African Minerals inks iron-ore deal with China Railway Materials
By: Chanel Pringle / 1st April 2010
JOHANNESBURG (miningweekly.com) - Base-metals-miner African Minerals and China Railway Materials Commercial Corporation (CRM) have now entered into definitive agreements regarding CRM's plans to buy a 12.5% interest in the mining company, as well as for offtake agreements from the Tonkolili iron-ore project, in Sierra Leone.
The miner had announced on January 6, that it had entered into a conditional agreement with CRM, which, if concluded, would provide the majority of funding required to advance its flagship Tonkolili project. African Minerals confirmed on Friday that CRM would acquire a 12.5% stake for about 167.9-million pounds.
This, along with an 80-million pounds share placement would fully fund the planned capital expenditure for the phase-one iron-ore production and related infrastructure projects at Tonkolili. The parties have entered into an exclusivity agreement for the transaction until July 31, 2010.
Among the various conditions to the acquisition, was that CRM would have to obtain the necessary approvals from the government of the People's Republic of China. If African Minerals terminated the transaction as a result of CRM being unable to obtain these approvals, CRM would owe it a break fee of $10-million.
Meanwhile, the parties had concluded a haematite agency agreement, in terms of which CRM would be an exclusive agent for expected sales in China of between five-million tons a year and eight-million tons a year of haematite iron-ore for a 20-year period. The first phase of Tonkolili would produce between five-million tons a year and eight-million tons a year of iron-ore by 2011.
The two parties would renegotiate the agency agreement, once in its third year, with the view to converting this to an offtake agreement for the full output of the haematite iron-ore output from Tonkolili. Further, CRM and African Minerals had entered into a 20-year guaranteed offtake agreement for the second phase of magnetite iron-ore production at Tonkolili.
In terms of the agreement, CRM would buy a minimum of ten-million tons a year of magnetite iron-ore from the second phase development of Tonkolili, which would start in 2013. Tonkolili's output was expected to ramp up to 45-million tons a year of combined haematite and magnetite products by 2014.
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