Minim Martap: Gearing towards production

Minim Martap has a total JORC-compliant mineral resource of 1,027Mt at 45.3% alumina and 2.7% silica and is expected to produce up to 6.4Mtpa of premium bauxite over the initial 20 years. The project’s development is dependent on upgrading the existing rail infrastructure, which is currently underway, and building a transhipment operation. Having obtained a mining licence in 2024, Canyon is in the process of completing a definitive feasibility study (DFS), due in Q325, which will include an updated mineral resource estimate and binding commercial rail and port agreements. The company is aiming for production start in 2026 and has already secured up to 50% of the initial project funding via a debt agreement with its key shareholder, Eagle Eye Asset Holdings (EEA), significantly de-risking the project.

New supply is needed to stabilise the bauxite market

After a long period of relative stability, global bauxite prices saw a sharp increase in 2024, trading above US$100/t on the back of significant production curtailments in China, supply disruptions in Guinea and, earlier, an export ban in Indonesia. Tight bauxite market conditions underscore its vulnerability to supply shocks and suggest that new sources of production are required to ensure long-term stability. This bodes well for Canyon, as its large-scale Minim Martap project is well-positioned to offer a more robust and diversified bauxite supply. In the long run, bauxite demand will continue to be driven by growing underlying aluminium consumption from the energy transition industries.

Valuation: Large scale offers significant upside

As one of only a few listed pure-play bauxite companies, Canyon offers rare exposure to the fast-growing bauxite market. We value Minim Martap at US$566m (A$877m) on an NPV basis, using a 10% discount rate, 20-year mine life and US$68/t long-term bauxite price. Given the large resource base, with mineral reserves only covering c 10% of total resources, and significant exploration potential, we value its residual resource at US$175m (A$272m) on an EV/resource basis.

Company description: A clear path to production

Canyon Resources is an ASX-listed exploration and development company advancing its 100%-owned Minim Martap bauxite project in Cameroon. With a total JORC-compliant mineral resource of 1,027Mt at 45.3% alumina and low silica of 2.7%, it is a high-grade, large-scale direct shipping ore (DSO) deposit with near-term production potential. The project’s development is subject to upgrading the existing rail infrastructure in Cameroon, which is currently underway, and building a transhipping solution at the port of Douala to deliver a premium saleable product to the fast-growing seaborne bauxite market. With the mining licence granted in September 2024, Canyon is currently working on the DFS, which, among other things, will include an updated mineral resource estimate, as well as binding commercial rail and port agreements. The recently signed debt agreement with Canyon’s key shareholder EEA significantly de-risks the project. EEA controls c 42% of the company and is a long-term investor that is supportive of the project’s development. Other near-term project workstreams include advancing offtake agreements and securing the remainder of the project funding with the aim of starting production as early as 2026.

Financials: Significant progress towards securing project funding

Canyon is a pre-production mining company and its financials reflect the project’s early development stage. In H125, it spent A$7.0m on exploration and A$2.5m on admin and staff costs, and it had A$15.6m in cash at end-December 2024. While the company is likely to be looking to raise funds this year as it gears towards the production start, the recent loan agreement with EEA (worth US$123m) to fund the purchase of rolling stock for the initial stage of the project covers up to 50% of Minim Martap’s development capital of US$253m, significantly reducing its funding risk. The remaining capex of c US$130m (A$195m) will likely be split between debt and equity. Canyon has 500m options outstanding with EEA, which could bring in an additional A$35m, leaving the company to raise c A$160m, or about 50% of its current market cap. As Canyon continues to de-risk the project throughout 2025, we expect the ratio of the required project funds to its market cap to reduce further. In terms of project economics, the bankable feasibility study (BFS) based initial bauxite production of 3.5Mtpa, cash opex of US$24/t and our long-term bauxite price of US$68/t imply annual revenues of US$203m and project-level EBITDA of US$109m. At full capacity of 6.4Mtpa, following the rail upgrade expected by 2030, the same opex and bauxite price assumptions would result in revenues and EBITDA of US$371m and US$200m, respectively.

Valuation: A$877m base case with upside potential

Canyon is one of only a few listed pure-play bauxite companies and its shares represent a rare opportunity to gain exposure to the fast-growing international bauxite market. Due to the lack of comparable peers, our main approach to valuing Canyon is a discounted cash flow analysis of the Minim Martap project on a standalone basis. To this, we add a value of the project’s residual resource. Our cash flow valuation is underpinned by the 2022 BFS assumptions, with some modifications, and we provide a number of valuation sensitivities that take into account potential cost inflation and mine life extension. Our net present value (NPV) of the project at a 10% discount rate is US$566m (A$877m), using a long-term benchmark bauxite price of US$68/t. At A$0.30/tonne, a 20% discount to Canyon’s EV/resource multiple, we value Minim Martap’s residual resource at US$175m (A$272m). Given the project’s large resource base, which could sustain 140+ years of production, significant exploration potential and rail infrastructure constraints, we believe that the biggest valuation upside will come from extending its mine life beyond the initial 20 years. Assuming a 30-year life, our NPV increases to US$680m (A$1,065m). The long-term bauxite market fundamentals look attractive, driven by the growing underlying demand for aluminium from the energy transition industries. At the same time, the recent spike in the bauxite price on the back of the supply disruptions in Guinea shows that the market remains highly vulnerable to supply shocks. This puts Canyon in a strong position as its large-scale, high-grade Minim Martap project offers more robust and diversified supply, which could help alleviate China’s dependence on Guinea’s bauxite.

