IPO Watch: Guinea style bauxite from WA – VBX lists today in a $10mn IPO

News.com.au

5 hours ago

WA bauxite developer VBX will list at 11am AEST this morning
$10m IPO included big name backers like Deutsche Balaton, Lowell and Terra Capital
Flagship Wuudagu project promises Guinea-spec bauxite closer to the Chinese aluminium market
In recent years among the biggest fears of Australia's resources industry have been that rising nations with cheap labour and newer, better deposits will erode the competitive advantage we've held for years.
Nowhere has that been more stark than in the iron ore industry, where for years the soon to be producing 'Pilbara Killer' Simandou in Guinea has been the bogeyman for Aussie miners and the WA Government.
But the newest IPO to hit the ASX boards this morning will be turning the tables, as VBX (ASX:VBX) charts a path to the bourse after a $10 million at 60c float.
Over the past decade, Guinea has emerged as the premier bauxite producing nation in the world, responsible for 69% of shipments to the world's top consumer China.
Australia ranks a distant second at 25%. But it falls flat compared to its Guinean competitors not just on quantity but also on quality for the aluminium feedstock.
That is where VBX's Wuudagu project is a difference maker.
Located in the Kimberley region on the very northern tip of WA, around 15km west of the community of the State's most remote permanent settlement Kalamburu, Wuudagu contains a 59Mt reserve, from which VBX plans to derive an average product grade of 45.4% Al2O3 (alumina) and 3.6% SiO2 (silica).
That compares to high grade Aussie products from Queensland's Weipa region that have much higher silica impurities or the lower grade variety produced in WA's South West by South32 (ASX:S32) and Alcoa Corporation (ASX:AAI).
'That's the unique aspect about Wuudagu, is that it's essentially a Guinea spec product – 45% alumina, 3% silica – then you've got the advantage of being in Australia, low sovereign risk, (short) shipping distance to China,' VBX managing director and major shareholder Ryan De Franck said.
Fan club
That relatively simple story has helped the family-owned VBX, which as Valperlon Group progressed the proposed $125 million development as a private entity for over a decade, pull in a number of well known institutional investors.
Wilhelm Zours' Deutsche Balaton, one of the most prominent small cap backers on the ASX has taken a 5.6% stake, while John Forwood's Lowell Resources Fund (ASX:LRT) was involved in pre-IPO seed rounds and now boasts 1.14%.
Jeremy Bond and Matt Langsford's Terra Capital has also reportedly backed the float, which comes on the back of a price rise last year caused by a 12.5% lift in Chinese demand and supply outages in Guinea that pulled bauxite prices beyond iron ore to over US$100/t.
Guinean bauxite prices have dropped back to ~US$74.50/t, while Australian prices have come back to US$70/t, according to the Shanghai Metals Market.
But that remains high by historic standards, and above the US$65/t CFR (incorporating freight costs to China) used in a PFS by VBX that outlined a 10 year mine life shipping around 3.5Mtpa from a transshipment jetty on WA's north coast.
All in sustaining costs come in at $54/t Aussie, generating average annual EBITDA of $143m.
The plan is, should environmental and regulatory approvals come through in the expected time frame, to be shipping bauxite by the end of next year.
A DFS is expected to be completed by the end of 2025, all funded via the IPO raising.
"There's been a lot more interest in bauxite given what happened in Guinea last year," De Franck said.
"The benefit of us doing the IPO, as opposed to other funding options that were available, is that you're going to retain all that strategic value in the project as we de-risk it over the next 12 to 18 months."
Bauxite on the market
VBX walks into a relatively small bauxite and alumina space on the ASX.
The biggest producers on the bourse are Rio Tinto (ASX:RIO) and South32, with Alcoa in the mix as well. But let's be real, you're in Rio Tinto for the iron ore and copper, and S32 will increasingly pivot to copper and zinc as the years tick by.
For pure play alumina and bauxite exposure the options are more limited.
Of those actively pursuing the space, Metro Mining's (ASX:MMI) status as a North Queensland exporter made it an attractive option to play the booming bauxite market last year. It's shares are up 60% over the past 12 months, giving the firm a market cap of ~$400m.
David Flanagan's Arrow Minerals (ASX:AMD) was on the trail of a high-grade deposit once explored by Vale at Niagara in Guinea, but has been suspended from trade for close to a month after the West African country's military junta started pulling exploration licences off local miners.
Western Yilgarn (ASX:WYX) posted an inferred mineral resource earlier this year for its Julimar West bauxite deposit near Perth of 168.3Mt at 36.1% Al2O3 and 14.7% SiO2 at a 25% Al2O3 cutoff.
But at a 35% Al2O5 cutoff that becomes a more attractive 97.1Mt at 40.5% Al2O3 and 11.3% SiO2.
That project is likely to get larger as exploration progresses, with WYX also securing an earlier stage but potentially high grade bauxite and gallium project 25km north of Julimar West at the Norcia project and the Cardea 3 project 17.5km east, where early drill results have delivered results exceeding 34.5% Al2O3 and averaging a low SiO2 content of 3.14%.
Wuudagu, too, has room to grow, De Franck says.
The project was first identified by BHP (ASX:BHP) in the 1960s and received relatively little attention for over four decades before VBX took it on. Around half of the tenement package remains undrilled.
"We think that we've got additional bauxite within our licences that we want to test and explore and the focus this year is doing that," he said.
" Having a resource update come out, we'll do an optimised mine plan based on that updated resource.
"And then that'll kind of drive the annual production rate and the mine life as part of the updates DFS."