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China is running out of bauxite.
Like iron ore, China is running out of bauxite that it can produce domestically. Chinese mines operate at significantly lower grades than offshore peers, and reserves are dwindling—production declined by 20% last year, according to Morgan Stanley. However, given how energy-intensive it is for smelters to produce aluminium, China still dominates the downstream aluminium market.
This creates an ever-increasing reliance on importing bauxite from Africa and Australia. China currently imports 70% of its bauxite requirements, with Guinea accounting for 74% of these imports and Australia supplying 22%.
Chinese bauxite imports have grown at 25% CAGR over the past 20 years.
Source
: CM Group Bauxite Industry Report May 2025
Chinese bauxite inventories are typically built at this time of year (May through October). However, Indonesia’s ongoing export ban, coupled with unreliable supply from Africa, means prices look set to continue increasing....
VBX - Upcoming IPO
VBX will soon be the leading pure-play bauxite developer on the ASX. Its IPO is on Tuesday, 17 June. VBX's Wuudagu bauxite project is in Western Australia.
We have previously discussed our criteria for early-stage mining companies here on Livewire, a process that enabled us to identify Sun Silver (ASX: SS1), which went on to be the top-performing IPO of 2024.
Source:
Seneca Research
Guinea-style bauxite, in Australia
Guinea dominates the global bauxite export market thanks to its abundant, high-grade 45%+ Al₂O₃ deposits with very low <2% reactive silica—ideal feedstock for aluminium producers.
Interestingly, parts of Western Australia share key geological similarities with Guinea, likely due to their historical connection within the Gondwana supercontinent ~500 million years ago. Both regions were once located near the palaeoequator, where warm, humid conditions promoted intense lateritic weathering and the formation of high-grade bauxite.
Not all bauxite is created equal, though, and Guinean spec bauxite typically commands a 20-25% premium over standard Australian material. As David Flanagan (of Atlas Iron and now Arrow Minerals) recently quipped:
“You could just about eat that stuff... It’s like having O-negative that can go anywhere.”
While Australian bauxite is generally lower in grade, it can still compete—if the logistics and impurity profile are right. Reactive silica, in particular, is heavily penalised by Chinese smelters. For example, South32’s Worsley mine in Western Australia operates at just 28.7% Al₂O₃ but remains viable due to its extremely low reactive silica (1.9%) and vertical integration.
As the Pilbara’s success in iron ore shows, grade is only part of the equation. Infrastructure is often the real driver of profitability in bulk commodities. Despite only “okay” ore grades, the Pilbara thrives thanks to world-class rail and port access, as well as proximity to China. That dynamic applies equally to bauxite. Australia enjoys a major logistical edge over West Africa: shipping from Guinea to China takes around 5 weeks and costs ~US$20/t, compared to just 2 weeks and ~US$10/t from Western Australia. That freight savings goes straight to the bottom line and can be reinvested by miners, giving Australian producers a clear margin buffer, especially in a volatile price environment.
Can you have your cake and eat it too?
VBX aims to achieve the best of both worlds, combining Guinea-like product quality with Australian logistics. Starting from a 39.4% Al₂O₃ in-situ resource, the company plans to beneficiate its ore to a 45.4% Al₂O₃ product with just 3.6% reactive silica. That’s far closer to Guinea-spec than typical Australian output—and should command a meaningful pricing premium.
Source
: CM Group (2023) Bauxite Industry Report
What gives us confidence that a junior company can get this into production?
VBX appears well-positioned to move into production, supported by a strong logistics advantage. Its mining operations are just 40 km from the loading point for large vessels shipping to China, providing a significant freight and efficiency edge.
For junior miners, low capital intensity is crucial, and VBX could follow a similar path to Fenix Resources (
ASX: FEX), a company we've closely followed that successfully entered production by keeping capital expenditures low. Unlike FEX, which hauls ore over 500 km to port, VBX’s ore will travel just 33 km, reducing transport costs and operational complexity. With an estimated capex of $125 million (per its PFS) and a minimal pre-strip requirement (0.2:1 strip ratio), VBX boasts an attractive NPV-to-capex ratio—an important factor for securing favourable project financing and navigating commodity price cycles.
VBX proximity to port. Source
: VBX presentation
We see significant potential for VBX to expand its resource and future production, with only 48% of target areas drilled to date and minimal exploration conducted between BHP’s work in 1967–1972 and VBX acquiring the ground in 2013–2014. While we don't incorporate anything in our assumptions for it, VBX's earlier stage, second project, the Takapinga bauxite project on Melville island off the coast of Northern Territory, reminds me of Mt Gibson Iron (
ASX: MGX)'s
spectacular Koolan Island iron ore project, off the northern Kimberley coast of WA.
We're realistic that mining development projects are certainly not risk-free investments. Heritage and environmental approvals will be critical in advancing the project. Over the last nine years, the company has built a strong relationship with the Wunambal Gaambera Traditional Owners on the ground to ensure that the development aligns with environmental and cultural considerations. Wunambal Gaambera are publicly supportive of the project, as per their website. Metro Mining has paved the way here with >30% Indigenous employment.
VBX is, in our view, the most compelling pure-play bauxite developer on the ASX. It has a clear ~ two-year path to production and robust economics even at conservative bauxite prices. However, its IPO price is only ~5% of its potential pre-tax NPV (at spot prices), and we expect it would deliver strong margins throughout the cycle.
Source:
Seneca Research
Just wondering...
What could VBX’s project be worth to Rio Tinto, given that its own bauxite mines in northern Australia (Gove, Andoom) are running dry? We estimate that buying VBX could boost RIO's ~60 Mtpa bauxite production by 10%.
RIO generated $1.25 billion in EBITDA in 2024 from its Australian bauxite operations, making the price tag more than manageable, even if VBX were to re-rate dramatically.
As VBX de-risks, we believe it can close the valuation gap with Metro Mining (
ASX: MMI), which trades at 7x VBX’s IPO enterprise value. With Guinea-related supply risks driving a ~30% re-rate in (ex-Guinea) peers like MMI and CAY, VBX stands out with the best risk/reward profile in the sector right now.
The Seneca Australian Small Companies Fund is participating in the VBX Ltd (VBX) IPO and holds shares
Bauxite prices spiked 40% last year, but we think this is just the beginning. Here’s how we’re playing it and why.