THE Tony Sage-chaired Cape Lambert Resources is looking to become a key infrastructure provider in west Africa within three years by developing a railway line to exploit its iron ore assets, a move which could yield up to $A270 million a year in value.
Speaking to delegates at the Mining 2011 Resources Convention, Sage said the company would soon have sufficient cash reserves to bankroll the $160 million rail line in Sierra Leone, based on a cost of $2 million per km over an 80km length.
“We have $40 million in the bank, we just sold our gold asset, which brings in another $30 million, we’ve got the $80 million debt owed to us by the Chinese and then we’ve got the impending sale of Marampa,” he said.
Still keen to float Marampa into a separate $500 million IPO, Sage said based on a rate of 10Mtpa and a $1/t royalty, Marampa had potential to generate $10 million annually, with a further $1/t royalty to kick in from the sale of African Iron, while its Kukuna iron ore deposit, which has the potential to deliver up to 50Mtpa, could yield $250 million each year based on shipping rates of $5/t.
With a current JORC compliant resource at Marampa of 700Mt, as well as an agreement providing it with access to a railway and port, a $500 million IPO is proposed with Cape Lambert to retain 75% in the form of cash and the balance in project equity.
Sage said several potential Marampa customers were currently looking at the data for the project, a process that would continue until the end of November.
The next asset in the company’s pipeline is Kukuna, located 80km from a new port being built by African Minerals, which coincidently also owns a 20% stake in Cape Lambert.
“We estimate Kukuna has the potential to host an exploration target of between 1 and 2 billion tonnes of iron ore based on mapping undertaken by SRK Consulting and we are drilling that now and expect to release a resource in nine months,” Sage said.
“We’ve done all the metallurgical work and that also shows that it is exactly the same type of orebody as Marampa, so will upgrade to a hematite grade of 66% iron.”
Across the border in Guinea, its Sandenia property is strategically located 40km north of Bellzone’s massive 6.16Bt Kalia magnetite play and adjacent to its proposed Kalia-Matakang railway line.
Yet to be drilled, based on soil sampling and aeromagnetic surveys, Sage believes it could potentially host an exploration target between 3-3.5Bt of ore.
Describing west Africa as the next Pilbara, the region has already attracted heavy hitters such as BHP Billiton, Rio Tinto and Vale, not to mention the Chinese and more recently Xstrata.
Shares in Cape Lambert were up 1.2% this morning to 41.5c.
CFE Price at posting:
41.5¢ Sentiment: Hold Disclosure: Held
(20min delay)