The resignation of Gabon’s mines and energy minister, Casimir Oye, has intensified the race for one of west Africa’s most sought-after iron assets.
The high-grade Belinga iron ore deposit is said to be already attracting heavy interest from a range of miners active in the region.
“Apparently he’s gone because he couldn’t get a deal done at Belinga,” an industry source said.
BHP Billiton is rumoured to be interested in the deposit, with Mr Oye charged with securing an agreement with a foreign miner to develop the deposit by the conclusion of last month’s Mining Indaba conference in Cape Town.
China’s CMEC won the rights to mine Belinga in 2006 after a fierce battle with Brazil’s Vale, but the Chinese company’s failure since then to move on its development has angered the Gabon president, Ali Bongo.
Mr Bongo has said he wants a new backer with the financial fire-power to get Belinga built quickly.
Another company believed to be interested is Waratah Resources, which recently appointed industry veteran Terry Streeter to its board.
Macquarie raised $3.5 million for Waratah at 25¢ this week to help fund drilling at its Youkou, Mekambo and Okanabora projects in the republic of Congo near the border with Gabon.
It is understood that the junior has already held talks with Gabon officials about Belinga.
On Friday Sundance Resources and privately owned Core Mining – in which Glencore and Russia’s Severstal both have investments – inked an agreement to share infrastructure in the region.
The move has prompted speculation that the two will ditch their current plan to rail iron ore through Cameroon and instead re-engineer their project to do so to a purpose-built port in Gabon.
Core’s Avima project and Sundance’s high-grade ore are both in the Congo and Core has previously indicated it would look at either Gabon or Cameroon rail options for the project. Sundance could underpin a 10-year mine life from current high-grade resources in the Congo.
Sundance and its takeover suitor China’s Hanlong Mining are still engaged in talks with the Cameroon government to secure a mining convention, which is a condition of Hanlong’s $1.4 billion bid.
But one industry source said the move to rail through Gabon rather than Cameroon would be much cheaper.
The rail corridor identified through Cameroon involves the construction of numerous bridges and a steep uphill stretch.
Redesigning the project could help reduce these challenges.
The market reacted well to Sundance and Core’s agreement on Friday. Core could either pay a tariff to use Sundance’s rail, wherever it is built, or invest in an equity stake in the line. Either would dramatically improve the project’s economics, speeding its return on capital or reducing the capital costs involved.
All three options make Sundance more attractive to Hanlong and should further eliminate market fears that the Chinese company might try to back out of any deal.
SDL Price at posting:
41.5¢ Sentiment: LT Buy Disclosure: Held