Risks and sensitivities

Canyon is exposed to a standard set of risks attached to a pre-production mining business. These include the geographical and political situation in Cameroon, funding and dilution risks, as well as exposure to the volatile commodity markets.

Company description: An emerging bauxite player

Canyon Resources is an ASX-listed exploration and development company advancing its 100%-owned Minim Martap bauxite project in Cameroon. Minim Martap is a pre-production DSO asset that boasts a large, high-grade bauxite resource and a long mine life. The development of the project envisages upgrading the existing rail infrastructure and building a transhipment operation, which will allow the company to take advantage of the fast-growing international bauxite market. Canyon has recently secured a mining licence for the project and is in the process of completing the DFS, with the release scheduled for H225. Other ongoing project-related workstreams include the updated mineral resource, binding rail and port agreements and progressing the project towards the final investment decision (FID). Canyon’s cornerstone shareholder, Eagle Eye Asset Holdings (branded as Fortuna Holdings), which currently controls c 42% of the company, is an experienced long-term mining investor and is fully supportive of the project’s development.

Minim Martap: A high-grade, long-life bauxite development

Canyon Resources owns 100% of Minim Martap through its wholly owned, in-country subsidiary Camalco. Minim Martap is a high-grade, long-life bauxite development in central Cameroon. In 2018, Camalco was granted an exploration licence for the project, with a maiden 2012 JORC-compliant mineral resource declared in 2018 building on the earlier exploration work. The company released a pre-feasibility study and a maiden mineral reserve in 2020, followed by a feasibility study and the submission of environmental studies in 2021, culminating in the publication of a BFS and granting of a certificate of environmental compliance in 2022. Finally, in mid-2024, the project obtained a mining convention and a licence with an initial 20-year term, requiring it to commence production within two years. Canyon is currently undertaking the DFS, due for release in H225, which will include a revised mineral resource estimate and updated infrastructure studies. With the main workstreams nearly complete, Canyon is looking to fast track the development of the project, aiming to start production in 2026, with the subsequent ramp-up towards full capacity within the next few years.

The project consists of the Minim Martap, Makan and Ngaoundal tenements in the Adamawa region of Cameroon, covering approximately 981km². The Minim Martap and Makan mining areas are located within 50km of the railway station, while the Ngaoundal tenement is about 5km from the rail head. The rail line connects the area to the Atlantic port of Douala. From a geological perspective, the project is represented by a large, shallow, high-grade bauxite resource dominated by Gibbsite with low levels of reactive silica. The resource is hosted in a series of plateaux. The main plateaux within the Minim Martap licence are Raymonde, Danielle and Beatrice. The bauxite zone in the region is predominantly 10–15m thick, with alumina grades varying between 35% and 62%. The Minim Martap and Makan bauxite is formed over more alumina-rich basal rocks with higher alumina grades, lower iron grades and higher-residual silica compared to Ngaoundal.

The most recent extensive exploration work on the project was undertaken by the company in 2018–20. In September 2018, Canyon announced a maiden 2012 JORC-compliant mineral resource of 550Mt at 46% alumina and 2.1% silica. Subsequent exploration activities focused on increasing the size and confidence of the resource base. This work resulted in a 62% upgrade in mineral resources to 892Mt (45% alumina, 2.8% silica) in 2019 and the subsequent definition of a maiden probable ore reserve of 97Mt (51% alumina, 2.3% silica) in 2020, later upgraded to 109Mt at 51.1% alumina and 2.0% silica as part of the BFS. The most recent resource estimate for the project was published by the company in May 2021, with the overall tonnage increasing to 1,027Mt at 45.3% alumina and 2.7% silica (cut-off grade of 35% alumina). It includes a higher-grade portion of 484Mt with alumina grades of 49.0% and silica of 2.6% (see Exhibit 2). The defined mineral resource represented only 15 bauxite plateaux within the Minim Martap licence area, while the three project tenements consist of 76 bauxite plateaux, of which 62 have not yet been drilled. The scale of the resource and its grade put the project within the largest and highest-grade bauxite deposits, behind Awaso in Ghana and Porto Trombetas in Brazil.

In its latest (Q224) quarterly report, Canyon announced completion of the 2024 drilling campaign, which comprised 1,526 boreholes for 23,254m across the project’s three tenements. The company noted exceptional drill core recoveries across all diamond holes. The results of the drilling programme are currently being analysed and will be announced in H125, forming the basis for the project’s updated mineral resource as part of the forthcoming DFS.

Extensive metallurgical test works conducted by the company indicated Minim Martap’s bauxite to be very reactive when treated at lower temperature levels, making it suitable for low-temperature refinery feed stock (Guinean and Indonesian bauxite specification). It can also be used as a feedstock ore in high-temperature/high-pressure digestion plants (Australian bauxite specification), with some mine planning modifications. Canyon completed three different digestion tests, which allowed for a detailed understanding of bauxite product specifications and optimal refining conditions for potential offtake partners. These were micro digestion, both low temperature (148^oC) and high temperature (235^oC), autoclave digestion and Fourier transform infrared spectroscopy (FTIR). All three types of test delivered consistent results demonstrating total available alumina and reactive silica conversion rates of c 90% and c 70–80%, respectively. We summarise the results of the metallurgical test results in Exhibit 3.

