VBX (ASX: VBX) has entered into a bauxite offtake and investment framework agreement with a Hong Kong subsidiary of a major Chinese aluminium industry group. The agreement is initially centred on the development of the Wuudagu bauxite project in northern Western Australia, with potential to expand into other local project opportunities.

Bauxite is the primary ore used to produce alumina, which is then smelted into aluminium, making long-term supply arrangements an important part of planning for aluminium producers and project developers. Under the purchase component of the agreement, the focus is on a mutually agreed volume of Wuudagu bauxite product, anticipated to be between two and three million tonnes per annum (Mtpa).

Managing Director Ryan de Franck highlighted the strategic appeal of the project: "Wuudagu's attractive low-silica product quality, short and efficient logistics, expanding scale and northern Australian location are highly desirable attributes for a bauxite supply source in the global aluminium industry."

"VBX has made a conscious decision to retain all rights to future products produced at Wuudagu and to seek to use these rights to provide an attractive funding solution to construct and commission the project," Mr de Franck continued. "This framework agreement with a major Chinese aluminium industry group provides a pathway to finalising a material funding solution for Wuudagu once the DFS is completed. We look forward to working collaboratively with the Chinese group to define the investment and offtake terms once the results of the DFS are available."

VBX is currently working to complete a definitive feasibility study (DFS), secure all relevant approvals and licences, and develop and operate a bauxite mining and export operation at Wuudagu. A DFS is typically a key technical and economic assessment used to support decisions on project financing, construction and development. The Chinese group's mining operations investment is intended to cover a material component of the cost of constructing and commissioning the mining operation at Wuudagu, with the investment amount to be determined based on DFS results and mutual agreement.

The two parties will use commercially reasonable endeavours to negotiate on a non-exclusive basis the terms under which the Chinese group may provide investment for VBX to establish the Wuudagu mining operation. Upon successful negotiation and completion of that investment on mutually acceptable terms, VBX and the Chinese group may also explore collaboration on the exploration, development, and operation of other bauxite projects in Northern Australia. This could include VBX's Takapinga bauxite project in the Northern Territory, through potential investment, product offtake, and/or advance payment arrangements.

The Wuudagu project is located in the Shire of Wyndham East Kimberley, in the north Kimberley region of Western Australia, approximately 270km north-west of Kununurra.

VBX shares closed down 8.93% at 51.0¢, with a market capitalisation of $46.53 million.