Sometimes it’s the supposedly smaller things that can grind industry to a halt, such as the current shortage of the obscure diesel additive AdBlue.
Few outsiders would know that aluminium smelters require an ingredient called aluminium fluoride (AIF3), to enable the right chemical balance through the complex process of converting alumina (refined bauxite) to aluminium metal.
While Australia has a prosperous aluminium sector, it relies on imports – mainly from China – to keep the smelters humming. We’re the largest aluminium-producing region without a domestic AIF3 capacity.
According to ABx Group Executive Director Ian Levy, the federal government appreciated the importance of AIF3 post-war, when it created Comalco (now owned by Rio Tinto).
As with other import-dependent activities, fostering a local supply was put in the too-hard basket. This short-sightedness is coming back to bite, with supply chain disruption becoming a major issue.
“Currently some smelters are experiencing significant challenges because of container shipping delays for chemicals and other specialist raw materials ,” says Levy.
“Imagine a bakery without the smallest thing: yeast. Without it you can’t make the bread. It’s the same for AlF3 in smelters.”
Like a decent loaf of sourdough, ABx’s 87 per cent owned subsidiary Alcore Technology is rising to the occasion with ambitious plans to build an AIF3 facility in Tasmania’s Tamar Valley, proximate to Rio Tinto’s Bell Bay smelter.
Costed at $20 million, the plant would secure supply for the local industry and generate strong short-term cash flow for ABx, which also has promising plans to extract rare earths from its Tasmanian bauxite tenements.
Until late last year, the ASX-listed ABx was known as Australian Bauxite but changed its name to reflect its broader repertoire.
Alcore plans to produce AIF3 using ‘spent bath’, a by-product generated from the smelting process itself.
About half of this bath-waste is fluorine, a perfect source of AIF3.
In contrast, most AIF3 traditionally is derived in a more expensive way from fluorspar – a purple crystal that has many other industrial (and ornamental) uses.
Investors may query why no-one else has cottoned on to spent bath as a cheaper and greener feedstock for AIF3 production.
Levy says the answer lies with Alcore’s know-how, developed under the auspices of chemical engineer and Alcore CEO Dr Mark Cooksey.
The process was perfected at Alcore’s Berkeley Vale labs on NSW’s central coast – one of only a small number of facilities globally that can carry out such research.
“The process is innovative, requiring multiple steps with the right amount of temperature, pressure and acidity levels,” Levy says.
Alcore currently is undertaking a $1.5 million pilot plant program at the lab, with construction of its initial commercial plant at Bell Bay slated for late 2022.
Alcore’s engineers have modelled the full-scale output of up to 60,000 tonnes per annum, which would generate earnings before interest and tax of $50 million a year.
The output is a small proportion of the total AIF3 global output of 1.5 million tpa, but a 10,000 to 20,000 tpa plant would go a long way of meeting Australia’s annual requirement of 25,000 tonnes.
Currently AIF3 fetches $US1000-1800 a tonne, but current costs range up to $US1500/t as the cost of traditional fluorspar is rising.
By utilising waste from mainland smelters as well as Bell Bay, ABx expects production costs of $US650-900 per tonne and a long-term average price of $US1200/t.
“During negotiations with customers none has mentioned price as a key factor,” Levy says.
“We have a lot of support from western country smelters, they are all keen for us to perfect the technology and help them out.”
Further afield, ABx holds a half-share of the Sunrise Bauxite Project at Binjour, 115 kilometres west of Bundaberg, in joint venture with India’s Rawmin Mining.
Budgeted at $15 million, the new project aims to sell half a million of tonnes of bauxite to alumina refineries in India and China.
The Binjour deposit hosts higher-grade gibbsite-rich trihydrate bauxite, the material most suited to producing aluminium metal at low temperatures.
The venture will also own a large bulk-port facility at Bundaberg Port which is the only shipping gateway north of Brisbane that does not require vessels to cross the Great Barrier Reef.
Levy says Rawmin Mining has been extracting and shipping bauxite from India for more than 50 years and needs additional supply from Australia to supply customers during India’s wet season when all the ports are closed.
Rawmin’s expertise in operating ports means the JV can expect significant revenues from Bundaberg, not just from bauxite. He notes that New Hope Corporation makes large side profits from operating a bulk facility at the Port of Brisbane.
ABx also owns the smaller scale Fingal Rail Project in Tasmania’s north, which is pitched at mining bauxite for the cement and fertiliser industries over at least 15 years. This output would replace ABx’s depleted Bald Hill mine nearby, which it has operated since 2015.
Levy says the business promises niche cash flow at small tonnages. But shipping from Tasmania is expensive, at least until Burnie Port expands to take Panamax-sized ships.
Levy says it’s possible that Alcore eventually will be demerged and separately listed, to maximise the potential of all of ABx’s assets.
“Meanwhile, we expect Alcore to be the cash flow driver for ABx over the next three years – and a very valuable addition to the Australian aluminium industry.”