Metro Mining gears up for an exciting year ahead

Metro Mining Ltd (ASX:MMI) is looking forward to a robust year ahead with the company progressing sales for 2021 deliveries along several fronts, including 2.3 million tonnes under its offtake agreement in place with Xinfa The strong operational performance during the June and Sept quarters of 2020 delivered robust cash flows leaving the company in a satisfactory financial position heading into 2021. Site-based activities The Bauxite Hills Mine moved into its planned 2020 wet season shut down earlier than usual with operations ceasing in September 2020 to minimise the COVID-19 impact and downtrend in commodity prices during 2020. Over the December quarter, the focus was on undertaking planned maintenance of the mining and haulage fleet and fixed plant, rehabilitation across the site and general activities to facilitate operations starting in April 2021. Key land-based activities undertaken during the quarter include ongoing maintenance of haul roads and creek crossing, which is expected to accelerate towards the end of the March quarter as the wet season winds down. Other activities undertaken are heavy maintenance of the prime movers and trailer sets, maintenance of the camp and accommodation facilities and early-stage mine planning for 2021 mining activities. Bauxite sales planned About 2.3 million wet metric tonnes (WMT) of planned 2021 production will be sold under the offtake agreement in place with Xinfa with prices received linked to an RMB denominated alumina price index. Metro has been progressing further sales for 2021 deliveries along several fronts, with all negotiations progressing well, albeit slowly as the market recovers from its COVID driven malaise. These discussions are contemplating a pricing structure linked to the prevailing bauxite market price. Additionally, Metro is negotiating a long-term contract that, if successfully finalised, will commence in 2022 and stretch over 5 years. Aluminium prices have been quite strong over the last several months and alumina is now showing gradual signs of improvement. Stage 2 expansion of Bauxite Hills Mine Stage 2 expansion remains the core strategy for the long-term future of Bauxite Hills. Timing for the formal commitment to stage 2 development remains subject to economic conditions across the aluminium supply chain in China and the resulting ability for Metro to secure long-term offtake agreements with customers. Metro will continue to monitor market conditions before deciding to formally proceed with the expansion. Bauxite prices outlook Prices across the aluminium supply chain have stabilised and are now showing gradual signs of improvement. There was reduced volatility in alumina and bauxite prices although some nervousness remains amongst refineries. Towards the end of 2020 (and into 2021), there has been a divergence in trends between prices for high temp (HT) and low temp (LT) bauxite imported into China. Cash position At the end of December quarter, Metro’s cash on hand and other receivables (including GST refund) were $25.6 million compared to $45.8 million at the end of September 2020.