Importantly, based on the metallurgical work completed as part of the BFS, Minim Martap’s bauxite product has a premium specification, as can be seen from Exhibit 4. It surpasses both Guinean and Indonesian low-temperature bauxite products in terms of nominal and available alumina and has lower nominal silica. It also has relatively low total organic content, which is one of the main impurities and the potential source of price penalties. All this suggests that the project’s saleable product will attract a premium pricing compared to benchmarks (Guinean bauxite, in particular) and should be sought after by the offtakers.

The 2022 BFS review

In June 2022, Canyon released the BFS on the Minim Martap project. The study covers the 500km² area of the project within the Minim Martap exploration licence, which is consistent with the project’s subsequently granted mining licence. The main focus of the BFS was to optimise the operational design of the project outlined in the earlier published pre-feasibility study (July 2020) and to maximise saleable product tonnage that can be transported through the existing rail corridor and port. We discuss the project transport infrastructure in the section below.

The 2022 mine plan for the project covers 99% of the defined proved reserves of 109Mt and assumes an initial mine life of 20 years. The proposed mining operation consists of three open-pit mines within the Beatrice, Raymonde and Danielle plateaux that will be mined sequentially with life of mine grades maintained at or above 50% alumina, ranging from 50% at Danielle Central to 52% at Beatrice South. The shallow nature of the deposit, with the majority of mineral resources being within 15m depth from the surface, coupled with the low strength ore, support a simple ‘free-dig’ operation using surface mining with no drilling or blasting. The favourable physical properties of the ore suggest that the mined ore will require no washing or screening and that the project can therefore produce high-grade DSO bauxite without any beneficiation.

The lack of processing and very low strip ratio (one tonne of ore for 0.3t of waste) allow for very low mine level operating costs. The BFS estimated total life of mine (C1) cash operating costs for the project at US$24.0/t of sealable product on a free-on-board (FOB) basis. The mine and mine site infrastructure costs account for c 15% of the total, with the remainder dominated by transport infrastructure, with rail costs estimated at US$7.4/t (31%) and port-related costs at US$7.6/t (32%). Road haulage from the mine to the rail adds another US$4.3/t (18%). Although cost estimates are likely to increase as Canyon completes the DFS, the overall project’s opex looks competitive, especially compared to current spot bauxite prices and our long-term price assumptions.

The project’s capital cost estimate is split into development and deferred components. The development cost was estimated by the company at US$253.1m, with rail-related items such as rolling stock and locomotives accounting for c 48% of total pre-production capex. The deferred portion of the capital cost is linked to the ongoing government-driven rail infrastructure upgrade, which should allow the project to increase its annual bauxite production from the initial BFS estimate of 3.5Mtpa to 6.4Mtpa (see the initial mine schedule in Exhibit 5). The largest portion of the deferred capital expenditure is, once again, rail-related and represents the purchase of additional rail cars and locomotives. We show the breakdown of both capex components in Exhibit 7. Looking at capital intensities, we estimate the project’s post-expansion capex per tonne of capacity at c US$65/t (development capital intensity of c US$40/t). There are very few, if any, similar independent bauxite projects, which complicates the comparisons of Minim Martap’s economics. However, the recently announced investment by Chinalco of c US$426m in bauxite mining in Suriname to produce 6Mtpa of bauxite implies a capital intensity of c US$70/t and is therefore comparable to that of Minim Martap.

Near-term project catalysts: DFS, mineral resource, infrastructure access

The BFS released in early 2022 was largely based on pre-COVID-19 capital and operating cost estimates. Canyon is in the process of updating this study to incorporate the results of the extensive drilling campaign, as well as the more accurate and up-to-date operating and capital cost assumptions that should reflect ongoing discussions with Camrail (the Cameroon rail operator) and the Port Authority of Douala. Given the passage of time since the completion of the original BFS, we would expect the project’s original opex and capex estimates to increase. The key areas of cost pressures are likely to be related to the rail transportation and port transhipment operations on the opex side and the long-lead, rail-related items on the capex side.

The magnitude of the potential increases in capex is difficult to assess from the publicly available information. However, we note that Canyon’s recent announcement regarding the rolling stock purchase agreement suggests the acquisition of 550 wagons and 22 locomotives, as well as a warranty and services agreement for c US$124m. This compares to the BFS cost of purchasing the rolling stock and locomotives of US$106m (plus c US$15m for auxiliary items such as spare parts, control systems, etc) for the initial phase of the project. The cost of buying additional rail cars and locomotives to accommodate the increase in production to 6.4Mtpa post the rail upgrade was estimated at c US$113m. Given that the number of wagons the company is potentially looking to buy (550) is similar to that considered in the 2022 BFS for the full project capacity (559), we believe that the underwritten debt agreement provides Canyon with a certain flexibility to pursue other rail-related investments such as an inland rail facility (IRF), the cost of which was estimated in the BFS at US$19m.

At the same time, the extensive drilling campaign completed by the company in 2024, which covered both the Minim Martap and Makan tenements, is likely to bring the project’s overall mineral resource higher and could result in an upgrade in its mineral reserve estimate, allowing for the project’s mine life extension. Based on our estimates (see the valuation section), the latter could, to a large extent, offset the potential increase in operating and capital costs. Minim Martap is a large-scale bauxite deposit with significant potential to extend the resource base and the mine life. The mining licence for the project secured in September 2024 covers the initial 20 years of operations and allows for subsequent extensions for periods of up to 10 years.

The near-term project workstreams include:

• updated compliant mineral resource estimate on the back of the 2024 drilling campaign due in H125;
• DFS due for release in Q325;
• binding port and rail access agreements to be finalised in H125;
• progressing offtake and funding discussions over the course of 2025;
• mining licences for Makan and Ngaoundal tenements to be obtained in 2025; and
• commissioning of an alumina refinery feasibility study in H125.

Downstream expansion potential

In addition to bringing the Minim Martap project into production, Canyon is considering its integration with processing plants to produce alumina and aluminium. The company is finalising a BFS contract with a well-known refinery developer for a 1Mtpa alumina refinery adjacent to the bauxite mine. The BFS is expected to be commissioned in H125 and construction to start within two years following its completion. At the proposed capacity of 1Mtpa, the alumina refinery could consume c 2–2.5Mtpa of bauxite from Minim Martap, or c 30–40% of the project’s steady-state production.

In addition, according to press reports, EEA is in talks with the government of Cameroon to acquire state-owned aluminium producer Alucam. Along with the proposed alumina refinery, this move could create the full aluminium value chain in the country. Alucam’s current capacity is about 100,000 tonnes of aluminium coil, ingots and sheets. We understand that it is currently loss making as its profitability is negatively affected by electricity supply and logistical constraints. It is also suggested that EEA is considering investing c US$70m towards Alucam’s capacity expansion, plus US$30m in refurbishing existing operations. The downstream expansion and vertical integration would allow the company to gain exposure to higher value-add aluminium products, benefiting from both the stronger profitability of an upstream business and the more stable margins of downstream operations through economic cycles.

Infrastructure is key to project development

Given the simple nature of the mining operations, infrastructure is key to the project’s execution. Minim Martap’s infrastructure solution is twofold: it assumes an upgrade to the existing railway lines that connect the project to the port of Douala and building the transhipment operation at the port of Douala to bring the saleable product to the international bauxite market.

Rail infrastructure

The company has undertaken detailed studies that analyse the state of the existing railway and its traffic, and align the project’s development timeline and its production ramp-up with available capacity on the line. Cameroon’s rail network consists of two main parts: Transcam 1, which is 262km long and connects Douala with Yaoundé; and Transcam 2, which extends for 626km and connects Yaoundé with Ngaoundéré. The network is predominantly a narrow-gauge, single-track rail. It is run by Camrail as a concession granted by the government to operate, manage and maintain the railway network. The government retains ownership of the rail infrastructure, including stations and tracks, and is mainly responsible for new infrastructure investments. The freight tariffs are not regulated and are set by Camrail.

Over the years, the network, especially the Transcam 1 section, has undergone significant refurbishment and renovation. In particular, as part of the five-year rail infrastructure modernisation programme, by 2021, Camrail renovated 68 rail bridges across the system. This work was part of a larger programme supported by the World Bank that saw the refurbishment of 330km and reinforcement of 500km of tracks. In October 2021, Canyon announced that the report from Camrail confirmed that all bridges on the line are rated to a 20-tonne axle load and are suitable for the planned tonnage from Minim Martap. More recently, in 2022, it was reported that the EU had agreed to provide an additional €123m as part of the overall funding of €243m to upgrade the 330km Belabo-Ngaoundere section of Transcam 2. With Transcam 1 having been largely modernised and works on Transcam 2 progressing, it is expected that, by 2030, Cameroon’s total railway network will be able to accommodate longer trains with higher payload per axle.

The rail modernisation should allow Canyon to implement a gradual ramp-up of the Minim Martap project from the initial BFS-based production of up to 3.5Mtpa of bauxite to a nameplate operating capacity of 6.4Mtpa. As part of the BFS, Vecturis, a well-known, West Africa-focused rail engineering and operations consultancy, provided detailed analysis of the project’s rail access and capacity requirements. Apart from the required fixed infrastructure upgrades, along the Transcam 1 and Transcam 2 sections of the network, it concluded that in total 24 stations will need to have their passing loops extended to a useful length of 1,200m. We understand that these upgrades are part of the overall railway refurbishment and will not require investments from Canyon unless the company chooses to invest certain funds to fast track the development of the project through funding some of the rail works itself. It is expected that, at the initial stage, the project will use two trains per day consisting of up to 70 wagons, each loaded at up to 17t per axle, or c 75t of bauxite per wagon. Once the full railway upgrade is completed, at a steady state of c 6.4Mtpa, another train will be added with the overall payloads increasing to 20t/axle, or 93t per wagon.

In 2020, Canyon signed a memorandum of understanding with Camrail, which provided a pathway and timeline for the completion of binding commercial rail access and rail haulage agreements. Further, in April 2022, the company executed a heads of terms agreement with Camrail to establish the negotiation process and agree on the commercial terms of the contract. We understand that these commercial agreements are expected to be reached in H125 as part of the ongoing DFS work.

At the beginning of February, the company announced that the government of Cameroon had approved the location of the inland rail facility and allocated 105 hectares of land to be used for the associated infrastructure. The IRF is situated near the existing Makor train station and will include a new rail siding suitable for 1,200m-long trains. It will operate as a satellite hub supporting the train, road haulage and road maintenance activities. In the BFS, the capital cost of the IRF was estimated at US$18.5m.

Port infrastructure

The saleable product from the Minim Martap project will be transported by rail to the unloading operation at a new dedicated area of the port of Douala. Based on the 2022 BFS, the port solution for the project was contingent on the completion of the extension of the Douala port on the Bonaberi side of the Wouri River. A new development would provide the platform for a mineral terminal with a dedicated area for train unloading, stockpiling and loading of the bauxite onto barges and then to capesize vessels. The transhipment operation would consist of a fleet of barges, tugboats and an offshore floating vessel, and represents a common way of moving bulk commodities, such as iron ore and bauxite, to ocean-going vessels in areas with limited water depth.

