Flanagan’s Arrow on target to capitalise on bumper bauxite market

The junior mining space is littered with examples of early-stage projects that get described as potential company-makers. More often than not, they don’t live up to the hype.

But sometimes they do and the junior involved starts its march upwards along the Lassonde curve.

Now it has to be said that Arrow Minerals’ (ASX:AMD) bustling boss David Flanagan did not use the company-maker term this week when announcing a 185Mt maiden resource at Arrow’s Niagara bauxite project in Guinea.

The temptation must have been strong to do so as there are not many $30m market-cap juniors with a potential high-margin bulk commodity business on its hands. Niagara certainly has that potential.

Flanagan did go as far to say that given the strength of the bauxite market and the scale and quality of the maiden resource estimate, 2025 is the year Arrow will transition to a development-focused company.

He has been at this point before in a different bulk commodity (iron ore) in a different location (the Pilbara), having established Atlas Iron (now part of Gina Rinehart’s Hancock Prospecting) as a 10Mtpa producer at the height of the iron ore boom before handing the baton over.

Niagara was only acquired in August last year. Picked over historically by the boys from Brazil (Vale) and a Russian academic, there was enough to suggest that Niagara was going to be big.

And just importantly, it was going to be of the typical Guinea standard spec – high grade, low silica. That sort of stuff that has underpinned the dramatic growth in Guinea’s share of the seaborne trade in the alumina/aluminium precursor to 30%.

Rio Tinto, Alcoa and Rusal are involved in the bauxite industry there, as are the Chinese and Middle East interests.

Niagara’s maiden resource estimate (there is the potential for additional resources captured in an exploration target) includes a subset of 48Mt at a very high grade mineralisation (48.2%) which Arrow will now zero in on in scoping/feasibility studies.

When they work, these sort of bulk commodity projects have immense earnings power. Assume a 30% margin based on current bauxite prices, and a 10Mtpa operation would print $US300 million in annual cashflow.

Niagara won’t be starting out at that level of production. A 3-4Mtpa operation based on the super high grade mineralisation would likely be the focus to ensure a quick capital payback, with growth in production to follow.

Again, it is all interesting stuff for a junior with a $30m market cap (3.3c a share) and some $8m cash to keep up the momentum.

But there is a long way to go with a key aspect being the project’s ability to access the railway to the coast that Rio and its Chinese friends have built for their $US22 billion Simandou iron ore project deep inside Guinea.

The railway is decreed open access by a government wanting to encourage more developments. And there are plenty of examples in the country where third party access is a happening thing, including in the bauxite industry.

Niagara is about 100km from the Simandou rail line, at which point it would be about half the distance to the coast that Simandou iron ore will have to travel. Accessing the railway makes Niagara a real candidate for development.

Leeuwin Metals (ASX:LM1):

There was a time not long ago when the future-facing metals of nickel and lithium were all the go for junior ASX explorers.

It was in that environment that Leeuwin Metals (ASX:LMI) joined the ASX in March 2023 through an oversubscribed $8 million IPO of nickel and lithium interests in the Canadian province of Manitoba.

Fashion changes quickly in the world of metals and nickel and lithium have fallen out of favour big time. They will make a comeback as new supplies will be needed to feed the new energy revolution (lithium and nickel) and GDP-type growth in stainless steel (nickel) demand.

Faced with the market reality in lithium and nickel, Leeuwin has decided to pivot to gold back in its home state of Western Australia. The nickel and lithium assets are still there, it’s just gold is now very much the focus.

And why not given record Australian gold prices. Pivoting to gold in WA is easier said than done if the key criteria is quality exploration ground on granted mining leases where there has been a history of production.

Leeuwin has pulled that off though in a deal to acquire the Marda project, 130km north of South Cross, itself an easy four-hour drive from Perth.

The seller for cash and shares was Ramelius (ASX:RMS) which the headlines will tell you is busy completing a $4 billion merger with Spartan (ASX:SPR), its neighbour in the Murchison where Ramelius has big-time ambitions at its Mt Magnet production centre.

The Marda pick-up sets Leeuwin up nicely to be a strong newsflow generator in coming months as it gets cracking with a funded drilling program across four main areas - Marda central, north, south and west.

Ramelius acquired Marda in 2017, with the ore trucked 170km to its Edna May mill for treatment. The last of the stockpiles at Marda have gone off to the mill, which has been winding down as Ramelius focusses on Mt Magnet and its Rebecca Roe project to the east of Kalgoorlie.

