Metro Mining positive about 2021 with production set to resume at Bauxite Hills Mine in April

Metro Mining Ltd (ASX:MMI) is buoyant about 2021 with production set to resume at the Bauxite Hills Mine in Far North Queensland after a tricky 2020 when COVID-19 impacted bauxite markets. In the annual report to shareholders, managing director Simon Finniss said the company aimed to recommence mining operations in April at the end of the wet season and in-line with the established schedule. Positive bauxite market He added: “We will immediately set about supplying around 2.3 million wet metric tonnes (WMT) of bauxite to Xinfa - our founding customer. “Trading conditions across the aluminium supply chain in China have stabilised and we foresee steady improvement during 2021, which we are hopeful will have a positive impact on bauxite demand and pricing.” Finniss also made comment on the company’s negotiations on a particular long-term contract that, if successful, will begin in 2022 and extend over a five-year period. Operational performance and strong cashflows Chairman Stephen Everett outlined the company’s operational performance and strong cashflows for 2020, which he said had been delivered early in the year leaving the company in a good financial position. He said: “Immediate deliveries will be made under the existing Xinfa contract (2.3 million WMT for 2021). “Negotiations are progressing well for additional sales in 2021 and beyond. “The market appears to be recovering and our marketing efforts are continuing as aggressively as possible given ongoing travel restrictions.” Stage-2 expansion remains core strategy Metro’s stage-two expansion remains a core strategy for the long-term development of Bauxite Hills, with timing for the formal commitment to stage two remaining influenced by the outlook for global growth and the resulting ability for Metro to secure long-term offtake agreements with customers. Everett added: “The company will continue to monitor market conditions prior to taking the decision to formally proceed with the expansion.” The largest component of the Bauxite Hills Mine stage two expansion is the construction and mobilisation of a floating terminal which will facilitate faster loading of larger ocean-going vessels. As part of financing for the expansion, Metro received an offer for a loan facility of up to $47.5 million from the Northern Australia Infrastructure Facility (NAIF) in April 2020. A key Condition Precedent (CP) for the loan was the Queensland Government’s consideration of the project and its agreement for the approved funds to be advanced. Bauxite sales Metro’s marketing strategy remains focused on executing further spot and long-term offtake agreements to ensure Bauxite Hills will operate for the 2021 normal nine-month operating window and support the planned expansion of production to a long-term annual rate of 6 million WMT. The group has been progressing sales opportunities along several fronts with all negotiations progressing as the market recovers from its COVID-19 driven downturn. These discussions are likely to include a pricing structure linked to the prevailing bauxite market price. Past production at Bauxite Hills The Bauxite Hills Mine is 95 kilometres north of Weipa on Western Cape York in Far North Queensland, where Metro holds a total tenement package covering 1,900 square kilometres. Mining operations started in April 2018 and in its first year of operations, Metro achieved its 2018 production guidance shipping of more than 2 million tonnes to five different Chinese companies. In 2019, Metro expanded the mine's annual production from 3 million tonnes to 3.5 million and reached the upper end of production guidance by shipping 3.5 million tonnes that year.