Bauxite Resources Ltd (ASX:BAU)

March 27, 2014 | Price: $0.125

Emerging Companies

Overview: Bauxite Resources Ltd (“BAU”, the Company”) is an Australian minerals Company engaged in mining, exploration, and development of bauxite properties. It is focused on Western Australia’s Darling Ranges, with direct and Joint Venture interests spanning 17,000 km2, incorporating Measured, Indicated and Inferred bauxite resources totalling 338million tonnes (mt). The Company’s most advanced assets include the Fortuna deposit (39.5mt), and free carried interest (30%) in the Felicitas JV (218.7mt). We initiated coverage in Oct 2012 at $0.11/share with a ‘spec buy’ recommendation for its turnaround potential.

Catalysts: After expanding its project inventory by 39% during the past six months, BAU is shifting focus to mine planning. Progression of environmental studies at Fortuna and scoping works at the Felicitas JV should highlight the Company’s near-term production potential. In a market facing supply constraints due to Indonesian export bans, we expect BAU’s status to attract greater recognition. The Company is presently valued below its cash reserves.

Hurdles: Whilst BAU has sufficient funding to advance project development, external capital needs may be influenced by a shareholder class action. Litigation funder, IMF, is pursuing a claim relating to disclosures surrounding a $19million share placement completed in Oct 2009 under former management. The Company intends to defend the claim, which we estimate could consume half of its cash reserves.

Investment View: BAU offers speculative exposure to the growing seaborne bauxite trade. We are attracted to the strategic positioning of its assets to key Asian markets and near-term production potential. Whilst strained landholder relations under former management and the IMF claim have challenged sentiment, we see a positive balance of risks. The Company is well funded and valued below its cash reserve, hence we reiterate our ‘speculative buy’ advice.

March 27, 2014

Spec Buy

$0.125

CORPORATE SUMMARY

Ticker BAU.ASX
Industry Mining
Price $0.125
Shares 231.48M
Other Securities Performance Shr rights 6.50m Options 2.00m
Market Cap $30.33m
Net Debt -$42.70m
EV -$12.37m
Issued Capital $87.41m

ASSET OVERVIEW

Name Darling Ranges Bauxite Projects
Location WA, Australia
Status Resource
Resource 338MT
*37.3%Al2O3 (total), 1,6%SiO2 (reactive)

MANAGEMENT

Non Exec Chairman Robert John Nash
CEO Peter Canterbury
Track Record
Value Creation Strong
Operations Fair
Capital Markets Strong

SHAREHOLDERS

HD Mining & Inv PL 8.40%
Yankuang Res PL 8.40%
Directors 15.90%
Top 20 58.76%

Disclaimer

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this report is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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