Metro Mining Limited (ASX:MMI) Managing Director and CEO, Simon Finnis provides an update on first production from the company's Bauxite Hills Mine, 100km north of the Weipa, offtake agreements and strategy.
Rachael Jones: Hello, I'm Rachael Jones for the Finance News Network. Joining me today from Metro Mining is Managing Director and CEO, Simon Finnis. Simon, welcome back to FNN.
Simon Finnis: Thanks for having me.
Rachael Jones: Now Metro Mining has a bauxite mine north of Weipa, what can you tell me about that?
Simon Finnis: Yeah look it's a lovely little mine, about 100 kilometres north, as the crow flies. It is much more difficult to get to than that, it is quite remote, as you would imagine up on Cape York. We have a 90 million tonne reserve, and 144 million tonne resource, and we started production this year. So we are in production, it’s very exciting time for us.
Rachael Jones: And now to the mine in more detail, how is it tracking?
Simon Finnis: Look, really well. We started in April, we recently shipped our one millionth tonne, so it's very nice and gratifying for the guys and girls on site to have a little celebration about a million tonnes. It seems like it might be easy, but it is not that easy. So we're going to go to two million tonnes this year, and three million tonnes next year, and given the demand we have from China we're thinking that maybe next year, if we can get a few more tonnes out, then we'll do that.
Rachael Jones: So what is the annual production?
Simon Finnis: So we're ramping up, so we're doing two million tonnes this year, three million tonnes next year, and then subject to demand and board approval, we'll double that to six million tonnes, and that all just goes into the Chinese market. So we've done a lot of work on the demand out of China and it's a lovely little project. DSO project, which means we don't process it, we don't wash it, we just dig it up. It's very simple, free dig. We screen it to 100 mils, 100 millimetres, and then we put it in a barge and send it out in the ocean. So it's a very, very straightforward project.
Rachael Jones: So what prices are being achieved Simon, and where exactly is the ore going?
Simon Finnis: Sure, look the pricings a little bit complex. We have one long term contract with a company called Jinfa for seven million tonnes in total, a million tonnes this year, and two million tonnes for three years thereafter, and that's linked to an alumina index. So when the alumina price goes up, our price goes up, and obviously vice versa. So from our perspective that contract is very, very robust to the moment, alumina price is very high. The rest of the product this year, so a million tonnes into Jinfa and a million tonnes into the general market, is more of a market price. So that's there is some discrepancy between those two prices, and from a commercial and confidence point of view we don't tell anybody the numbers. But everyone will be able to work that out when the quarterly comes out. From the point of view of location, Shandong has been the ... or Province of China, it's on the eastern coast of China, just south of Beijing, that's been the main driver of bauxite into China. So they built aluminum smelters and they built alumina refineries, and they started importing bauxite. So last year they imported about 70 million tonnes of bauxite. Most of the new demand in fact though is coming from inland provinces Hanan and Shanxi mainly. So they used use their own domestic bauxite, but with the environmental scrutiny, with the long term use of that bauxite, the quality is diminishing and the costs are going up. So we're starting to see very, very strong demand from those inland provinces for our bauxite.
Rachael Jones: And Simon are you able to give me an insight into long term demand?
Simon Finnis: As I mentioned in my last question, we are seeing a strong demand from inland refiners, and we could see that coming because they have been depleting their own reserves. So there's two ways it could really go, new refineries probably not in Shandong, probably in other provinces on the coast, and then continued supply to those inland provinces. So last year Shandong by itself imported 70 million tonnes, Shanxi and Hanan consume about 70 to 75 million tonnes of bauxite every year. So we see the demand and this is sort of supported by different pundits, CN Group amongst them, that demand will probably double over the next decade. So we see it being 150 million tonnes, or thereabouts within the next 10 years.
Rachael Jones: And now to the financials, what is your cash position and how far will that take you?
Simon Finnis: We're in production, so we're in revenue. So, we're in a very strong position, very good balance sheet. We're supported of course by long term shareholders, but we also have some debt, we've got about Australian $40 million in debt, which we start to pay down next year. So we don't see us dipping back into the market, we see a strongly growing company. We'll double our production towards the end of 2019, and then we'll see the growth of Metro really come to the fore, and we'll start to build the cash position.
Rachael Jones: And can you provide a comment on the share price? What is the makeup of the register and the expectations there?
Simon Finnis: Yeah sure. Look share price has been really soft in the last few months, I think the market's been a bit off, but certainly people are waiting to see whether we perform. You know the end of this quarter really will be the start of what they should be seeing from our project. Last quarter really was a ramp up, so operating costs are high, we're trying to get the mine into production. So now we're starting to ramp those costs down, production is going up, and we should start to see the real picture for Metro. So the share price should start to strengthen once the quarterly comes out, once people start to believe that what we've been saying is actually the truth. Our register really has been very strengthened in the last few years. We've got about 26 per cent institutional out of the UK, also out of Australia. So strong institutional register. Still a good retail register and we've got some major shareholders there. So we're very happy with the register. We think it's driven, the pricing is driven by the retail side, but the support is driven by the institutional side. So look we're very, very, very comfortable at the moment.
Rachael Jones: And last question now Simon, what is the priority for the next 12 months?
Simon Finnis: Our priority is to stick to our knitting. So we've got a mine that's just come into production, we're pushing to get two million tonnes out this year. We're very comfortable that we'll achieve that, which is our guidance, and we're comfortable we'll get to the three million, perhaps a bit more next year. Then really the dream is to build this company up. So we're already the biggest independent bauxite producer in Australia, if people want to invest in a company that purely is focused on bauxite alumina, then that's Metro to a tee. So our focus is to get the mine operational, get the production up to where it should be, and then we'll see the share price perform.
Rachael Jones: Simon Finnis, thanks for the update.
Simon Finnis: No worries. Good to be here.