Metro Mining and its ‘game-changer’ expansion plan

Of the more essential commodities produced around the world, bauxite has a unique tendency to fly under the radar. A natural product of weathering, bauxite occurs largely in regions prone to high volumes of rainfall and, as the principal ore of aluminium, boasts a range of critical applications probably too numerous to list here. 

It is, in every sense, a staple of the modern global economy without which we’d be living in a very different world — a fact firmly recognised by the folks at Metro Mining (ASX:MMI), which operates the Bauxite Hills Mine located 95km north of Weipa on the western edge of Queensland’s Cape York Peninsula.

The mine, which employs roughly 300 people, produced some 4.57 million wet metric tonnes (WMT) in 2023, up from about 3.5 million WMT in 2022. But it hasn’t all been smooth sailing. 

“We started production in 2018,” Metro’s Managing Director and CEO Simon Wensley says.

“It operated reasonably well for a couple of years and then COVID hit in 2020, and that caused a significant contraction in the market demand for bauxite and also the price. Metro at that point hadn’t really established a full sales book at the time, and had to go into care and maintenance for about a year between the middle of 2020 and 2021. That’s about when I came into this role, in the third quarter of 2021.

“And because the price had come down and freight had gone up, Metro” — which ships bauxite to customers itself — “wasn’t making any money. So we had to do quite a bit of restructuring. We had to focus on increasing sales to get the economy of scale back into the company, and then also change the way in which we were shipping.”

These, Wensley explains, were events which highlighted a greater need for resilience — the idea that a bigger, more efficient mining operation could better weather future storms, both weather-related and not. It was with this in mind that Metro’s board approved an expansion program in May 2023 to build the capacity of the Bauxite Hills Mine to 7 million WMT per year.

“These are like bits of the jigsaw puzzle we have to put in place to try to get up to what I’d call a sustainable level, where we have margins that are sustainable for the long run

Various expansion-focused activities since then, including improved site, processing and shipping equipment, helped deliver some early production efficiencies, but Tropical Cyclone Jasper — the wettest cyclone in Australian history, which made landfall in December last year and delivered a $15 million financial hit to Metro — showed how much work was left to do.

“These are like bits of the jigsaw puzzle we have to put in place to try to get up to what I’d call a sustainable level, where we have margins that are sustainable for the long run,” Wensley says.

“Where — even if we had another, say, COVID event — we have a solid set of customers and contracts, we have a cost structure that’s very competitive, and we would then be able to survive that and still make money during those lows. 

“We’re on our way to that. This is set to be our first year where we’re going to be operating for most of the year at our expanded rate. So we expect that we’ll see those economies of scale coming through. And the market is pretty strong. After COVID, it’s sort of steadily built up and up and up, and we’re trading in decent conditions again now.”

A bigger, more resilient beast

First put to shareholders in June 2022, the expansion plan for the Bauxite Hills Mine was originally expected to cost $31.9 million. Inflationary pressures have since pushed that out by 13% to $36.1 million, but it’s nevertheless a relatively cheap undertaking to effectively double Metro’s annual production output.

“Everything we’re doing, every piece of equipment that we’re putting in, whether it’s a mobile piece of equipment or a fixed plant, all of it is designed to give us more operating days per year, given a changing weather environment,” Wensley explains.

“The new screening system, for example, is specifically designed to work with wet, sticky material.”

Due to northern Queensland’s seasonably wet environment, the dry screening system currently in use for processing has proven itself insufficient for a company with aspirations like Metro’s. 

“The dry system is effectively a mesh, like a sieve, and the bauxite comes across the top and it goes through these vibrating screens. When the ore is wet, the screens don’t work right. Even though it’s vibrating, nothing is passing through the screen. So when you get the wet weather up there, you do get impacts — quite considerable impacts — on your productivity,” Wensley adds.

“The new screening system we’re putting in is what’s called a wobbler screen. These are rotating bars, and the ore goes across these bars which almost squeeze the ore through the screen. The big rocks can’t pass through, they still travel across the top. But the sticky bauxite, which is actually just made up of small particles all stuck together, still passes through the screen and then goes to the loading conveyor.”

According to Metro’s December quarter report, published at the end of January, the wobbler screen is on track for installation and commissioning by the end of March. With a duel-fed, large capacity feed hopper, it will be choke-fed by two new loaders, providing a continuous load stream to the barges. This is expected to deliver a significant improvement over the existing system, which required substantial double-handling and unnecessary costs.

The existing dry screen will also be retained to provide additional, back-up capacity for the new system.

The ‘game-changer’

If the new wobbler screen is a key part of Metro’s expansion plan, the company’s upgraded Offshore Floating Terminal (OFT) is a “game-changer.”

“The transhipper we have now is a pretty simple, basic single crane. That’s what we got at the end of 2021. It’s done the job, it’s a good single asset. This vessel is the next level,” Wensley says.

