Lindian Resources ‘elephant hunt’ in Guinea has delivered in spades after the company announced this week it has made a potentially transformational acquisition after entering into an agreement to procure the colossal Lelouma bauxite project in the West African country.
The Lelouma project currently boasts a jaw-dropping resource of 847 million tonnes at an outstanding grade of 45.1 per cent alumina and is located close to established mining infrastructure.
The pivotal acquisition will see Lindian issue 30.6 million shares to Lelouma’s current owner, Sarmin Mining, and fund the work program over the project to the completion of a definitive feasibility study for a 75 percent holding in the project.
Upon completion of the DFS, Sarmin’s shareholders can then elect to convert their remaining 25 per cent shareholding to a 1 per cent royalty on future production, delivering 100 percent ownership of the project to Lindian Resources.
Lindian Resources’ Chairman, Asimwe Kabunga said:
“The acquisition of Lelouma provides Lindian with another world class bauxite asset in the world’s premier bauxite jurisdiction.”
“With the market shifting rapidly towards higher quality bauxite, we believe that the Company’s portfolio, combined with a well thought out infrastructure development plan, will become increasingly attractive to strategic investors and refinery groups seeking high quality bauxite supply.”
Lindian has been building a portfolio of high-quality bauxite assets since setting up shop in Guinea in early 2019. Guinea is an established mining jurisdiction that hosts around a third of the world’s reserves of bauxite, which is used to make aluminium.
Whilst the aluminium price took a hit earlier this year in the wake of the COVID-19 outbreak, like so many other metals, it has now leapt back to life, rising from a low of US$1,477 a tonne in April to more than US$1,769 today – a solid gain of close to 20 percent in a little over four short months - and it is showing no sign of stopping.
Lindian already owns the very high grade Gaoual bauxite project in the centre the country that is only 40km from the new Lelouma project. The company has been drilling up storm at Gaoual in recent months, delivering a high-grade maiden bauxite resource over the Bouba Plateaux in July of this year that weighed in at an impressive 101.5 million tonnes grading and even more impressive 49.8 per cent alumina.
However, the company has clearly been looking for rapid transformational opportunities, resulting in its latest acquisition.
The previous owners of Lelouma, including Mitsubishi Corporation, poured more than US$10 million of investment into it to define the huge 847m tonne resource that also boasts low silica grading just 2.1 per cent – silica is a nuisance when mining aluminium and the low grades at Lelouma are encouraging. The ore at Lelouma is predominantly near, or at surface and the project shows low mining strip ratios which lend themselves to low cost mining.
Lelouma is conveniently located 100km northeast of the world-class Sangaredi Conglomerate Bauxite Deposit which has been economically mined for more than 30 years. The rail head at Sangaredi links the operation with the Kamsar Port and Alcoa’s Kamsar alumina refinery, located 155km to the west south-west on Guinea’s coast – a potential path to both processing and shipping facilities for the company.
In addition to the Lelouma purchase, Lindian has also entered into a binding agreement to acquire 75 per cent of the Woula bauxite project in north western Guinea, which is subject to ongoing due diligence. Woula is situated within an established bauxite mining region and lies adjacent to existing infrastructure, including mine haul roads and is only 50km from a bauxite-exporting river port.
Woula hosts a JORC resource of 64 million tonnes at 38.7 per cent alumina, with an initial review of the project putting the spotlight on several highly prospective areas within the tenure that require additional exploration and may result in a rapid expansion of the existing resource.
The company is already eyeing off potential zones of high-grade ores at Woula that might, through modest investment, deliver near-term cash flows. These potential bauxite DSO ores could potentially be delivered to the mine gate or river port in Guinea for sale to third parties.
Any resultant cash flows from Woula could then be used to fund the development of the larger Lelouma and Gaoual deposits to the east. The company will pay the current owners US$150,000 cash, as a series of staged payments over 9 months, to purchase a 61 per cent interest in Woula. The company can then move to 75 per cent ownership of the project by completing a scoping study within 18 months of earning its initial interest.
Lindian Resources’ CEO Danny Keating said:
“The key focus for us now is the development strategy; we believe that staged development of bauxite assets is critical, starting with lower capex assets that are close to the coast or existing infrastructure, such as Woula, and then progressing to larger world class resources like Lelouma and Gaoual. “
“A coherent development plan that de-risks the projects and reduces the overall capital investment will assist in attracting financing partners, operational partners and refinery players seeking security of supply and access to world class multi-generational bauxite resources. “
In one fell swoop Lindian has leapt from a bauxite explorer to an aspiring developer with a critical mass of tonnes on its books in one of the world’s most high-profile bauxite jurisdictions.
The rising bauxite price doesn’t hurt either.
Is your ASX listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Matt Birney
