Page 6 - Bauxite Resources Annual Report 2013

Chairman’s Report 2013
Dear Shareholder,
The past 12 months have been challenging for mineral
explorers globally due to uncertainty in the economic recovery
of major economies and the slowing in China’s rate of
economic growth. We have seen large global mining houses
pull back on planned major expansions. In Western Australia
a number of large resource development projects have been
deferred or cancelled. The aluminium industry has suffered
a downturn due to lower than projected demand in China
combined with a significant over supply of aluminium.
Despite these concerns about the global conditions, the
Company remains optimistic about the outlook for bauxite
and alumina in the medium to longer term. Industry
projections are that there will be increased demand from
China for bauxite in the years to come. It is also expected that
there will be increased political restraints on the availability of
Indonesian bauxite which has been a major supplier of bauxite
to China in recent years. Australian producers stand to benefit,
given our geographical proximity to China.
In the last year significant progress has been made towards
the Company’s ambitions of establishing itself as a significant
player in the alumina industry and as a supplier into the export
bauxite market. The Company and its JV partners for the 12
month period to 30 June 2013 achieved a 96% increase in
JORC compliant bauxite resources. The total JORC compliant
bauxite resource base presently stands at 256.4 million tonnes.
Significantly, of that total resource base, the Company’s
100% owned bauxite resources have substantially increased
following focussed exploration on its Fortuna project which
began at the start of this year. The Fortuna bauxite resource is
now 39.5 million tonnes and is expected to increase further. It
has the added advantage of being geographically close to the
existing Felicitas deposit and also close to existing road and rail
infrastructure.
It is extremely difficult to compare our reported bauxite
resources with companies operating in regions outside
the Darling Range. It is not as straight forward as simply
comparing total and available alumina levels. Some companies
report their alumina levels on a post beneficiation basis.
The Company does not do that because of the inherent
uncertainties involved and the potential risk of the market
being misled by the practice. The quality of a bauxite resource
is also not solely governed by the reported percentage of total
or available alumina. There are other factors that need to be
borne in mind such as the mineral form in which it is found
(eg; gibbsite, boehmite, diaspore), the level of reactive silica
at both low temperature and high temperature digestion,
and the other refining characteristics of the bauxite in
question. The Company is increasingly confident, based on
the mineralogical testing work done to date, that its bauxite
will prove to have good refining qualities and will be very
marketable to an informed market.
In April of this year, your Board resolved to put in place the
on-market share buy-back program which commenced in
May. The decision to do that was based on the view that
the Company’s shares were trading at a substantial discount
to their asset backing. At the time, the shares were trading
between 10 and 12 cents, giving the Company a market
capitalisation of between $23m and $28m. Given that the
Company’s cash resources alone (without regard to resources
or land holdings) substantially exceeded its market value,
the Board determined that the on-market share buy-back
program could only enhance the value of the shares held by
its committed, loyal and long term investors. In addition to its
substantial resource base, the Company has approximately
$43m cash at bank, owns two farming properties in the
Chittering area, owns valuable laboratory assets used at the
Nagrom laboratory, and has no debts. The Company’s shares
at the time of writing were trading at 14 cents giving the
Company a market capitalisation of $32m.
4 Bauxite Resources Annual Report 2013