Sometimes it’s the so-called little things that can cripple the industry, like the current shortage of the obscure diesel additive AdBlue.
Few outsiders know that aluminum smelters need an ingredient called aluminum fluoride (AIF3), to allow the correct chemical balance through the complex process of converting alumina (refined bauxite) into metallic aluminium.
Although Australia has a thriving aluminum sector, it relies on imports – mainly from China – to keep smelters running. We are the largest aluminum producing region without a national FIA3 capacity.
According to ABx Group Chief Executive Ian Levy, the Federal Government has appreciated the importance of the AIF3 post-war, when it created Comalco (now owned by Rio Tinto).
As with other import-dependent activities, the promotion of local sourcing has been placed in the overly difficult basket. This myopia is resurfacing, with supply chain disruptions becoming a major issue.
“Currently, some foundries are experiencing significant difficulties due to container shipping delays for chemicals and other specialty raw materials,” Levy says.
“Imagine a bakery without the least thing: yeast. Without it, you cannot make bread. It’s the same for AlF3 in foundries.
Like a good loaf of sourdough, ABx’s 87% subsidiary Alcore Technology is rising to the occasion with ambitious plans to build an AIF3 installation in the Tamar Valley in Tasmania, near Rio Tinto’s Bell Bay smelter.
Costing $20 million, the plant would secure supply for local industry and generate strong near-term cash flow for ABx, which also has promising plans to extract rare earths from its buildings in bauxite from Tasmania.
Until late last year, ASX-listed ABx was known as Australian bauxite, but has changed its name to reflect its wider repertoire.
Alcore plans to produce AIF3 using “spent bath”, a by-product generated by the smelting process itself.
About half of this bath waste is fluorine, a perfect source of AIF3.
In contrast, most AIFs3 is traditionally more expensively derived from fluorspar – a crystal violet that has many other industrial (and ornamental) uses.
Investors may wonder why no one else has figured out that spent bath is a cheaper and greener feedstock for AIFs.3 production.
Levy says the answer lies in Alcore’s know-how, developed under the auspices of chemical engineer and Alcore CEO Dr. Mark Cooksey.
The process was perfected at Alcore’s laboratories at Berkeley Vale on the central coast of New South Wales – one of the few establishments in the world able to carry out such research.
“The process is innovative, requiring multiple steps with the right amount of temperature, pressure and acidity,” says Levy.
Alcore is currently undertaking a $1.5 million pilot plant program at the lab, with construction of its first commercial plant in Bell Bay slated for late 2022.
Alcore engineers modeled full-scale production of up to 60,000 tons per year, which would generate earnings before interest and taxes of $50 million per year.
The output is a small proportion of the total AIF3 world production of 1.5 million tpa, but a 10,000 to 20,000 tpa plant would be more than enough to meet Australia’s annual requirements of 25,000 tonnes.
Currently FIA3 fetches between US$1,000 and US$1,800 per tonne, but current costs are up to US$1,500/t as the cost of traditional fluorspar rises.
Using scrap from mainland smelters as well as Bell Bay, ABx expects production costs of US$650-900 per tonne and a long-term average price of US$1,200/t.
“During negotiations with customers, none mentioned price as a key factor,” Levy says.
“We have a lot of support from foundries in western countries, they all want us to perfect the technology and help them.”
Further afield, ABx owns half of the Sunrise Bauxite project at Binjour, 115 kilometers west of Bundaberg, in a joint venture with India’s Rawmin Mining.
With a budget of $15 million, the new project aims to sell half a million tons of bauxite to alumina refineries in India and China.
The Binjour deposit hosts high-grade gibbsite-rich bauxite trihydrate, the material most suitable for low-temperature aluminum metallic production.
The company will also own a large bulk port facility at the Port of Bundaberg, which is the only maritime gateway north of Brisbane that does not require ships to pass through the Great Barrier Reef.
Levy says Rawmin Mining has been mining and shipping bauxite from India for over 50 years and needs additional supply from Australia to supply customers during India’s rainy season when all ports are closed. .
Rawmin’s expertise in operating ports means the JV can expect significant revenue from Bundaberg, not just bauxite. He notes that New Hope Corporation is making significant secondary profits from operating a bulk facility at the Port of Brisbane.
ABx also owns the smaller-scale Fingal Rail Project in northern Tasmania, which aims to mine bauxite for the cement and fertilizer industries over at least 15 years. This production would replace ABx’s depleted Bald Hill mine nearby, which it has operated since 2015.
Levy says the company promises niche cash flow at small tonnages. But shipping from Tasmania is expensive, at least until the Port of Burnie expands to accommodate Panamax-sized ships.
Levy says it’s possible Alcore will end up being spun off and listed separately, to maximize the potential of all ABx assets.
“In the meantime, we expect Alcore to be the engine of ABx’s cash flow over the next three years – and a very valuable addition to the Australian aluminum industry.”