Australian bauxite aspirants struggle for traction amid bauxite boom

Mining development companies which are aspiring to make it big in the Australian bauxite market are struggling for traction despite Chinese imports of the aluminium ingredient rising 45 per cent in 2015. While industry giants like Alcoa and Rio Tinto are increasing their exposure to bauxite, the fleet of Australian juniors that sought to ride the same wave are struggling to hang on.

Bauxite prices did not rise as high as expected in 2015 as an unexpected, and in some cases unregulated, surge in production from Malaysia added to global supply. The Malaysian surge derailed plans by Australian Bauxite Limited (ABX) to be the first Australian junior into the seaborne trade in 2015, with the company's chief Ian Levy saying in December there was not enough space left at Chinese ports for his company to deliver to.

The Malaysian government has since announced a three-month moratorium on bauxite shipping, but for ABX the damage might have been done already. The cash-strapped company has had to halt mining and haulage from its mine in northern Tasmania, and has started paying some contractors in shares rather than cash.

Moves to preserve cash
The moves are designed to preserve cash until the company can ship its first tonnes of bauxite from Bell Bay, where a sizeable stockpile has been built over the past six months. ABX said in recent days it had just $1.3 million in cash, and many shareholders fear that an equity raising could be imminent.

Metro Mining is trying to acquire its way to glory. Having taken over Cape Alumina in 2014, it is seeking now to take over Gulf Alumina's tenements on Cape York Peninsula.

Rio Tinto stronghold expanding
Metro and Gulf occupy tenements that are just north of Rio Tinto's bauxite stronghold near Weipa, which will be expanded soon with the new $US1.9 billion ($2.7 billion) Amrun project. Meanwhile, fellow junior Bauxite Resources Limited is selling most of its exposure to its project near Wundowie in Western Australia.

Rio and Alcoa have traditionally used their bauxite in their alumina refineries and aluminium smelters, but the companies want to sell an increasing proportion of their product to third parties who are not vertically integrated.

Alcoa has trialled recently bauxite exports from Australia, and the company is increasingly confident about the prospects for the metal as Chinese bauxite reserves begin to wane amid continuing demand for aluminium in the automotive and aviation sectors.

"The third-party bauxite market we believe is going to double by 2025," Alcoa boss Klaus Kleinfeld said this week.

Alcoa will split soon into two companies, with the bauxite assets going into the "upstream" company. China imported 53 million tonnes of bauxite in 2015, up from 36.6 million tonnes in 2014.

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