JOHANNESBURG (miningweekly.com) – Perth-based Moly Mines has set its sights on a direct shipping ore (DSO) bauxite project north of Weipa, in Queensland, announcing on Thursday that it will buy Gulf Alumina.
Moly will offer Gulf’s shareholders a combination of A$0.46 in cash and 1.4 options for each share they hold.
The proposed acquisition, which the board of Gulf unanimously recommended, provides Moly with an opportunity to develop a low-cost operation at the Skardon River project, positioning itself as an independent supplier of DSO bauxite into the seaborne Asian market.
In late 2015, bauxite developer Metro Mining made a play for Gulf, but the transaction fell through earlier this year.
Gulf undertook a definitive feasibility study early this year, which has highlighted the potential for commercial extraction of the bauxite at Skardon River. Gulf has proposed mining at an initial rate of three-million tons a year and later increasing it to five-million tonnes a year, subject to market conditions. The project operational life is expected to be ten years.
Moly reported that it would aim to progress the project into production “as soon as possible”, noting that environmental approvals were at an advanced stage.
The mining leases for the project included existing infrastructure and allowed for improvements.
Meanwhile, Moly said that it believed that the demand for seaborne bauxite in China was growing. “Moly believes that Gulf is well positioned to take advantage of this increased demand, especially in light of recent bans on the DSO exports from Malaysia, Indonesia and the Philippines,” the company said in a statement.
If the Gulf offer is successful, Moly plans to operate Gulf as a subsidiary, but does not plan any changes to the board or senior management.
The combined group is expected to have assets of A$88.5-million and total equity interests of A$71.8-million.
Moly owns the Spinifex Ridge molybdenum/copper project, in Western Australia, which is on care and maintenance.