So the sale of Marda is not a big deal for the $2.5bn Ramelius and its $2.2 billion Spartan acquisition. But it is a big deal for Leeuwin with its 12.5c share price for a market cap of $12 million.

Leeuwin’s exploration program is multi-pronged in that it will range from resource definition around existing open pits, historical workings, geochemical anomalies and some new ideas its geology team have worked up.

Given its current modest market cap, it could be worth watching, remembering that the Canadian nickel and lithium assets remain on the books. They could be described as sleeper assets.

There is another sleeper asset in the Pilbara where Leeuwin has an interesting iron ore exploration project in the same neck of the woods as the Mesa A operation of the Rio Tinto-controlled Robe River joint venture.

The joint venture has just made a $75 million offer to CZR Resources (ASX:CZR) to acquire its Mesa project. It follows mid-west producer Fenix (ASX:FEX) bidding $78m in an all-scrip offer for the company.

And before those two showed up, a Chinese group bid $102m back in January last year. But for reasons it never gave, as is its wont, the Foreign Investment Review Board never gave clearance for it to proceed.

Mark Creasy is the kingmaker in what happens next at CZR as he has 52% of the company and has a 15% direct stake in the Mesa project with CZR (85%). CZR has continued to side with Fenix so far.

The bigger point today is that iron ore projects in the Pilbara held by juniors are of interest to the Chinese and the incumbent producers of Rio, BHP and Fortescue if they are up close to their operations.

And if chatter in Perth is on the mark, Glencore has also been looking to establish a beachhead in the Pilbara.

Leeuwin’s Mesa project is early stage stuff. But given the action in the region, it probably has more than sleeper status as an asset in Leeuwin’s portfolio. And given Marda more than covers Leeuwin’s current market capitalisation, the iron ore exposure comes for free, as does the lithium and nickel.

SKY METALS (ASX:SKY):

The tin bulls are out and about thanks to the prices for the ever-volatile metal hitting three-year highs.

It would be nice to think the latest price spike to more than $US35,000/t was simply a response to the building demand for tin coming from the solar PV and semiconductor sectors at a time when the supply response is hampered by decades of under investment.

That thematic remains intact. But it is current supply shocks that are pushing the metal around. No one is quite sure what the near-term export levels will be from Indonesia (export controls) and Myanmar (insurgency issues).

On top of that came the recent evacuation of the Bisie tin mine in the Democratic Republic of the Congo. It accounts for 7% of world production and is owned by the Toronto-listed Alphamin Resources (TSX-V: AFM).

Alphamin said the decision to temporarily cease mining operations was made after insurgent militant rebels recently advanced westward towards the operation, raising security concerns for the workforce.

The ongoing supply concerns from the major tin exporting nations is a real concern to China, which is increasingly reliant on more imports of the metal.

None of the above has been lost on investors in the leading tin stock on the ASX, Metals X (ASX:MLX). Thanks to an Aussie tin price that averaged $46,961 in the December quarter, and which now sits at $55,437/t, its shares have jumped 60% year-to-date.

All-in costs at its 50%-owned Renison mine in Tassie in the Decembert quarter (it has made a bid for control of the remaining 50% owned by Hongkong listed Greentech Technology) came in at $A29,331/t, giving rise to net cashflow per tonne of $A17,630/t on the company’s share of production.

The enthusiasm for tin reflected in Metals X’s performance year to date is yet to rub off on the bunch of juniors looking to break into the industry. Fair enough, they are not in production and won’t be in a rush.

But given price projections that $US45,000/t are needed to ensure a supply response to meet the demand surge coming thanks to tin’s newfound status as new age metal, their time in the sun will come.

Apart from anything else, global end users, including China, recognise that encouraging new supply sources in stable jurisdictions would be welcome stuff given the current market’s constant state of flux.

It is against that backdrop that NSW tin explorer/developer Sky Metals (ASX:SKY) hosted an investor call on Wednesday. It was mentioned here last September as a 4c stock and it has since moved up to 5c.

The key message from Sky boss Ollie Davies was that the Tallebung project could be in production within two years as a first quartile cost producer thanks to its shallow mineralisation and the application of TOMRA x-ray ore sorting technology for substantial mass reduction and grade improvement.

There’s lots of work to do before first production. A funded drilling program aims to increase the scale and grade of the hard rock resource at the historic alluvial operation, as well as upgrade the confidence levels to underpin scoping studies by mid-year into a low capex development.