MACIG Connect Series
Alufer is developing its new Bel Air bauxite project in Guinea and describes the company’s progress there.
Can you provide a brief company history of Alufer’s presence in Guinea and highlight its strategy going forward into 2018?
Alufer has been involved in exploring for bauxite in Guinea for over eight years. The company initially identified the Labé project, which is in the plateau hills in the north of the country and is a very large, high-quality bauxite deposit. This deposit is circa 350 km inland however, which is more economically challenging and so the company focused on finding a bauxite resource closer to the coast. Our exploration efforts led us to discover the Bel Air project which is 15 km from the sea and easily accessible from Conakry. Finding a new deposit which we could develop all the way from being a greenfield site through to production was a very exciting and unique situation for us. We closed our construction financing for US$205 million at the end of last year with a consortium of large mining houses, and that money is being used to build the Bel Air mine. We are now halfway through the construction phase and first ore ship is scheduled for Q3 2018.
Amco Drilling removed their operations from Guinea because of the difficulties in the business environment. What risks do your investors see in the Guinean market?
Investors look at three things when investing in a project. Firstly, they look at the quality of the resource, what the cost to production is and the future of the commodity pricing. Secondly, they look at geographic and political risk and where the country sits in its support of foreign investment. Thirdly, investors will look at management teams and their previous success. We feel that we are very well positioned with our high quality resource, in a democratic country that actively encourages foreign investment. We as a management team are executing on our stated objectives of bringing this mine into production to create value for all stakeholders, whilst looking to mitigate our risks as far as we can.
Can you elaborate on what trends are driving such a bullish market in regards to the price of bauxite in the coming years?
Firstly, you cannot look at bauxite through a pure supply and demand lens like copper, zinc, nickel or even iron ore. The supply-demand curve is highly influenced by the quality of bauxite. If you produce good quality product, you will be able to sell it at a premium, but if it is low quality, this is more of a challenge. That is a key distinction to make.
The second thing is that China is still the largest consumer of bauxite and the country continues to consume at an ever-increasing rate. The reason behind this is that bauxite is the key raw material for aluminum, and as we move towards reducing our carbon emissions, aluminum plays a vital role in improving the wellbeing of the planet. If you look at China and their Belt and Road policy, they are looking to invest billions of dollars in Asia, to continue to grow and create opportunities and employment for their population. For their infrastructure, they need three core minerals: iron ore, metallurgical coal and bauxite. We are very positive about the demand for bauxite in the foreseeable future although it is difficult to know how this will translate in terms of pricing.
What do you think is the greatest challenge facing Guinea from fully recognizing the potential of its position in the bauxite market?
Guinea is already a global bauxite player and produces a significant portion of the world’s supply. Companies like CBG have been operating for 40 years, and SMB has grown rapidly in the market. Furthermore, democracy is now entrenched in the country through several peaceful elections and the current ministerial outlook is receptive to investors. In terms of continuing with this position, the Government needs to keep building on their current strategy to continue to increase their public appeal.
How does Alufer envision the company’s presence evolving in Guinea as it progresses with its projects?
The focus of Alufer for the next few years is to make Bel Air an absolute success story by building a mine in Africa to international standards, not only technically speaking, but environmentally and socially as well. A core focus for Government, which has been very supportive of our project to date, is that we are doing the right thing for the country by hiring Guineans and developing local content. We are very committed to this – currently 84% of our workforce is Guinean – and we will look to further increase this percentage going forward.
We want to be a beacon for mining companies to show it can be done successfully and sustainably, and to expand on the Bel Air platform to create further value for shareholders and economic benefits for the people of Guinea.