Transhippers are an essential part of a logistics-heavy business like Metro. Without access to a deepwater port, the company relies on barges to transport the ore, which is then unloaded by an OFT — like Metro’s new ‘Ikamba’ vessel — onto a high-capacity ship for delivery.

Where the current transhipper vessel has one basic crane, Ikamba has two, each rated at 34 WMT. The system’s nameplate capacity is more than 3,000 tonnes per hour, but with Metro’s specific operation and bauxite, the company is targeting 2,000 tonnes per hour.

“It’s not just a doubling of capacity, it’s actually increasing capacity by almost 200%,” Wensley explains.

“It gives us a lot more sprint capacity. If we do get weather interruptions, it allows us to catch up. We can load vessels much quicker, which brings our freight rate down, brings our demurrage down. There are a whole bunch of knock-on effects from having this much bigger vessel. And yet it’s still only run by about the same number of crew as the single floating crane, plus or minus one or two people. It’s got a very similar crewing cost, so the cost per tonne of using this is going to be much lower than the current vessel.

Built and commissioned roughly 10 years ago, the Ikamba would cost $100 million to construct today. Metro, however, managed to gain access — plus transport to Australia and a major dry-docking refurbishment — for just US$15 million through a joint venture with ALM Shipping Management, a subsidiary of French maritime transport provider Louis Dreyfus Armateurs.

Ikamba’s 10 years of life have also served as a sort of proofing phase, having operated in Guinea’s bauxite sector for the last 4 years.

“It’s such a good design, and all you’ve got to do is keep replacing the components and maintaining it, and this thing is going to last you a long time. These things should last for 20 to 30 years, so we’ve got at least 10, maybe 20 more years of use,” Wensley says.

“The other part of it is, look, we operate in a difficult part of the world. It’s northern Australia, it’s remote, it’s hot, and of course we’re a transhipping organisation, so it means we’re subject to wind and waves and all of these things. This vessel has demonstrated a capability to operate in very difficult conditions. So that will again give us another dimension of resilience and predictability, which is what I’ve been trying to bring to the whole Metro flow sheet.”

Ikamba departed a shipyard in Shenzhen, China, in early January and is due to arrive this quarter in Darwin, where it will undergo regulatory inspections prior to starting operation.

Bauxite and beyond

In the end, Metro Mining’s adventures in bauxite are all about scale. Dealing with such bulk commodities, Wensley explains, is all about the size-related economies these operations can provide.

“We think the 7-million-tonne rate will deliver the sort of cost base that will actually get us right to the bottom of the cost curve,” he says.

“That bottom of the cost curve pretty much says that under almost any circumstance in the market, we’re going to be able to make a margin. What is that margin? I’d say it’s between $10 and $20 a tonne. We’re targeting $15 a tonne this year. If we can mine and sell at $15 a tonne, that gives us about $100 million EBITDA. For a small company like ours, if we can generate that sort of money, then we’ll be very quickly into paying down our debt and then getting into returning some funds to shareholders.”

These economies of scale, however, aren’t likely to be held back by a 7-million-tonne ceiling. In fact, Wensley is already contemplating a ‘de-bottlenecking’ program, which will take place after the expansion phase in an effort to stretch the Bauxite Hills operation to 8 million or even 9 million tonnes per year.

And though Metro is more focused on production than exploration, there is the potential to grow the mine’s bauxite reserve beyond the 89.5 million tonnes it currently measures.

“We do have other tenements around, so adding to our resource base is something that we’re going to be looking at over the next sort of year or so,” Wensley says.

“The other thing is if we find lower-grade material that currently doesn’t meet market specifications, there is a well-trodden path to what you might call ‘upgraded’ bauxite. It’s a washing process that Weipa (Rio Tinto) uses quite successfully. That’s another option for us to look at how we might get more bauxite, even with lower-grade resources. 

“I think there’s also potential for kaolin. There was a kaolin operation at our site prior to Metro taking off. It wasn’t successful for a number of reasons, but the market’s changed. The kaolin sits pretty much under the bauxite, so we’re already effectively stripping the top off a kaolin resource. It’s a higher-value industrial mineral. Since we’re already mining there and we’ve already got our equipment, we’re exploring whether there is a sort of a bolt-on kaolin operation that we could bring to bear.”

Indeed, there is no shortage of growth options — both organic and in-organic — apparent to Wensley and his team. The current expansion program is of the more aggressive, make-hay-while-the-sun-shines sort; other avenues will take time. What’s clear is that, with the global bauxite sector both integral and gathering pace, the coming year will be one to watch for Metro Mining.

Write to Oliver Gray at Mining.com.au

Images: Metro Mining
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Written By Oliver Gray
Originally from Perth, Oliver has a keen interest long-form journalism. He has written for a number of publications and was most recently Contributing Editor of The Market Herald’s opinion section, Art of the Essay.