In 2022, the port of Douala entered into an agreement with KTH Engineering (KTH) to build a new 42-hectare bulk terminal and a 900m dock on the right bank of the Wouri River at the Douala-Bonaberi port. According to press reports, after significant delays, in mid-2024, KTH secured a €142m loan with the African Export-Import Bank to fund construction of the first phase of the new terminal, with a project company providing an additional €60m in financing. The terminal project is expected to be completed within 60 months. The 2022 BFS assumed that Canyon would be one of the anchor tenants of the new development. However, delays in obtaining funding suggest there is a high risk that the new terminal will not be completed on time for the project and, in addition, may not offer the company the required capacity and the most convenient location.

Separately, in October 2024, it was reported that ARISE Integrated Industrial Platforms (ARISE IIP) signed a partnership agreement with the Port Authority of Douala to build the Dibamba industrial port zone. It is expected to be an integrated industrial ecosystem covering 517 hectares of land and will include a multimodal logistics hub and an integrated industrial park. Founded by Gagan Gupta, ARISE IIP is part of the ARISE group and has experience in developing similar industrial zones in other African countries such as Gabon, Togo and Benin. The new port development will be located along the banks of the Dibamba River and could represent an attractive logistical solution for Canyon using the same design as the project’s proposed transhipment operation. We understand that the terminal’s construction time should fit within the project’s overall production ramp-up timeframe and that it is now the company’s preferred port solution for the project.

Cameroon: A country of relative stability in Africa

Cameroon is a lower-middle-income country in Central Africa located on the Atlantic coast with a population of about 30 million. The country is rich in natural resources such as oil and gas, mineral ores and timber, which (together with agricultural products) represent its main exports. Overall, industry accounts for c 25% of the country’s GDP, with agriculture and services contributing 17% and 50%, respectively. Cameroon’s economic growth has recently been around 3–4% and the IMF expects GDP to expand by 4.2% in 2024 and 4.4% in 2025. Inflation has slowed post COVID-19 but still remains at relatively high single-digit levels. Despite a low unemployment rate of about 3.5%, mostly within the younger population, poverty levels and inequality in Cameroon are high, with c 23% of the population estimated to live below the international extreme poverty line. The country was ranked 140th out of 180 in Transparency International’s 2023 Corruption Perceptions Index.

Cameroon is a presidential republic. The country has been run by President Paul Biya since 1982 (having been the prime minister from 1975 to 1982) and its political landscape has been largely dominated by the Cameroon People’s Democratic Movement party and its satellites, with limited and scattered opposition. Apart from the seven-year insurgence led by the Anglophone separatists in the north-west and south-west regions of the country (with the majority of the population being Francophone), the country has been largely immune to the significant political instability or war conflicts that are common in Africa. Cameroon’s presidential term is seven years and the next election is scheduled for October 2025. While at present it is not clear whether Paul Biya is going to be re-elected, local commentators suggest that political continuity is likely to be maintained given the lack of strong opposition and the general population’s preference for stability. This would be a positive outcome for the country’s ongoing infrastructure investment programmes, which are crucial for Canyon’s project execution. We, therefore, consider political risk in Cameroon, especially within the broader African context, to be low to neutral for the company and its local operations.

Shareholders and ownership

Following an initial placement of A$12m (20% ownership) at the end of 2022, Canyon announced a follow-up strategic investment agreement with EEA in August 2023. As part of the transaction, EEA acquired 150m new shares in Canyon and exercised 203m existing options at A$0.07 per share, generating A$24.7m in new cash proceeds for the company. As a result, EEA increased its ownership of Canyon to 40.6% (subsequently raised to 41.7% through on-the-market purchases). In addition, Canyon granted EEA 500m options, with an exercise price of A$0.07 and an expiration date of 26 December 2026. If exercised, these options could generate an additional A$35m in funding for the company. The options are conditional on (1) the granting of the mining licence for the project and (2) a binding contract for port access and rail transportation. With the mining licence already secured and infrastructure agreements being negotiated as part of the DFS, we expect EEA to exercise the remaining options during 2025, providing Canyon with additional financial resources to advance the project towards the FID. If the options are exercised, we estimate that EEA will bring its ownership in Canyon to c 57%. However, we understand that EEA is not interested in reducing the free float and is likely to be looking to limit its shareholding in the company through bringing in new strategic partners.

EEA is a single-family office based in Singapore and Dubai, managing a portfolio of investments in mining, clean energy and healthtech companies. In addition to Canyon, in the mining space, it has interests in FG Gold, Fura Gems and Prospect Resources. Having been gradually building its stake in the company, EEA is a long-term investor and is committed to bringing the Minim Martap project into production, which it demonstrated by providing Canyon with significant funding and infrastructure support. EEA is represented on Canyon’s board by Gaurav Gupta.

At the project level, Minim Martap is 100% controlled by Canyon’s Cameroon subsidiary Camalco. As part of the mining licence agreement, the company is required to transfer a free-carry 10% interest in the project to the Cameroon government. We understand that Canyon is in the process of complying with this requirement.

Management changes

The company has recently implemented a number of management changes as it steps up its preparation for the next stage of the project’s development.

On 5 February, Canyon announced the appointment of Peter Secker as chief executive officer (CEO) from 1 July 2025. The company’s current CEO, Jean-Sebastien Boutet, will transition to the new role of chief commercial and corporate development officer. Prior to joining Canyon, Mr Secker was the CEO of Bacanora Lithium from 2015 to 2023, where he was responsible for the development of the Sonora lithium project in Mexico. Bacanora was acquired by Ganfeng Lithium in 2023.

