"Bauxite mining is very simple”, says James Lumley, the chief operating officer of Anglo African Minerals.
Or at least in the case of Anglo African’s Far license in the Kindia Prefecture of Guinea, it will be. The idea is to get Far into up and running and producing at a rate of two million tonnes of
bauxite per year.
It’ll be a simple DSO operation, scooping off a metre or two of overburden, lifting the ore into trucks and then transporting it 15 kilometres by road to a rail spur that also serves the famous
Russian aluminium giant Rusal.
From the railspur, the journey to the port of Conakry is measured in tens rather than hundreds of kilometres, and the thinking is that if the ore can be got on board at a relatively low cost then
the company could be generating around US$20 million in cash per year.
That number assumes a modest selling price of US$40 per tonne free on board, and a margin of between US$10 and US$15 per tonne.
But the really juicy number is the cost of construction. Just how much will it cost to build this US$20 million per year operation? – just US$40 million, a fraction of the cost of comparable
projects, and a sum well within the reach of today’s wary capital markets.
What the IRR on the project is, James can’t really say – the number looks too good to be credible. But in any case, there is a catch – there always is.
First off, Anglo African needs £10 million to take it all the way through to the bankable feasibility stage. The company already has strong backing, particularly in Ireland where it is domiciled,
but the thinking is that with the raising of that money should come a graduation to a dual listing on the Irish and Aim markets, up from the current GXG quote, which gives a certain amount of
visibility but isn’t good for much else.
James won’t set a precise timetable on when all that’s going to happen, but it will be soon. He’s been in detailed talks with brokers who have a good understanding of what happens in markets on
both sides of the Irish Sea, and the company has a good shareholder and ambassador in Doug Howlett, the most the highest try-scoring All Black in history and former Munster player.
He’ll help bang the drum when the roadshow really gets going, as will Yellow Jersey, a young and thrusting public relations company that’s currently making real inroads into the junior mining
So, with the backing of major shareholder John O’Connor, who runs investment company OCI and who also holds stakes in Alecto Minerals and Trans Afrika Resources, and allowing for the robust
numbers at Far, the fundraising stands a good chance of success.
The wild cards are bauxite itself, and the political situation in Guinea. James knows that other bauxite companies have tried and failed to come to the market over the past few years – in part
because sentiment towards bauxite had turned sour, in part because small bauxite companies are unknown quantities to most investors, as small iron ore companies were 10 or 12 years ago, and in part
because most of them were carrying huge upfront capex costs.
Anglo African doesn’t have the huge upfront costs and bauxite in the junior space is becoming a little more common now, as our recent report on Canyon
That leaves Guinea. Assessing the risk in a place like Guinea isn’t easy, but following the chaos that surrounded the huge Simandou iron ore project there recently, KPMG has done a fully
independent review of the mining environment in Guinea – available here, which holds up the country as actually very
Now that the Simandou ownership wrangles are out of the way, KPMG points out that Simandou will be the largest iron ore mine and infrastructure development of its kind anywhere in the world. In
addition, says KPMG, Guinea is the sixth largest producer of bauxite in the world, mining contributed over 20 per cent of GDP in 2012, and 90 per cent of exports.
All told, this is a country that welcomes mining and welcomes transparency too. So when the government of Guinea tells James that it wants Anglo African’s Far project to be the country’s next
producing mine, these are words to weigh with real significance.
“We’re targeting 2016”, says James. “The government knows that.” So although it’s unlikely that Anglo African will get any kind of free pass, the likelihood is that permitting will be relatively
rapid. After all, when Vale walked away from its Somalu project having spent US$28 million working up a bauxite JORC resource capable of supporting a five million tonne a year operation, it was to
Anglo African that the government turned.
“We were invited in by the government after Vale left”, says James. So, where Far represents near-term production, Somalu represents medium-term production, at an increased rate. Even further down
the line is Toubal, which is deeper inland, but which can also support a five million tonne a year operation.
“So what we’re able to offer is near-term production, mid-term production, and longer-term production”, says James.
First thing’s first, that £10 million for the feasibility study at Far. But once that’s in, things should really start to get moving.