Ausenco created a dynamic simulation model to simulate the seasonal throughput of the Bauxite Hills mine in Northern Queensland under a range of environmental conditions. These simulations quantified the cash flow risk and projected return on investment for potential investor Nebari Holdings and guided their decisions on key capital expenditures.
The Challenge
Metro Mining Limited (MMI) operates the Bauxite Hills Mine on the Northern Peninsula in Queensland, Australia, with annual bauxite production reaching 3.5 Mtpa in 2019. MMI sought financing to fund a production expansion project to 6.0 Mtpa – transporting bauxite from the mine to a barge loading facility and then to a transshipment platform loading Ocean Going Vessels (OGV). Presented with this investment opportunity, Nebari Holdings engaged Ausenco to vet MMI’s expansion plans as part of its due diligence process, and comment on the feasibility of the proposed expansion’s logistics.
The Better Way
At Bauxite Hills, bauxite is trucked to a barge loading facility on the Skardon river, where it is transported to a transshipment facility in the deeper water of the Gulf of Carpentaria for shipment overseas. Many factors affect the efficiency of this process, including the load capacity of the barges, which can vary greatly depending on weather and tide-related water depths upriver. To avoid grounding at low tide, barges must sometimes be limited to <60% of their capacity, reducing the efficiency of each trip. To reduce barge cycle times and fuel costs, each OGV is half-loaded at a transfer location close to shore first and then moved further out into the gulf to complete loading in deeper water.
Many variables affect the water levels in the river and transshipment conditions offshore, including tides, seasonal rainfall, winds, and wave heights. Ausenco created a dynamic simulation model, incorporating historical operating performance and 15 years of metocean data, to estimate the benefit of MMI’s proposed expansion plans. Evaluating the range of worst-case to best-case scenarios empowered Nebari to predict their projected cash flow and demurrage costs in a risk-based way.
The Outcome
Ausenco simulations confirmed MMI’s projected throughput performance estimates after the proposed expansion, as well as the conditions under which those targets might be at risk. Predicted demurrage costs resulting from maintenance or environmental delays informed Nebari’s cash flow projections and ROI schedule, which confirmed their investment opportunity. By accomplishing the difficult task of quantifying the cash flow risk, we provided nuanced answers that allowed Nebari to make a more informed business decision.
Models also confirmed that an increase in MMI’s barge fleet size and the purchase of a locally available floating crane for the offshore transfer platform would meet throughput targets with sufficiently low risk, giving our client additional confidence before investing this additional capital.