In addition, on 20 February, the company announced the appointment of Dean Horton as non-executive director. Mr Horton is a senior corporate finance professional with experience in developing and financing energy, natural resource and infrastructure projects. He previously served as group manager of funding at Fortescue. In mid-January, the company announced the appointment of Kudzai Mtsambiwa as chief financial officer. Mr Mtsambiwa was CFO of Coda Minerals from 2021 to 2025.

Overall, we view these appointments as a clear indication that the project is rapidly moving to the development and early production stages.

Bauxite market: A solid case for further demand growth

Historically, the global aluminium market has had a high degree of vertical integration, with the largest producers of aluminium outside China, such as Rusal, Rio Tinto, Alcoa and Norsk Hydro, controlling the full value chain from production of bauxite and alumina, to higher value-added aluminium products. However, market conditions have been changing rapidly due to stricter environmental regulations, gradual depletion and grade deterioration of some of the existing bauxite resources, as well as the increasing number of independent alumina refineries. As a result, the international seaborne markets for both bauxite and alumina have been on the rise, creating an attractive entry opportunity for independent producers to fill the growing supply gap.

China, the largest producer of both alumina and aluminium and the largest global consumer of bauxite, imported a record 142Mt of bauxite in 2023, up an impressive 13% y-o-y, with the majority of the supply coming from Guinea (c 73%) and Australia (c 23%). At the same time, the seaborne bauxite market reached 177Mt in 2023, a 16% increase over just two years, fuelled by China. In 2024, China’s bauxite imports increased by another 12% to 159Mt. An important contributing factor in growing Chinese imports last year was production curtailments at bauxite mines in Henan and Shanxi, the main domestic bauxite production area, due to environmental concerns. Similarly, alumina plants in Hebei and Shandong saw production suspensions last year due to heavy pollution. Along with growing underlying demand, these factors have resulted in shortages of both bauxite and alumina in China and caused a significant increase in prices for both commodities.

On the supply side, in mid-2023, Indonesia, once the third-largest supplier of bauxite to China, introduced a ban on its bauxite exports. As a result, its share in the international bauxite trade has fallen from c 15% in 2021 to just c 5%, creating a visible supply gap. At the same time, 2024 saw bauxite export restrictions in Guinea in October, which followed supply disruptions at the end of 2023 due to an explosion at Guinea’s main oil terminal in Conakry. In Australia, production interruptions also affected the aluminium value chain, with both Alcoa (Kwinana plant shutdown) and Rio Tinto (Yarwun and Queensland operations) visibly reducing alumina production during the year. While the significant negative supply impact may not persist for long, it demonstrates the market’s vulnerability to supply shocks and suggests that new sources of supply may be beneficial to ensure market stability. This bodes well for Canyon, as its large-scale Minim Martap project is well-positioned to alleviate China’s reliance on Guinea’s bauxite, offering a more robust and diversified supply.

Apart from the market supply/demand imbalances, the longer-term increase in bauxite trade is underpinned by the growing consumption of aluminium, in particular in China, driven by the metal’s use in energy transition industries such as electric vehicles (EVs), electronics and green energy (solar panel and wind turbine manufacturing). According to the International Aluminium Institute, global primary aluminium production grew by 3% to 73Mt in 2024, with China’s production growing by c 4%. Estimates compiled by the Australian Department of Industry, Science and Resources show that global demand for primary aluminium could grow to 76Mt by 2026, while industry sources suggest that the green energy transition may require some 15–22Mt in additional primary aluminium by 2030. Increasing aluminium content in cars, as a result of the electrification of the car market, is a useful example of how the energy transition is driving global aluminium demand. Thus, a study produced by consultant Ducker and commissioned by European Aluminium suggests that the aluminium content per vehicle could increase by c 81kg on a gross basis (c 52kg net) between 2022 and 2030. The biggest increase is expected to come from EV-specific components like e-drive and battery housings to partly compensate for the weight of EV batteries.

With global new energy vehicles (NEVs), demand is growing at double-digit rates (in China alone, NEV sales rose by 42% and penetration reached 48% in 2024, with industry commentators suggesting growth of 39% and penetration reaching 57% in 2025) and global solar panel installations are growing at even higher rates (with expected global photovoltaic installations of 592GW in 2024, up 33% on 2023, when installations surged by 87%), medium- to long-term demand fundamentals for aluminium look to be well underpinned. These trends should also continue to support alumina and bauxite demand.

Bauxite prices have been gradually rising since the beginning of the COVID-19 pandemic, averaging US$57/t (CIF China, 45% Guinea) in 2020–23 compared to a c US$45/t trough in 2021, driven by growing demand, a bauxite export ban in Indonesia and production curtailments in China. This growth has recently accelerated, with prices exceeding US$100/t at the end of 2024 (2024 average of c US$78/t) on the back of significant supply disruptions in Guinea and Australia. While alumina prices have started to come down from their peaks of c US$790/t reached at the end of 2024, benchmark prices for bauxite delivered to China remain at elevated levels above US$100/t, supported by tight market conditions. This puts significant pressure on alumina refining margins. In the aluminium value chain, upstream producers are currently enjoying more favourable economics, and we believe this situation may continue given the tightening bauxite market fundamentals, in particular in China.

