Nov 12, 2019

Loan leverages economies of scale

Loan leverages economies of scale

A successful loan offer to Metro Mining would help its Bauxite Hills operation almost double production over the next 24 months.

It would allow the operation to capitalise on economies of scale.

The opportunity has come in the form of a Northern Australia Infrastructure Facility (NAIF) investment to fund a new floating terminal on the Skardon River on the north-west coast of Cape York Peninsula.

The $47.5 million loan offer would allow for new infrastructure to load larger vessels, as part of the company’s planned Bauxite Hills Mine Stage 2 expansion project. 

The offer will be formalised at the conclusion of the Federal Minister’s consideration period.

It is also subject to the Queensland Government’s consideration of the project and its agreement for the approved funds to be advanced. 

Bauxite Hills currently employs 246 people, 36 per cent of whom were Indigenous, and the new infrastructure would take the total workforce to more than 300 said Minister for Resources and Northern Australia Matt Canavan.

Minister for Resources and Northern Australia Matt Canavan.

This infrastructure project is part of a broader plan to expand to six million metric tonnes per annum by 2021, said Mr Canavan.

It would also support economic and social development, he said. 

“More than $500 million in public benefit has also been forecast to be generated over the life of the mine to 2037.”

Meanwhile, the operational costs of plant acquisition and infrastructure and civil works were largely addressed said Bauxite Hills general manager of operations Graham Tanner.

“There’s no need to double up on equipment or double up on people,” said Mr Tanner. 

“It’s a matter of the equipment we’ve got on site. It’s a matter of putting some more machine hours into it. There’ll be added equipment, earth moving equipment, some more truck and trailers to physically cart the stuff in the mining area. 

“But, it’s probably about 20 percent of the equipment you add on, to double every point. 

“So, when you look at it that way, the more times you mine, it draws the unit costs down, because you’re doubling production, doubling your income and only raising your costs by 20 percent.”

The Bauxite Hills staff and management mine met the budgeted two million tonnes in the first year of operation and are well on track to delivering 3.5MT this calendar year.

That’s accounting for the wet season which leaves only 240-operational days a year said Mr Tanner.

“We’ve tracked on budget since day one, really. I guess, beginning of this year, we had a slower than we wanted to start up, because of a light cyclone,” he said.

“September, October and November are always going to be big production months for us, which has proven so. And, so, we’re well and truly making up ground for what we lost earlier in the year.”

A record 500,000 tonnes was mined in September which was 90,000 tonnes over budget said Mr Tanner.

The resource is ranked as one of the best in the world and the company has environmental approval to mine ten million tonnes/year.

The company had introduced a continuous improvement process which was as much to do with people as driving down costs said Mr Tanner.

“We get everyone on site involved in that, from the bus driver through to my full management team and we’re seeing some great results,” Mr Tanner said.

“It’s only been running, the continuous improvement committee, for the last two months. We’ve been really kicking some goals in that area. 

“So, I can see driving the unit costs to add value to this company, continue. There’re plenty of areas we can do it and that’s a big, big driver for me. And, the other one is safety. If you don’t get your safety right, then you don’t make any money at all.”

The operation is located about 95 kilometres north of Weipa where the company holds a total tenement package covering about 1900 square kilometres.