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The African Iron Ore Opportunity
“Despite the presence of significant resources, West and Central African projects are constrained by the lack of necessary infrastructure to facilitate iron ore delivery to the market.” Ousmane Kane, CEO
The African continent is known to be rich in iron ore resources with the largest untapped iron ore bodies found in West and Central Africa. Within this region four major iron ore clusters have been identified, as illustrated on the map below. The first cluster is present within Mauritania, one of a very few iron ore producing countries in Africa. The second cluster includes Guinea, Sierra Leone and Liberia, the third is Nigeria and the final cluster includes Cameroon, Gabon and the Republic of Congo.
According to the current and limited exploration works undertaken in these clusters over 50 billion tonnes of exploitable resources have been discovered. These regions have the potential to produce over 400 million tonnes annually if all the currently identified iron ore projects were developed into commercial mining operations. This would place this African region in direct competition with the largest producers, Australia and Brazil, in volume, quality and production cost terms.
China has rapidly become the world’s largest iron ore consumer and importer. In the past decade, its annual consumption has risen to approximately 70 per cent. of global seaborne iron ore, in a trade that currently totals in excess of 1 billion tonnes annually. Chinese steel output is expected to continue to grow for at least another twenty years as the country continues its rapid urbanisation and as more and more Chinese become consumers of iron ore related products, such as cars and domestic appliances.
The Key – Infrastructure Despite the presence of significant resources, West and Central African projects are constrained by the lack of necessary infrastructure to facilitate iron ore delivery to the market. Nonetheless, a range of opportunities is available in the region to unlock value and access significant iron ore volumes through the provision of creative infrastructure solutions. China has funding capability and engineering expertise and capability for large scale infrastructure projects. Chinese domestic production is constrained by growing production costs, depleting resources and environmental issues. Therefore, China needs to find new supply sources to satisfy its increasing consumption requirements. As all the world’s high grade, large iron ore deposits are found outside of China and few large multinational producers currently dominate iron ore imports into China, the country’s current national development plan seeks to diversify its iron ore supply away from its over-reliance on the three large multinational producers by directly influencing or controlling at least 50 per cent. of its iron ore import sources within the next five years. Africa creates a great opportunity to fulfil this plan.
IMIC – Unlocking West Africa’s Potential IMIC’s strategy, in conjunction with its strategic partner AIOG, is to work with African countries, including those that are officially classified as highly indebted, to create fully fundable solutions for infrastructure provision. In addition, we will look to acquire interests in or control of junior iron ore miners where there is an opportunity for an infrastructure solution. We consider such investments are attractive because we will benefit from the uplift in the value of the investments once the infrastructure solution begins to be put in place. We made our first investment in a junior miner during the 2013 financial year by acquiring Afferro.
AIOG, through its extensive regional expertise, governmental relationships and strategic alliances, will take the lead in developing iron ore mining related infrastructure solutions. It is intended that the infrastructure projects will be largely debt funded with whatever equity component is required being provided by IMIC in view of its ability, as a company whose shares are traded on AIM, to access the capital markets. The development costs for such projects will be funded by IMIC.
We believe that mining-related infrastructure in Africa – mainly railways and seaports – should be multi-user and that it should serve a number of mines, even when the mines are operated by competing companies. We also believe that if practicable such infrastructure should be multi-purpose, carrying general freight and passenger traffic. In this way, the mining-related infrastructure can provide the backbone of a country’s transport system, playing a key role in economic and social development.
IMIC’s focus will initially be on iron ore opportunities in West Africa. The demand for iron ore is currently being driven by China which consumes approximately 70 per cent. of the world’s current annual production. As the urbanization of China continues demand for iron ore is expected to remain at significant levels through to 2030.
Afferro – First Asset in Cameroon Iron Ore Corridor The acquisition of Afferro marked our first asset on the ground. With four licenses in the heart of the extensive South Cameroon, North Congo, Gabon iron ore corridor, it provides us with the perfect starting point for our strategy of facilitating infrastructure solutions and consolidating further assets.
Looking forward, we are excited by the prospect of accelerating the smaller Ntem deposit’s development. It’s close proximity to the Kribi Port already under construction and associated power generation facilities means it has the potential to deliver early iron ore and cash flows.
Nkout, which is currently planned for 35 million tonnes per year of production over a 20 year life of mine, requires significant investment in infrastructure, as the deposit lies 330kn from Kribi Port in a region with no existing power infrastructure and little road access. We plan to proceed to bankable feasibility study stage with Nkout and then develop a financing package with our partner AIOG to develop the multi user infrastructure which will unlock not only Nkout, but will form the backbone of a wider economic development opportunity.
Further down the line, an IMIC developed infrastructure corridor will provide us with multiple opportunities to take strategic stakes in other junior mining companies operating in the area and benefit from the catalyst our infrastructure solution will provide to their businesses.
Strategic partnership with AIOG IMIC and AIOG have agreed to partner on an exclusive basis to acquire, finance and develop iron ore mining and related infrastructure projects in Africa. AIOG plans to leverage its extensive regional expertise, governmental relationships and global strategic partnerships in the mining, banking and infrastructure construction sectors to assist Central and West African governments to develop and implement iron ore mining related infrastructure solutions in return for access to iron ore production. It is IMIC’s intention to acquire strategic stakes in iron ore mining projects and companies in order to benefit from the significant value creation unlocked when these projects secure infrastructure solutions that will enable their commercial development into producing assets AIOG has devoted much work to successfully assembling a "best of breed" alliance of relevant Chinese construction and equipment groups, iron ore off-takers and financial institutions which fully understand the mission of AIOG and IMIC, and are prepared to provide the backing required to ensure this initiative's launch and fast-track success.
Agreements have been signed by AIOG and in some cases the Company with the following Chinese companies (or their subsidiaries):
China Railway Group (CREC): Railways and Ports China Railway Materials Co. Ltd, (CRM): Off-take China Huaye Group Co. Ltd, (MCC Huaye): Ore beneficiation Hebei Iron and Steel Company, (Hebei): Steel Production
IMIC Timeline 2010
Change of investment policy and name to IMIC plc
2011
Heads of Terms with AIOG
AIOG signs JV agreement with Guinea
Appointment of Advisory Board
2012
Appointment of IMIC NEDs
Formal Relationship Agreement with AIOG signed
AIOG forms Best in Breed Chinese consortium:
China Railway Group – railways and ports China Machinery Engineering Corporation - power China Huaye – ore beneficiation IMIC raises ?10m of new equity
Acquisition of first stake in Afferro
$50m bond issue
2013
Appointment of Ousmane Kane, as CEO
Announcement of offer for Afferro
Letter of intent with Liberian
4 bond issues totalling $75m
Agreement with Hebei Iron & Steel – off-take
Appointment of Mr Liu Guofeng, as NED
Appointment of Khalifa Beyah, as COO
Completion of Afferro Acquisition
Future Plans Near Term
Accelerate Ntem cash flows
Drilling programme with existing rigs and personnel from Nkout PFS & DFS prioritised Progress Nkout to production
Development of financing package for required infrastructure post DFS Medium Term
Consolidate further stakes along the South Cameroon/North Congo/Gabon iron ore corridor
Longer Term
Develop further iron ore corridors in West Africa where lack of infrastructure is limiting economic development
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