Chinese sign up for refinery

THE Chinese parent of Yanzhou Coal, which this month swallowed Australian coalminer Felix Resources, has signed a heads of agreement with West Australian junior Bauxite Resources to study building a $1.5 billion alumina refinery south of Perth. State-owned Yankuang Corporation, which owns 88 per cent of Yanzhou, has strengthened an earlier memorandum of understanding to take a 50 per cent stake in a proposed refinery in the Darling Ranges. The area produces 20 per cent of the world's alumina and already has four refineries -- three owned by Alcoa and one by BHP Billiton. Yankuang has signed a heads of agreement on a previous MOU to subscribe for 19.7 million Bauxite Resources shares, at a cost of 50c each -- just half the company's current share price. Yesterday, Bauxite's shares slipped 4c to $1, valuing the company at $213 million. The company did not return calls yesterday. "Bauxite Resources and Yankuang will now proceed with the detailed engineering studies, environmental and regulatory approvals and resources evaluations necessary to bring to fruition a modern, world-class, socially and environmentally responsible, low-cost alumina producer," Bauxite managing director Daniel Tenardi said. Bauxite's biggest shareholder is Shandong Provincial Bureau of Geology & Mineral Resources, whose 19.7 million shares give it a 9 per cent stake. Yankuang and Bauxite are yet to announce a preferred site for the WA refinery. The pair have run into some problems in getting a mine to feed a potential refinery going after the WA shire of Chittering refused to let Bauxite boost the size of its trial mining site. This led the company to widen its timetable for commercial shipments from this half to some time this year. The Foreign Investment Review Board has approved both Yankuang's 50 per cent stake in a proposed refinery (for which it will pay 75 per cent of the total costs) and the issue of 19.7 million Bauxite Resources shares. The stock issue will require shareholder approval and Chinese regulatory approval.