"A $US1.5 billion ($1.46 billion) Chinese investment into a London-listed iron ore explorer headed by controversial Romanian-born businessman Frank Timis might not seem like it has a lot to do with WA’s resources sector.
But Shandong Iron and Steel Group’s investment in African Minerals’ Tonkolili project in Sierra Leone, long-awaited and finalised last week, is a deal that could have ripple effects for WA explorers in Africa and Australian investors.
The most immediate beneficiary of the deal is Tony Sage’s Cape Lambert Resources, which has an agreement in place with African Minerals to use its port and rail infrastructure for its Marampa project.
Good news for Tonkolili is therefore good news for Marampa.
African Minerals also has a cornerstone stake in Cape Lambert.
Marampa, however, isn’t destined to stay in the Cape Lambert stable for long. Having spent much of last year talking about a Marampa float Cape Lambert now hopes to have it listed by June 30 this year, likely retaining a 25 per cent stake and $1-a-tonne royalty over the project, also in Sierra Leone.
Foster Stockbroking put out a note last week suggesting it expected marketing for Marampa to kick off this month, with the prospectus to follow next month.
On its numbers Marampa will cost about $500 million to build, with operating costs close to $50 a tonne.
All of that should bode well if the project is brought into production in 2014 as planned and the iron ore price does what most people expect it to do until then — that is, stay strong.
The Marampa float will be in part a test of Mr Sage’s credibility — having promised it for so long he must now deliver — but also a test of the IPO market.
Moreover it should give some insight into investor appetite for the African iron ore space.
Cape Lambert’s last quasi spin-out African Iron (it sold the junior’s flagship Mayoko project to Stirling Minerals, which was rebadged African Iron) went on to be acquired by Exxaro Resources for $338 million.
Expectations are investors who made money out of that deal might follow Sage et al into Marampa.
And although there are plenty of juniors sitting on iron ore in Africa, a combination of limits on infrastructure and shaky market conditions of the past few years mean there aren’t that many close to production.
Bellzone Mining is another AIM-listed African iron ore play with WA links in the form of controlling investor Nik Zuks.
It became the region’s latest iron ore miner last month with the start of mining and stockpiling at its Forecariah joint venture in Guinea.
Like African Minerals, Bellzone is backed by China (in its case China International Fund) and it hopes to send its first shipment in early June."
CFE Price at posting:
48.5¢ Sentiment: ST Buy Disclosure: Held
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