Australian Bauxite to benefit from Indonesia's planned mineral export ban

No one is getting too excited just yet, but there is a chance that Indonesia of all places may be about to do Australia a big favour -- more particularly, our tin, nickel and bauxite producers.

Like the rest of the mining sector, all three could do with a bit of early Christmas cheer. Apart from the broader fallout from the recent spying scandal and the ongoing tragedy of boatpeople, Indonesia has not exactly endeared itself to the local resources industry, with its regular shocks and horrors when it comes to security of tenure.

But if the Indonesians deliver on their big commodities threat of early 2014, much of that will be quickly forgiven. The big threat is to follow through on the government's plans to proceed with a mineral ore export ban from January 12 -- a drastic attempt to force through value-adding processing of minerals with all the attendant jobs and investment creation.

IT is more than a little bit ironic that while Indonesia is pushing for more value-adding to its mineral exports, Australia has recently gone the other way, with Rio Tinto confirming that it will stop alumina production at its remote Gove operation in the Northern Territory and revert to exporting bauxite only

Bauxite at about $US35 a tonne before shipping costs does not sound all that exciting. But that Indonesian ban is at play in this market as well.

China is the world's dominate alumina/aluminium producer but its indigenous supplies of bauxite to kick the whole process along are of low quality and in short supply.

Indonesia has been making up the gap. If it were to turn off the taps, $US50-plus a tonne bauxite could arrive in a hurry, which is part of the reason Rio seems so confident that a slimmed down Gove producing only bauxite could be a goer.

But today's interest is in a little thing that has been planning for this sort of scenario since joining the ASX list, Australian Bauxite. It is well advanced on plans for a five million to 10 million tonne a year export niche from Tasmania and its other projects in NSW and Queensland. Brokers have estimated total operating costs of about $US30 a tonne, implying big margins should the tightness in bauxite supplies in to China take hold as suspected. All that explains the recent run-up in ABZ's share price from 16c a share in early November to the 23c a share on offer yesterday.