For the purpose of our modelling, we assume a long-term benchmark bauxite price of US$60/t in 2024 real terms, which implies a price of US$68/t in 2030, using a 2% inflation adjustment. We model spot bauxite prices to reduce gradually from an estimated average of US$90/t in 2025 to our long-term assumption in 2030. Given recent industry trends, we view our pricing assumptions as relatively conservative and provide a sensitivity analysis in the valuation section below.

Canyon is a pre-production mining company and its financials reflect the stage of its development. In FY24 (to June 2024), the company reported operating cash outflows of A$9.6m, which included A$6.1m in expensed exploration activities and A$3.8m in employee and supplier payments. Another A$2.4m in exploration activities was capitalised, along with A$1.1m in property, plant and equipment payments. Canyon raised A$24.4m in net equity and finished the year with A$22.2m in available cash. In H125, the level of spend increased in line with the increase in project-related work, with total exploration cash outflows of A$7.0m and another A$2.5m in admin and staff costs. The company generated A$2.8m in cash from an options exercise and had A$15.6m in cash at end-December 2024. Canyon reported that this amount of cash should sustain its operations for approximately another three quarters.

While the company is likely to be looking to raise funds this year as it gears towards the start of production at Minim Martap, we note that on 28 January it executed a loan agreement with its main shareholder EEA to fund the purchase of rolling stock for the initial stage of the project. The total underwritten loan amount of US$123m represents up to 50% of the project’s development capex based on the 2022 BFS, significantly reducing the project’s funding risk. We assume that the remaining c US$130m will be split between debt and equity. With a 75% equity share, Canyon would therefore need to raise an additional c US$100m (c A$150m). We note that the company has 500m options outstanding with EEA, which could bring in some A$35m in funds, leaving Canyon to raise another c A$120m, or just c 35% of its current market cap. As Canyon continues to de-risk the project through 2025, the ratio of the required equity funding to its market cap should reduce further.

The loan agreement with EEA assumes a 12% interest rate and has an underwriting fee of 3% (US$3.7m) payable to EEA. The loan term is 60 months, including the 12-month moratorium from the date of first drawdown. Repayment of the loan and interest will be made in equal instalments every six months, with the first payment therefore due 18 months after the first drawdown. Canyon is required to pay 30% of any fund-raising towards reducing the loan amount.

In terms of project economics, based on our model:

• The 2022 BFS-based initial bauxite production of 3.5Mtpa, cash opex of US$24/t, 5% royalties and our long-term benchmark bauxite price of US$68/t imply revenues of US$203m and project-level EBITDA (before overheads, central costs, etc) of US$119m.
• At a 6.4Mtpa run rate post 2030 and the same opex and bauxite price assumptions, we estimate the project’s revenue and direct EBITDA at US$371m and US$200m, respectively.
• Finally, in a more theoretical current market scenario, assuming a bauxite price of US$100/t, which on our assumptions implies a saleable FOB price of US$85/t, opex of c US$31/t (2022 BFS direct cash opex of US$24/t inflated at 5% per year to 2025), the steady-state 6.4Mtpa bauxite production scenario would generate revenue and direct EBITDA of c US$576m and US$348m, respectively, before any overhead costs, implying a margin of c 60%.

While industry comparisons are complicated by the lack of publicly listed, independent bauxite producers with similar saleable product specifications, we note that Rio Tinto reported H124 bauxite revenues and underlying EBITDA of US$1.4bn and US$513m, respectively, implying a margin of 36%. During the period, the benchmark Guinea bauxite price was approximately US$72/t. Similarly, Metro Mining, an independent bauxite producer in Australia, reported FOB revenues of A$105m and site-level EBITDA of A$36m in Q424 (to December), implying a margin of c 34%. Metro produces lower-priced, high-temperature (HT) bauxite and sells mainly to China and the United Arab Emirates. During the period, the price differential between the Guinea benchmark and HT Australia bauxite was approximately US$25/t (c 20%).

Canyon is one of only a few listed independent bauxite producers and developers, and its shares represent an attractive opportunity to gain exposure to the fast-growing bauxite market. Due to the lack of peers, our main approach is to value Canyon using a discounted cash flow analysis. The company is at the development stage and we therefore consider an NPV of the Minim Martap project on a standalone basis. To this, we add the value of the project’s residual resource. Our valuation is based on the 2022 BFS assumptions with some modifications, as discussed below. However, to account for the fact that the BFS was produced largely in the pre-COVID-19 era and the fact that Canyon is currently working on updating the study, we have considered a number of sensitivities that take into account a potential increase in costs and a longer mine life.

Our main base-case valuation assumptions are as follows:

