The price of bauxite, the raw material for aluminium, is set to surge as the market undergoes a similar journey to that of iron ore, according to bauxite junior miner Alufer, which plans to list on London’s Alternative Investment Market in mid-May.
“The fundamentals are exceptionally strong for bauxite. Our listing in London – and we are the first pure bauxite company –is only the start of many more to come,” said Adonis Pouroulis, the executive director and founder of Alufer, which has bauxite assets in Guinea.
Pouroulis sees Guinea bauxite prices of about $35 per tonne, while alumina from Guinea would cost about $400 per tonne.
Therefore, he argued, a big surge in bauxite prices is inevitable.
“Today [bauxite] is a standalone commodity. We see pure iron ore producers in the market, selling iron ore and maximising the value from the commodity. Bauxite is the new iron ore,” Pouroulis said.
Alufer has 3 billion tonnes of bauxite resources in Guinea, and plans to raise $40 million to fund the bankable feasibility study of its Bel Air mine, based on an 80-million-tonne resource, which it wants to ramp up to produce 10 million tpy of bauxite by 2015.
Bauxite is comparable to iron ore, Pouroulis told Metal Bulletin, explaining that a decade ago iron ore was mostly a commodity extracted within integrated producers.
Integrated and non-integrated bauxite producers at Metal Bulletin’s Bauxite & Alumina Conference in March called for a bauxite index price
, arguing it would enable the market to trade based on its own fundamentals.
The time for integrated aluminium producers to be the sole owners of bauxite is over, he argued.
“China has bought 30% of the new refining capacity for bauxite. It doesn’t have its own consistent supply of bauxite. This is the era of the emergence of the third-party bauxite producer,” Pouroulis said.
China’s demand will be the main driver for pure bauxite players to emerge, but demand will also come from countries such as India.
Demand for bauxite will be about 225 million tonnes this year, but will grow to 380 million tonnes by 2020, he forecast.
“We see an increase on average of bauxite consumption of 16-20 million tpy every year until 2020. That is only for the next eight years. The world will need new large bauxite mines every year,” he said.
Alufer has two projects in Guinea: Bel Air, an 80-million-tonne resource about 15km from the coast and set for start-up at the end of next year or early 2014; and Labé, the bigger of the two at 2.5 billion tonnes in reserves, but further inland.
Alufer’s projected capital expenditure for its Bel Air project is $330 million, Pouroulis said, of which the biggest part – about $80 million – will be used to build the loading facility at the port to ship its bauxite.
As soon as Bel Air starts production, it will become cash generative and will be used to fund some of the plans Pouroulis has for Alufer. Bel Air is set for an output of 10 million tpy by 2015.
“We have an attractive product to sell around the world. We don’t have to do a lot in terms of infrastructure, like some other juniors with bulks. We have a large resource with high content aluminium. We have trihydrate, which is cheaper to refine than monohydrate bauxite. We don’t have a lot of silica. We are set to become a solid, low cost producer of bauxite.”
Alufer started its roadshow on April 30 to woo investors to buy shares when it lists on London’s Alternative Investment Market (AIM) on May 17.