Queensland Bauxite (ASX:QBL) is progressing its plans for its South Johnstone DSO Bauxite Project in northern Queensland to begin production of bauxite later this year.

The recently completed drilling program is waiting on drill results to upgrade the current quantity of Indicated Resource and define a Measured Resource, which will allow finalisation of the initial mine plan for the Mineral Development Licence (MDL) Application.

Samples are currently being processed by ALS Laboratory with results to be modelled upon receipt of all assays.

Mine plan, environmental studies and works for the mineral development licence application are on schedule.

Granting of an MDL would enable shipping of bauxite from the South Johnstone Bauxite Project – currently scheduled for Q4 2015 – with the goal of proving the feasibility and viability of the South Johnstone Bauxite Project for the long term.

Sholom Feldman, managing director, commented:

“Now that this stage drilling program is complete, we will shortly report new upgraded resource modelling to JORC standard which facilitates the application for a Mineral Development Licence Application.

“The granting of a MDL is a significant milestone that QBL is looking to achieve. Once we secure this MDL, QBL can commence its first shipping of bauxite, currently scheduled for the fourth quarter of this year, which is an important step towards not only commencement of mining, but also assist in our ongoing marketing and sales efforts of first bauxite to customers, and should serve the purpose of proving the long term viability of bauxite production from the South Johnstone Project.

“The second half of calendar 2015 is an exciting time for QBL with a number of significant developments occurring. South Johnstone is now firmly in the project development phase and we are well placed to deliver increased value to shareholders.”

Drilling

The recently completed drill program was also aimed at increasing the bauxite tonnage quantity of the current Indicated Resource by determining the depth of the mineralisation within the Indicated Resource area.

As a result, drilling down to 5 metres (previous drilling depth averaged only 1.0 – 1.5 metres) has been undertaken within the previously reported Indicated Resource area.

With many of those previous holes at 1.5 metres still in bauxite mineralisation and some deeper holes within the Indicated Resource still finding bauxite at over 4.5 metres depth, it is expected that the resultant tonnage calculations within the previously calculated Indicated Resource should increase following the modelling of the results of this program.

Once this process is complete it will be released to the market.

Following this drilling program, additional detailed drilling will be undertaken throughout the now identified extensive bauxite mineralisation throughout the tenement area to continuously increase mine life of the South Johnstone Project.

This further drilling is expected to identify additional JORC Compliant Indicated and Measured Resources to support the long-term export DSO operation.

Market Analysis

In June, independent bauxite industry consultant group CM Group (CM) provided a market analysis of bauxite from South Johnstone as analysed by ALS Laboratories.

This found that its bauxite is suitable for low temperature Bayer processing as a single source feed to a refinery or it could equally be blended with other low temperature bauxites as a feed to refineries.

Its Total Available Alumina (TAA) and Reactive Silica (RS) figures are also similar to the bauxites of the Darling Ranges in Western Australia, which form the basis for Western Australia’s world-class alumina industry.

CM Group added:

“Being low temperature bauxite opens the market for the South Johnstone product to approximately 82% of the current Chinese merchant refinery capacity and increases the potential customer base.”

“When QBL-supplied costs for South Johnstone are considered on a ViU-adjusted pricing basis (relative to the CBIX price index forecast), the South Johnstone bauxite project is positioned in Q2 of the China import margin curve, again sandwiched between Malaysia and Australia.

“In other words, on a ViU-adjusted basis, relative to CBIX, South Johnstone bauxite could be treated at a lower cost than Malaysian bauxite, but a higher cost than Weipa bauxite.”

“The Chinese value quality bauxite, a diversified supply base, consistent supply and grades, and a SE Asia or Oceania location (to minimize freight costs). In this respect, if the South Johnstone project can provide a consistent quality of product, it will satisfy all of the value criteria. Thus the South Johnstone project is well placed to supply the Chinese market.”