• In line with the 2022 BFS, we assume a 20-year mine life using the project’s defined mineral reserve of 109Mt at 51% alumina and 2% silica. The 2022 BFS considered production start in 2024 at an average rate of 3.7Mtpa of bauxite for the first six years, with a subsequent increase to full capacity at an average run rate of 6.4Mtpa from year seven to allow for infrastructure upgrades. Given the passage of time and the fact that completion of the rail upgrade now appears to be closer, we have made the following modifications to the production schedule. In line with the company’s intention to speed up the development and comply with the mining licence requirement to start production within two years, we now assume that the project will commence production at lower rates of c 1Mtpa in 2026 and will gradually ramp up to full capacity of c 6.4Mtpa by 2030/31. These assumptions have the overall effect of bringing steady-state cash flows forward compared to the 2022 BFS. This scenario assumes that the company will be able to use existing rail capacity (potentially shorter trains and less payload) and that the transhipment solution will be available within the next c 12–15 months.
• We have kept the BFS development capex estimate of US$253m largely unchanged. As noted above, Canyon has already secured a US$123m loan from EEA to purchase wagons and locomotives for the initial stage of the project. This amount covers up to 50% of the development capex and significantly de-risks the project. In the BFS, rail-related capex was estimated at US$120m, consisting of US$106m for rolling stock and c US$15m for auxiliary items. While it is not clear whether the US$123m loan covers full rail development capex or just rolling stock, for now we have increased the BFS capital cost estimate by US$20m to US$273m to account for likely cost overruns. We have brought forward deferred rail capex of US$113m and mine upgrade capex of US$16m, keeping both unchanged, in line with our mine schedule assumptions. In addition, the project’s sustaining capital is estimated at US$127m over the life of mine.
• We have assumed a long-term (2030 onwards) cash operating cost of US$24/t in line with the BFS. The cash cost is predominantly made up of the rail and port transportation charges and is likely to increase as Canyon finalises binding infrastructure agreements. Further, in the event the company moves less product on the rail at the initial production stage, it could result in higher unit costs. As such, in order to model a more realistic production start scenario, we have assumed a cash cost of US$31/t in 2026 (2022 BFS opex inflated at 5% pa), gradually falling to our long-term, steady-state assumption of US$24/t by 2030 as the company ramps up production.
• As discussed earlier, our long-term benchmark bauxite price assumption is US$68/t on a CIF China basis. We model benchmark bauxite prices to fall gradually from an average of US$90/t in 2025, converging to our long-term assumption by 2030. To arrive at a saleable FOB price, we use a long-term freight rate estimate of US$25/t (US$30/t at production start falling to our long-term assumption by 2030). Further, the benchmark price specification is based on Guinea bauxite grading 45% alumina and 3% silica. Given that Minim Martap is expected to produce premium-grade bauxite, with higher alumina content, lower silica and low impurities, we have assumed a flat value in use quality adjustment of US$15/t compared to the benchmark price. These assumptions imply the project’s long-term saleable FOB price is US$58/t in 2030 (US$65/t in 2026).
• Finally, we use our standard 10% discount rate, 30% tax rate and 5% royalty assumptions, as well as a five-year tax and royalties holiday period. We have assumed 12% interest on debt in line with the EEA loan agreement. Given that Canyon has already secured up to 50% of development capex as a loan from EEA, we assume that the remainder of development costs will be 75% equity (US$114m; A$170m) and 25% debt funded. While Minim Martap is at a relatively advanced stage of development and the company appears to be in a strong position to bring the project into production, we note that the discount rate of 10% may not fully capture the risks associated with pre-production mining business in Africa. We provide a valuation sensitivity analysis of changes in discount rate assumptions below.

All in all, our base case valuation of the project using the above assumptions is US$566m, or A$877m, on a 100% ownership basis. The currently assumed 20-year mine life is underpinned by a mineral reserve that represents only c 10% of the project’s overall mineral resource of 1,027Mt. Given the lack of peers, to value the residual resource we use the company’s EV/resource multiple of A$0.37/t discounted by 20% to reflect its relatively advanced development stage. At A$0.30/t, we value Minim Martap’s residual resource at US$175m (A$272m).

Given the scale of Minim Martap’s resource base, its exploration potential and rail infrastructure constraints, we believe that the main valuation upside will come from extending the project’s mine life. Assuming a 10-year mine life extension to 30 years and keeping all other assumptions unchanged, our valuation of the project would increase to US$680m (A$1,065m).

Other base case NPV sensitivities include:

• a 10% increase in the long-tern benchmark bauxite price would boost our NPV estimate by 27% (and vice versa);
• a 10% increase in our long-term opex assumption of US$24/t would lower the NPV by 11%;
• a 10% increase in the development and deferred capex estimate would lower our NPV by 5%; and
• a 1pp increase in the discount rate would reduce the valuation by 12%.

Overall, based on our model, the project’s NPV is most sensitive to changes in bauxite price and opex assumptions, while changes in capital costs have a less pronounced impact on the valuation. Below we show our base case valuation’s sensitivities to changes in capex, opex, the discount rate and the benchmark bauxite price.

Sensitivities and risks

The company is exposed to a standard set of risks associated with a pre-production mining business. We have covered valuation sensitivities above. Other risks include:

Geographical and political risks. The project is located in Cameroon and, although we view the current political and economic situation in the country as relatively stable, the upcoming presidential election represents uncertainty that could affect Canyon and the project.

Funding and dilution risk. The company has made significant progress in securing funds for the development portion of the capital cost. That said, there is still a significant risk that Canyon will not be able to raise the required outstanding financing on time to meet current production start expectations. In addition, we see the risk of a higher capex estimate as part of the currently ongoing revised BFS work, which could result in higher funding requirements and delays in raising financing. In addition, despite securing a significant part of the development cost via debt, the company still needs to raise a large amount of funds, which could potentially result in significant dilution for existing shareholders.

Commodity prices. As with any mining company, Canyon is exposed to high fluctuations in commodity prices that could affect the project’s economics and valuation. While bauxite fundamentals appear to be favourable, the international bauxite market is relatively opaque, very concentrated and characterised by supply/demand swings that cause significant price volatility.

Project execution risk. While the Minim Martap project is at an advanced pre-development stage, bringing it into production to a large extent depends on the rail infrastructure being upgraded and the transhipment operation being built within the specified timeframe. These factors are largely outside the company’s control. Any infrastructure delays could significantly affect the project’s execution and valuation.