Metro Mining Ltd (ASX:MMI) (FRA:6ME) plans to resume operations at its Bauxite Hills mine in Far North Queensland in April after shutting down for the wet season – in time for deliveries recommencing under the existing contract with Xinfa.
A strong operational performance in early 2020 delivered robust cashflows leaving Metro in a good financial position with cash on hand and other receivables as at September 30, 2020, of $45.8 million.
Sales revenue (gross) for the September quarter was A$61.9 million, generating site EBITDA of A$9.5 million.
The company is confident that the mine’s operational results during 2020 demonstrate that, with the existing plant and equipment, the Bauxite Hills Mine can easily operate at an annual rate of 4 million tonnes.
Strong September shipments
Bauxite mining for the quarter was 1.062 million wet metric tonnes with 1.23 million WMT shipped during the September quarter.
Total shipments for the year consisted of 2.481 million tonnes and transhipping also performed strongly with daily loading rates averaging 16,192 tonnes per day - maintaining the near-record levels seen in the June quarter despite additional COVID-19 protocols required.
The average price received was A$49.87/wet metric tonne, with an average site margin of A$7.72/wmt for the quarter.
The last ocean-going vessel prior to the seasonal shutdown completed loading on September 14
Bauxite market outlook
During the quarter, the average bauxite price received declined given the impact of COVID-19 on aluminium and the subsequent weakness in the alumina price.
However, the aluminium supply started to show some improvement and there was reduced volatility in alumina and bauxite prices although a nervousness remains amongst refineries.
Imported bauxite prices CFR China (per the CBIX Bauxite Index) were largely stable during the quarter and ended the period at US$46.00/DMT and domestic alumina prices retreated from the post-COVID-19 highs seen in July and finished the quarter at approximately RMB2,320/t.
While refineries remain cautious there continue to be some positive developments for bauxite that indicate the potential for a more positive 2021 for Metro including:
- A fall in reagent costs (caustic soda and energy) which mean that refineries are now operating back at break-even or profitable levels;
- Cape freight rates from Guinea have settled to more normalised levels, taking the pressure off spot bauxite prices and supply out of Guinea;
- Domestic bauxite supply remains constrained and inland refineries will require imported bauxite as alumina production increases; and
- Bauxite imports into China have remained at good levels over the last 3-4 months.
Stage 2 expansion plans
Metro’s Stage 2 Expansion remains the core strategy for the long-term development of Bauxite Hills but timing for the formal commitment of the expansion remains influenced by general uncertainty over the outlook for global growth due to the impact of COVID-19.
Whilst there have been recent improvements in macro conditions leading to a recovery in general confidence in the sector, customers remain reluctant to enter into long-term offtake agreements.
As such, the company will continue to monitor market conditions prior to taking the decision to formally proceed with the expansion.
Debt financing remains in place through the previously announced Loan Facility from the Northern Australia Infrastructure Facility (NAIF), with the sunset date for financial close extended during the quarter to March 31, 2021.
Metro anticipates the completion of the Stage 2 expansion would not occur until 2022 at the earliest.