Shipping out – bauxite takes to the water
Michael Forrest talks to Ian Levy, CEO of Australian Bauxite, about the aluminium market and his company’s projects to develop new mines in Australia.
The demand growth rate for aluminium is the greatest of all the metals traded on the London Metal Exchange and is only second to steel in global consumption, which last year reached 45 million tonnes. Aluminium use is expanding across a range of industries including transport, construction and packaging, and it is this variety of use that buffers consumption from downturns in individual sectors. It is regarded as a green metal thanks to its ability to lightweight a design, and is particularly sought-after in the construction of cars, trucks and trains where over a vehicle’s lifetime the reduced weight can substantially reduce CO2 emissions.
The consumption growth rates of aluminium exceed most other metals. According to the USGS, the compound annual growth rate of aluminium consumption over the past 20 years is 4.3%. The International Aluminium Institute puts the figure in the two decades to 1992 at almost 10% per year. Most notably, aluminium consumption in China since 2002 has grown at more than 18% per year as construction and manufacturing expand in Asia.
The structure of the aluminium industry has also changed from large, vertically integrated companies controlling ore-to-metal production to specialised companies focusing on bauxite, alumina (aluminium oxide) or aluminium. The big six aluminium companies now control just 50% of bauxite and alumina production, down from 83% two decades ago. Geographically, aluminium smelter production has become focused primarily in cheap energy locations and secondly near major markets, resulting in a large component of seaborne trade. Until about 10 years ago, bauxite mines supported local alumina plants and the alumina was transported to the smelters. It takes five tonnes of bauxite to make two tonnes of alumina, the intermediate product that in turn makes one tonne of aluminium metal.
However, with an increasing demand for aluminium, local raw materials are not always available, initiating seaborne trade. As with other metals, China has been a major stimulus to the seaborne trade because its aluminium capacity has been growing faster than its domestic bauxite production (in 2012 some 37% of bauxite was imported). Its largest source of seaborne bauxite is from Indonesia, which has begun to enforce legislation that imposes bans and 50% tax on the export of raw mineral products, including bauxite, from mid-2014. The new regulations are designed to encourage value-adding mineral processing industries in Indonesia, which has an operating aluminium smelter and an alumina plant under construction.
On the up
China is about three-quarters through a massive expansion of aluminium smelting capacity and there are major smelters starting up throughout the energy-rich Middle East. This step-change in production of aluminium has depressed the metal’s price, but at the same time has triggered a major demand for seaborne bauxite. As a result, bauxite prices – as measured by import prices of CIF into northern China – have risen from US$27 per tonne in 2005 to more than US$50 per tonne in 2013, and are still rising steadily.
Bauxite is a product of the tropical weathering of high aluminium content rocks that form aluminium oxide minerals of gibbsite, boehmite and diaspore in a lateritic rock that is usually near surface and easily mined. Most occur in rocks from the Tertiary and Recent geological periods when hot humid climates prevailed, although some deposits are older and preserved by overlying sediments. The bauxite in all of Australian Bauxite’s (ABZ) bauxite leases is comprised primarily of the low temperature alumina mineral gibbsite. Low temperature refers to the temperature that bauxite dissolves in the Bayer process, whereby the ore is chemically refined to alumina in hot caustic soda (sodium hydroxide), then filtered, precipitated and calcined. The efficiency and cost of the process is dependent on a number of factors, paramount being the mineralogy of the bauxite. Ian Levy, CEO of Australian Bauxite explains, ‘Low temperature ores are predominantly gibbsite and have a digestion temperature of 140–145°C’. For those ores with a higher concentration of boehmite, the digestion temperature rises to 240–245°C and diaspora can require 290°C. The different minerals determine both the operating and capital costs, with gibbsite being best.
ABZ’s first mine will be in central Tasmania, where a mining lease application process has been underway since March 2013 for the Bald Hill Bauxite Project near Campbell Town, 100km south of Launceston Port at Bell Bay. The Tasmanian projects have remarkably low capital and operating costs – and somewhat surprisingly for Tasmania, are located in developed areas with no socio-environmental constraints and with strong support from local communities and governments.
The Bald Hill Bauxite Project is scheduled to commence bauxite shipments in late 2014, based on simple quarrying and trucking on the adjacent Midlands Highway to Bell Bay for shipment to China. In March 2013, ABZ and Chinese aluminium major, Xinfa Group, signed a memorandum of understanding to commence a 50:50 joint venture to develop a series of mines across the bauxite province in Tasmania, each one typically three to five million tonnes in total size and exporting 0.8 million tonnes per annum from three operating mines at any one time. Rehabilitation will be done immediately that each pit area is mined out so that the low-quality grazing land and tree-plantation land can be left slightly better than it was before mining. Xinfa has paid a US$500,000 exclusivity payment for a five-month due diligence period.
The company has three projects in eastern Australia, the largest of which is located near Taralga 40km north of Goulburn, some three hours southwest of Sydney. Bauxite in the Taralga area has been exploited for road construction for more than 150 years, but was first drilled by ABZ in 2009. A prefeasibility study for Taralga included metallurgical tests on large samples from different horizons within the deposit. The upper layers contain small (2–50mm) nodules of fused alumina spinel – a type of emery that has also been noted at Weipa in northern Queensland and Darling Ranges in Western Australia. The test work showed that they can be removed by gravity separation and sold, leaving a good quality gibbsite-bauxite. Below this horizon is a good quality bauxite with low levels of reactive silica clays, moderate levels of iron minerals and low moisture content. Overall, about 80% of the total resources in the Goulburn projects are gibbsite-bauxite, which is termed direct shipping ore (DSO). Taralga bauxite resources have been estimated at nearly 40 million tonnes, including some exceptionally thick bauxite at Mount Rae that has a true thickness exceeding 36 metres – most Australian bauxites are three to four metres thick.
Once again, global events and international decisions have altered the market for a country’s resources. And it would seem Australia is set to benefit from the decisions of its neighbours.