­mand for im­ported baux­ite in the Chi­nese mar­ket over the next decade, driven by its do­mes­tic sup­ply short­age.

Ac­cord­ing to Mr Fin­nis, ne­go­ti­a­tions were pro­gress­ing well to fi­nalise the 2019 sales pro­gram.

“Pro­duc­tion at the Baux­ite Hills mine is steadily in­creas­ing, and we are con­fi­dent of reach­ing pro­duc­tion guid­ance for this year,” Mr Fin­nis said.

“Given cur­rent de­mand we are ac­tively look­ing at ways to in­crease 2019 pro­duc­tion above the cur­rent planned rates.”

Pos­i­tive Fore­casts

Ac­cord­ing to re­search re­leased in Au­gust by Perth-based bro­ker Arg­onaut, Metro was suc­cess­fully ramp­ing-up, with op­er­a­tions in key areas in­clud­ing min­ing and ship­ping steadily in­creas­ing month on month.

Arg­onaut found Metro was achiev­ing key mile­stone tar­gets, in­clud­ing min­ing and ship load­ing rates of more than 10,000t per day and ship load­ing times of fewer than six days.

Metro had a guided tar­get of be­tween 1.98mt and 2mt mined and shipped in CY18.

This was ex­pected to in­crease to 3mt in 2019, with a fur­ther in­crease to 6mtpa by 2021 fol­low­ing an ex­pan­sion.

In the re­port, Arg­onaut stated that while there were no fa­tal flaws in the op­er­at­ing process at Baux­ite Hills, it would like to see some ad­di­tional ca­pac­ity, or sprint ca­pac­ity to off­set the risk of a ma­jor disruptive event, po­ten­tially though mi­nor, low cost de­bot­tle­neck­ing ini­tia­tives.

This could in­clude an ad­di­tional screen ahead of barge load­out and ad­di­tional barges to bet­ter man­age tidal con­straints.

In the re­port, Arg­onaut gave Metro a buy rec­om­men­da­tion and 40 cent tar­get price – more than dou­ble the price at the end of Septem­ber, which stood at $0.18, sug­gest­ing sig­nif­i­cant po­ten­tial.

Arg­onaut also re­ported that while still tech­ni­cally in ramp-up mode, it ex­pected Baux­ite Hills to be­gin pro­duc­ing pos­i­tive cash flow in the Septem­ber quar­ter.

The Baux­ite Hills op­er­a­tion, 95km north of Weipa on Western Cape York, has an ini­tial mine life of 17 years.

It has an es­ti­mated re­serve of 92.2 mil­lion tonnes and to­tal re­sources of 144.8 mil­lion tonnes.

Arg­onaut’s fore­casts fol­low a suc­cess­ful June quar­ter, with Metro re­port­ing pro­duc­tion to­talling 399,000t gen­er­at­ing $25.2m of rev­enue at the mine.

Metro’s out­stand­ing debt fa­cil­i­ties, in­clud­ing ac­crued in­ter­est, were $40.6 mil­lion.

In June, Baux­ite Hills mine shipped 214,000 wmt, mined 245,000wmt and recorded its first monthly profit.

Mr Fin­nis said while it had be­gun as a chal­leng­ing quar­ter, Metro had still fin­ished on a high.

By the end of the quar­ter, the Baux­ite Hills was achiev­ing the daily pro­duc­tion re­quired for the 2mtpa tar­geted pro­duc­tion.

“I am ex­tremely proud of how the site team and our con­tract part­ners re­sponded to re­solv­ing is­sues as they arose,” Mr Fin­nis said.

“All as­pects of the op­er­a­tion have fin­ished the quar­ter per­form­ing strongly, and I look for­ward to the project reach­ing tar­geted op­er­at­ing rates dur­ing the Septem­ber quar­ter.”

Early chal­lenges in­cluded those pre­sented by trop­i­cal Cy­clone Nora, which hit QLD in late March, forc­ing the work­force to evac­u­ate Baux­ite Hills.

De­spite a two week de­lay caus­ing June to be a half month, the dis­rup­tion had no ap­par­ent im­pact on Metro be­ing able to meet its 2018 pro­duc­tion tar­get.

Min­ing op­er­a­tions at Baux­ite Hills were only un­der­taken in the dry sea­son, which was no­tion­ally an eight month pe­riod be­tween April and Novem­ber.

Fur­ther Ex­plo­ration

While Metro’s fo­cus has re­mained on its Baux­ite Hills ramp-up, it was still com­mit­ted to fu­ture ex­plo­ration ac­tiv­i­ties in the im­me­di­ate area.

Ex­plo­ration ac­tiv­i­ties were ex­pected to be­gin in July 2019 and would be aimed at iden­ti­fy­ing areas in the ten­e­ments close to Baux­ite Hills mine in­fra­struc­ture that would war­rant de­tailed, grid-based drilling.

This ini­tial ex­plo­ration would in­volve ground travers­ing, map­ping and wide-spaced re­con­nais­sance drilling, where jus­ti­fied, us­ing a trac­tor-mounted RC drill rig.

Metro con­trols about 1900sqkm of ex­plo­ration ten­e­ments in Western Cape York, and has 19 granted ex­plo­ration per­mits for min­er­als, six granted min­ing leases and four min­ing lease ap­pli­ca­tions.

All of Metro’s ten­e­ments were on la­t­eritic plateaus, which have a high po­ten­tial to host baux­ite min­er­al­i­sa­tion.

Metro Min­ing also owned Bundi coal ten­e­ments in the Su­rat Basin in QLD, how­ever it no longer planned to en­gage in any sub­stan­tial ex­plo­ration and eval­u­a­tion ac­tiv­i­ties there, in­stead plan­ning to dis­pose of its in­ter­est in the ther­mal coal re­source, ei­ther through a trade sale, farm-out or joint ven­ture ar­range­ment.

In the mean­time, Metro’s mar­ket strat­egy re­mained fo­cussed on con­vert­ing ex­ist­ing non-bind­ing agree­ments into long-term agree­ments and de­vel­op­ing a broad cus­tomer base to sup­ply baux­ite into long-term ev­er­green con­tracts.

Al­lim­ages:MetroMin­ing.

Metro Min­ing had com­pleted 17 ship­ments from its Baux­ite Hills mine by Septem­ber.

Metro Min­ing shipped its first mil­lion tonnes of baux­ite in Septem­ber.

Metro Min­ing be­gan first pro­duc­tion at Baux­ite Hills in April, just 10 months after con­struc­tion com­menced.

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