Could this junior explorer be on the cusp of becoming the next Sirius Resources N.L. (ASX: SIR) and deliver shareholders whopping capital gains?
Despite rising 367% over the past month, junior explorer Queensland Bauxite Ltd (ASX: QBL) is set to soar again today. In pre-trade moves, the shares are expected to open up another 45% at 6.1 cents.
The reason for the price move is that recent exploration results have confirmed that the company has a significant bauxite resource at its flagship South Johnstone Bauxite Project in North Queensland.
Despite only 26 drill holes being analysed from just 2.3% of its existing tenement, the company says the results confirm it has found a large, close to port and infrastructure, direct shipping ore (DSO) with initial estimates suggesting resources of more than 30 million tonnes.
The company is now upgrading its exploration target to a whopping 300 million tonnes, but the existing 30 million tonne DSO already supports a major bauxite export operation. Queensland Bauxite says it will look to initially ship 5 million tonnes per year, with revenues of between $200 million to $300 million each year, based on current bauxite prices.
Not bad for a company with a current market cap of just $12.7 million!
Direct Shipping Ore (DSO) generally means that the company can just dig the minerals out of the ground and ship them to customers, with very little need for processing. That should mean low production costs, and potentially, substantial profits. Surface deposit bauxite mining is reported to cost around $10 a tonne before transport and port costs.
Bauxite prices have surged to around $60 a tonne recently, after Indonesia implemented a ban on exports of the raw commodity in a move designed to encourage producers to process the raw material at refineries in Indonesia.
But that has opened the window for other countries, including Australia, to ramp up bauxite exports, particularly to China. And it’s potentially why Australian bauxite explorers have soared in recent times, including Cape Alumina Ltd (ASX: CBX), Bauxite Resources Limited (ASX: BAU) and Australian Bauxite Ltd (ASX: ABZ).
Queensland Bauxite says it will now focus on early development of the project and considering bringing in partners to help fund the project.
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Motley Fool writer/analyst Mike King owns shares in Sirius Resources. You can follow Mike on Twitter @TMFKinga
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