Lindian Resources Ltd (ASX:LIN) is trading higher on inking a supply deal with a China-based conglomerate to supply 23 million wet metric tonnes (WMT) of bauxite from the Gaoual High-Grade Conglomerate Bauxite Project in Guinea, West Africa.
The supply agreement with C&D Logistics Group, a subsidiary of Shanghai Stock Exchange-listed Xiamen C&D Inc, will cover a six-year period from 2025.
Investors have welcomed the agreement, sending shares as much as 9.73% higher intraday to A$0.395 while the company's market cap is approximately A$378.67 million.
Balance sheet will fast-track the project
C&D Logistics’ parent company has considerable coffers – in 2022, Xiamen C&D Inc reported net after-tax profits of CNY$11.27 billion (US$1.62 billion) with net assets of CNY$165.34 billion (US$23.77 billion) – which can bolster Lindian’s own efforts to fast-track development of its Gaoual Bauxite Project.
C&D Logistics will now discuss options with Lindian to cooperate on the development of the Gaoual Project through bauxite prepayment arrangements.
The parties have agreed to fixed annual volumes through to 2030 with pricing to be negotiated and determined annually. Binding annual contracts will be defined by price, annual quantity, product quality, payment terms and delivery time and location.
The Gaoual Bauxite Project was selected by C&D Logistics following years of engagement and an appreciation of the scale and quality of the bauxite.
Gaoual has a JORC-compliant indicated mineral resource estimate of 102 million tonnes, with a high-grade tonnage of 84 million tonnes at 51.2% alumina (Al2O3).
It’s one of only two known major ‘conglomerate bauxite’ occurrences in Guinea, the other being Sangaredi, which has been mined for some 30 years by Compagnie des Bauxites de Guinée (CBG).
Screening test work done in 2021 confirmed that Gaoual high-grade samples showed the average alumina grade increasing by 8.6% (53.8% Al2O3 to 58.4% Al2O3) and the average silica grade decreasing by 71.4% (9.8% SiO2 to 2.8% SiO2).
The supply agreement with C&D Logistics stipulates a minimum bauxite grade greater than or equal to 49% Al2O3 and silica content being less than or equal to 8% SiO2.
Strong position to secure logistics
Now that the supply agreement is firmly in place, Lindian is in a strong position to secure logistics infrastructure in Guinea and the company anticipates a relatively low-cost capex start-up operation.
“This is a major step forward for Lindian in unlocking the value of our extensive bauxite assets in Guinea, much like we have done in a short space of time in Malawi with our world-class Kangankunde Rare Earths project,” Lindian executive chairman Asimwe Kabunga said.
“For some time, we have been seeking a partner with a strong balance sheet and offtake requirements to fund the development of our Gaoual Conglomerate Bauxite Project.
“C&D Logistics Group has all of these characteristics and great pedigree. The recent ban on bauxite exports from Indonesia has increased the demand for Guinea’s bauxite and in some cases, accelerated project development activities. Today’s agreement reflects this.
“We have a relatively short window to achieve supply of the first 3 million WMT in 2025 which is less than two years away.
“As such, our immediate focus is to rapidly advance negotiations to lock in logistics infrastructure access, and secure contract mining services which ensures start-up capex is relatively modest given it’s a straightforward bulk mining, screening and transport operation.
Kangankunde still top priority
CEO Alistair Stephens emphasised the importance of the flagship Kangankunde Rare Earths Project: “As we ramp up development of our bauxite assets in Guinea with an immediate focus on the unique Gaoual Conglomerate Bauxite Project, at the same time, work streams are accelerating at our world-class Kangankunde Rare Earths Project in Malawi which is Lindian’s top priority.
“More assays are pending, the MRE is on track for delivery next month and project development activities are advancing very well. I look forward to reporting more positive updates very shortly.”