Metallica Minerals Limited (ASX:MLM) CEO Simon Slesarewich provides an update on the company's Cape York, Urquhart Bauxite Project.
Jessica Amir: Hi, I'm Jessica Amir for the Finance News Network with Metallica Minerals CEO Simon Slesarewich. Simon, welcome.
Simon Slesarewich: Thanks, Jessica. Thanks for having me here today.
Jessica Amir: For investors new to the company, just give us an introduction.
Simon Slesarewich: Metallica Minerals has been listed on the ASX for about 14 years. Primarily, it was an exploration company. I joined Metallica about 2 1/2 years ago with the express purpose of taking Metallica from an exploration company and taking it being a producer. The focus on our Urquhart Bauxite project up in far north Queensland, near Weipa. We're focusing on bauxite fundamentally because we like where bauxite's heading. Gotta remember that about 5 tons of bauxite makes about one ton of aluminum, and as we get more fuel efficient every day, we want things to be lighter, and we're consuming more and more aluminum as we move forward.
Jessica Amir: And what's the outlook for bauxite with respect to China and other developments there?
Simon Slesarewich: We see China's consumption bauxite going up in the short, medium and longer term. Fundamentally, the aluminum consumption China will continue to go up. Now, there's also some macro events that are happening in China. We all know that the Chinese government's looking to clean up it's environment. Part of that is consolidating bauxite mines, and also consolidating some of the alumina and aluminum production throughout China. What that will mean is that the Chinese alumina refiners will be looking to import more bauxite. That's also coupled with the domestic bauxite grade in China decreasing rapidly over the last few years.
Jessica Amir: Simon, moving to the proposed tariff on aluminum now, what impact does that have on bauxite and the industry as a whole?
Simon Slesarewich: We're not overly concerned about the tariff's in the US. Primarily China, which is our target market, is domestic consumption. They're taking the bauxite, turning it into alumina and then consuming the aluminum domestically. So they don't export a great deal of aluminum. So the growth that we see in bauxite, is driven by domestic China consumption.
Jessica Amir: And what's the significance of your recently approved mining lease for the Urquhart bauxite mine?
Simon Slesarewich: That's a major step forward for the project and the company, so it's been well over two years in environmental approvals to get that. We're done the studies, we've engaged with the local traditional land owners, as well as the other stake holders, and what that meant is we can now have approval to mine the bauxite at Urquhart Bauxite Project in a sustainable manner and move that forward from where we're sitting right now. That's a big tick for us, and how we're going to work together with the community to deliver benefits across the entire community.
Jessica Amir: Simon, can you tell us why the long haul road was not approved?
Simon Slesarewich: We initially had the haul road and the mining lease being approved together as one approval. We saw there could be some complications in the middle of last year. So what we did is we decoupled that process, and focused on the mining lease. The haul road process has been in approval stage for some time, and we're focusing on that right now, moving that forward.
Jessica Amir: So what is the process of moving that forward? And what else needs to occur?
Simon Slesarewich: Approvals in Queensland are complicated. They are taken very seriously by State and Commonwealth governments. There's basically three things you need to get a mining approval in Queensland. The first one is you need to do your environmental studies, and make sure that your development is sustainable. So therefore, we're working with the environment and the land uses thereafter can go back and deliver value for the community.
Secondly, you have to engage with the traditional land owners and get agreements to use their land. We've engaged with the traditional land owners, and we've got an agreement with them in the middle of last year that allows us to move forward.
Thirdly, and what's outstanding for us on this haul road approval is dealing with the other stake holders, the land holders. We're very confident we'll have an approval and it's just a matter of time. Whilst we're completing that approval, we're also finalizing the trans shipping agreement with the nearby Hey Point project.
Jessica Amir: Simon, what are the economics of Urquhart, and just tell us what makes this a really attractive development proposition?
Simon Slesarewich: Te economics the project are very attractive, remembering we're looking to bring this project on for less than $2 million. Once we get on the ground, within 4-6 weeks we'll be into production, so we'll be getting bauxite, which is very near to the surface and building stocks. Straight from there, we'll be looking at producing clear cash flow thereafter. It's very attractive, it's very quick payback for the company.
Jessica Amir: Last question, Simon. How confident are you in securing sales, and why haven't you really secured an offtake agreement yet?
Simon Slesarewich: We're very confident. We've been spending a lot of time up in China talking to potential customers. We've got a very experienced marketing agent, who's been guiding us through that process, and those customers are willing and able and looking for bauxite. We've pre-qualified with many of those customers. We've been holding off on signing a formal agreement, because the last thing we want to do is disappoint our customers. Until we have the final date when we can ship to our customers, we'll hold off until that point, cause the last thing we want to do is ruin our reputation with our customers moving forward, and therefore that would hurt our long-term prospects as a business.
Jessica Amir: Simon Slesarewich, thank you so much for the update.
Simon Slesarewich: Fantastic. Thanks for having me here today.