Metro Mining Ltd (ASX:MMI) will increase annual bauxite production from the Bauxite Hills project in Far North Queensland to 3.5 million wet metric tonnes (wmt) as it seeks to meet strong customer demand.
The company plans a series of initiatives and these will be predominately implemented in the March quarter of 2019 during the expected wet season shutdown with long lead items already ordered.
Economies of scale
Expanding operations are expected to result in increased sales revenue and lower unit costs via greater economies of scale as well as other operational benefits.
Shares were up almost 10% in early trade to 17 cents.
READ: Metro Mining doubles ore shipment from Bauxite Hills as Chinese domestic supply tightens
Metro’s managing director and CEO Simon Finnis said: “Metro has seen an increase in demand for our bauxite from a range of customers in China.
“The operation has now produced over 1.6 million wmt of bauxite and we have identified low-cost and short lead time initiatives to increase production next year.”
Planned initiatives
Metro’s planned initiatives include:
- Supplementing the truck and haulage fleet configuration; - Duplicating screening capacity at the Barge Loading Facility; - Accelerating installation of a jaw crusher to enable shipment of any oversized material; and - Supplementing the marine fleet and on-water infrastructure to maximise efficiency of tug and barge movements.
Much of Bauxite Hills’ existing plant and infrastructure has been designed to accommodate higher operating levels, which means the initiatives will be easy to implement and low-cost.
READ: Metro Mining powers ahead with Bauxite Hills output continuing to set records
A number of initiatives were part of the long-term stage II expansion to steady state production of 6 million wmt per annum, subject to definitive feasibility study (DFS) update and board approval, and as such will be brought forward.
The increase in production will allow Metro to deliver meaningful volumes to customers that have experienced shortages of domestic bauxite supply.
Product well accepted
Metro’s product has been well accepted in China with sales being made to a total of five customers to date.
Capital costs are expected to be approximately $6.8 million funded from a combination of Metro’s cash reserves and existing financing arrangements.
Finniss said: “The payback on the capital would be well within the 2019 calendar year, an excellent return.
“We have an outstanding platform to incrementally add to sales in 2019, increase operational cashflow, and assess in detail the stage II expansion opportunity.”
Stage II DFS to be updated
Metro will also update the DFS for the stage II expansion which will incorporate the operating experience to date and current bauxite market conditions in China.
This is currently planned to be completed in the second quarter of 2019.
READ: Metro Mining ramping up its award-winning bauxite mine
The company achieved an attributable (gross) sales revenue of $43.8 million during the September 2018 quarter.
September quarter shipments were 822,000 wmt, more than double the ore shipped in the June quarter, with bauxite shipped to five different Chinese customers including foundation customer Xinfa.
Metro remains on track to meet its production and shipping guidance of 1.98 – 2.075 million wmt for 2018.