Alufer Eyes Bauxite Supply Gap, Expects Guinea Production in 2014

Nov. 1, 2012 (Dow Jones Commodities News Select via Comtex) --

--Guinea bauxite to replace Indonesia supply as China seeks new sources

--Bel Air project to have designed capacity of 10 million tons a year

--Company may reconsider IPO for project funding

--Alufer to seek potential partners for Guinea alumina refinery project

Alufer Mining Ltd. is aiming to bring its Bel Air bauxite project in western Guinea on stream in 2014 to take advantage of strong fundamentals for the aluminum raw material, a senior company executive said.

Supply from the West African country, which has some of the world's largest bauxite reserves, will help meet a shortfall in the market following the introduction earlier this year of legislation in major producer Indonesia that curbed raw material exports to promote downstream processing in the country. Bauxite is refined into alumina, which is then smelted into aluminum.

Indonesia is a key supplier of bauxite to the Chinese market, and a sharp reduction in Indonesian ore exports should drive China to secure supply from other producing nations including Guinea, Danny Keating, Alufer's chief executive, said Wednesday, forecasting sustained strong growth in Chinese demand over the next decade.

Some Chinese consumers "are already facing a dilemma about where to get their material," he said. "This is an industry in flux; all the old rules about [which country's ore supplies which consumers] are being redefined."
Other producers of bauxite include Brazil, Jamaica, Suriname and Guyana.

To respond to China's demand for new supply sources, Alufer is developing its 10-million-metric-ton-a-year capacity Bel Air project as fast as possible, he said. According to company estimates, global bauxite demand totalled 220 million tons in 2011.

By the end of the year, the company will have completed its feasibility study on Bel Air and made an application for its mining licence from the Guinean government.

Mr. Keating said the project could start production late in 2014, with full commercial production expected in 2015. Alufer is in discussions with possible offtake partners for the bauxite, he said.

The company still has to raise some capital for the Bel Air project, which will cost between $350 million and $400 million to bring into production, he said.

In early June, Alufer shelved its proposed $40 million Alternative Investment Market initial public offering plans in London after adverse market conditions resulted in low valuations. Instead, the company raised $12 million in a private placing.

Alufer "isn't rushing to be a public company," he said, but "would reconsider a listing in the first half of next year as a possible funding strategy."

Once Bel Air is close to production, Alufer will look to start discussions with potential partners for a refinery project that would allow the processing of bauxite into alumina in Guinea, he said, noting that Alufer's expertise is in mining rather than refining.

As well as its Bel Air project, Alufer is exploring at the Labe bauxite deposit in north central Guinea, where it expects to complete a pre-feasibility study in 2013.

Alufer's developments in Guinea come at a time of increasing investor interest in the country following its first democratic elections, which were held in 2010 after years of political and social upheaval.

"From a political risk point of view, I don't look at a point in time; I try and look at the trend. When we first started out working in Guinea, it was a military dictatorship...and now there's a democratically-elected president and civil society is hopeful of change," Mr. Keating said. "It's been a period where in terms of trend, the political risk has been reducing substantially."