Determining the Price of Minerals

The document outlines a methodology for applying the Comparable Uncontrolled Price (CUP) method to bauxite transactions, focusing on the impact of mineral quality and market indexes on pricing. It identifies available alumina and reactive silica as the primary drivers of economic value and provides a detailed process for adjusting benchmark index prices to reflect specific ore characteristics and transportation costs. The guide also lists reputable price-reporting agencies and provides a worked example of calculating a Free on Board (FOB) price for Guinean bauxite exported to China.

• The economic value of bauxite is primarily determined by its behavior in the Bayer process, with gibbsitic and diasporic ores being more valuable than boehmitic ores because they are less expensive to process.
• Available alumina is the most critical factor for commercial value, as each 1% reduction in available alumina typically results in a cost increase of approximately USD 4–8 per tonne of alumina production.
• Reactive silica is the most economically significant impurity because it directly increases the amount of caustic soda required during refining; a 1% increase in reactive silica can increase caustic soda consumption by more than 20 kg.
• Bauxite pricing has shifted from being a percentage of the London Metal Exchange (LME) aluminum price to being based on independent alumina and bauxite indexes due to diverging supply and demand dynamics between bauxite, alumina, and aluminum.
• Tax administrations can use bauxite price indexes from agencies such as CBIX, Fastmarket, CRU, and Asian Metal as a starting point for determining arm's length prices, provided they apply comparability adjustments for alumina content, silica, and freight.
• Common comparability adjustments for bauxite include price changes of USD 1 per dry metric tonne (dmt) for every 1% deviation in alumina content, and between USD 1 to USD 4 per dmt for every 1% deviation in total silica content.

APA

Viola, A., Lassourd, T., & Readhead, A. (2023). Determining the Price of Minerals. International Institute for Sustainable Development. https://www.iisd.org/system/files/2023-11/determining-the-price-of-minerals-framework-bauxite.pdf

Chicago

Viola, Andrew, Thomas Lassourd, and Alexandra Readhead. Determining the Price of Minerals. International Institute for Sustainable Development, 2023. https://www.iisd.org/system/files/2023-11/determining-the-price-of-minerals-framework-bauxite.pdf.

Wikipedia

{{cite report |last1=Viola |first1=Andrew |last2=Lassourd |first2=Thomas |last3=Readhead |first3=Alexandra |title=Determining the Price of Minerals |publisher=International Institute for Sustainable Development |date=2023 |url=https://www.iisd.org/system/files/2023-11/determining-the-price-of-minerals-framework-bauxite.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{viola2023determining, author = {Viola, Andrew and Lassourd, Thomas and Readhead, Alexandra}, title = {{Determining the Price of Minerals}}, institution = {International Institute for Sustainable Development}, year = {2023}, url = {https://www.iisd.org/system/files/2023-11/determining-the-price-of-minerals-framework-bauxite.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }