2 ideas in 200 words #10
Actually, for this post, it's one idea in 200 words. I think you’ll see why.
In 2024, China produced 93mt of bauxite and imported 159mt. In the first half alone of CY2025, China has increased imports by 34% to 103MT. China is desperately short bauxite ore. Production in China peaked in 2018. This is China’s iron ore moment all over again, but this time in an even scarcer commodity.
Currently >70% of China’s bauxite imports come from a single country in West Africa. China is desperate for more ore and to diversify its sources
MMI is the leading dedicated Australian bauxite producer. It is on track to export >6.5mtpa from the Skardon River port in Weipa, far north Queensland.
MMI is one of the lowest cost producers globally due to:
- the low strip ratio -virtually zero
- proximity to port just 9km away
- absence of drill and blast – the ore is literally scraped after removing the top 0.5m of overburden.
And its worth noting that It costs <US$10/t to ship ore from Weipa to China vs ~$US25/t from Guinea.
The company is forecasting a margin of ~$30 per tonne. This places MMI on a PER of 2.8x and a dividend yield >12%.
MMI is not without risk and has had a chequered past with high debt and operational issues. But the infrastructure has undergone significant improvements over the past 3 years. And on the debt front, broker research indicates that the company will be net cash within the next month.
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Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.
Expertise
Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.
Expertise
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