As I wrote last year, bauxite has great potential as a speculative investment, although it also carries hefty risks to go along with the upside potential – that’s why these shares are speculative!

Six months later, and now is the prime time to check on the developments at Australia’s bauxite producers. One of the major changes is the unforeseen introduction of low-quality Malaysian supply to China, which has seen the price of bauxite trimmed back ~10% to roughly US$60 per tonne. Prices remain much higher than they were in 2013 though.

Another big development is the fall in the Australian dollar, which should lead to some serious net benefits for Australian exporters. Oil’s decline should also meaningfully reduce shipping costs; while I do not expect low oil prices to last for the long term, they might provide a little extra kick in the critical early days of production. In addition to these macroeconomic factors, there have been a number of company-level developments in two of Australia’s most promising bauxite explorers:

Australian Bauxite Ltd (ASX: ABX) successfully commenced production at its Tasmania mine site and is ramping up output in anticipation of commencing shipments in the mid to late second quarter of 2015. A second private capital raising was conducted recently in order to accelerate construction of a second mine, and Australian Bauxite also announced a substantial (61%) increase in its Tasmanian ore reserves this morning. Even better, mining and screening operations in February exceeded the rate of 900,000 tonnes a year, nearly double the 500,000 tonne design rate.

With 9.2 million tonnes (Mt) of reserves in Tasmania, Australian Bauxite has a reasonable asset life and two recent discoveries are expected to add several years to that figure. With $3.5 million in cash, no debt, first sales planned for June, and ‘90% of capital spending complete’, Australian Bauxite is a strong contender for Australia’s best junior bauxite explorer/producer.

Queensland Bauxite Ltd (ASX: QBL) is a bit lower down the food chain, with a longer path to production and a weaker financial position. Despite this QBL might prove to be the better buy in time, with its massive tenements located in a single location (near Mourilyan, in Queensland), and with better infrastructure, access to labour, and 3,000 kilometres closer to China compared to Australian Bauxite.

However the company is earlier in the development stages, having recently released a scoping and completed a capital raising to fund ongoing operations. The figures are promising, with Queensland Bauxite targeting 800,000 tonnes per annum initially (similar to ABX) and a projected 6-month repayment time on the capital expenditure. Queensland Bauxite has applied to commence production in 2015, but I am sceptical of whether the company can pull things together so quickly.

In addition, mine development is expensive and I would not be surprised to see another capital raising or an offtake partnership similar to the type Australian Bauxite signed earlier this year. However QBL’s recent capital raising knocked the share price around a bit, and the company looks to be changing hands cheaply given its potential. With all the recent progress at these two aspiring bauxite producers, I am happy to continue holding my shares while I watch the companies develop.