Pivotal Deal

Sundance Resources Limted

Sundance signs pivotal deal for construction of Mbalam-Nabeba iron ore project

Sundance Resources (ASX: SDL) today revealed that it had struck the eagerly-awaited construction contract for its Mbalam-Nabeba iron ore project in Africa, appointing leading international engineering and construction company Mota-Engil Africa as the Engineering, Procurement and Construction (EPC) contractor. Under the deal, Mota-Engil Africa will build the US$3.5 billion port and rail infrastructure, which accounts for the lion’s share of the project’s capital cost. Sundance also revealed today that it had appointed Standard Bank, Africa’s largest bank by assets and earnings, to advise on debt and project equity funding and be the lead debt arranger for the rail and port and the project’s mines in the Republics of Cameroon and Congo-Brazzaville.

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Mota-Engil Africa’s role includes detailed design, construction, testing and commissioning of the 510km railway from the Mbarga Mine in Cameroon to the Mineral Terminal Facility at Lolabe on the west coast of Cameroon.
It also covers the 70km rail spur from the Nabeba Mine in the Republic of Congo (Congo-Brazzaville) and a 35Mtpa deep water port facility, including stock yards, capable of loading ‘China-max’ vessels.
Sundance said discussions were well advanced with a wide variety of potential funding partners, with export credit agencies, development funds and commercial banks already expressing interest in providing debt funding.
Sundance aims to have debt and equity funding secured by mid-2015. Construction is expected to take 3.5 years from the time of financial close.
Sundance Managing Director Giulio Casello said the appointments of these global groups marked a pivotal point in the project’s development.
“Mota-Engil is a globally-recognised European engineering and construction company with extensive experience in building transport infrastructure for large bulk-commodity mining projects in Africa,” Mr Casello said. “Alongside Standard Bank with their Africa-focused strategy to promote business investment in the region, they are both a fantastic fit for Sundance and the project.
“Their decision to take on the key roles of engineering and construction contractor and lead debt funding arranger is a major vote of confidence in not only our company and project, but also in the central African countries of Cameroon and Congo and our belief that this will become a world-class iron ore region.
“The Mbalam-Nabeba Project will be one of the lowest cash-cost producing assets in the world. Now that we have confirmed capital costs across the total project, I believe it is positioned as the most attractive large-scale, high grade iron ore project in the world that is ready for development.”
Mota-Engil and Sundance signed the binding and bankable EPC contract for the construction of the Cameroon portion of the port and rail infrastructure component of the Project at a signing ceremony in the capital city of Yaoundé.
Mota-Engil Africa is a subsidiary of Mota-Engil SGPS, a multidisciplinary Portuguese construction company with an international presence that spans across 21 countries. It has significant experience in Africa, having established its African operations in Angola in 1946.
Under the terms of the mandate with Standard Bank, Standard will be the financial advisor and non-exclusive lead arranger with respect to project debt and equity facilities.
Standard Bank has provided indicative terms for the debt funding of the port, rail and mine plant facilities in association with the Mota-Engil EPC tender. Standard Bank’s tiered funding plan for debt financing includes export credit agencies, development finance institutions and commercial banks.
Given the low cash costs and capital intensity of the Mbalam-Nabeba Project, Sundance anticipates a debt to equity ratio of better than 70:30.
Standard Bank has already held discussions with a wide variety of potential funding partners and has received several expressions of interest from export credit agencies and development finance institutions.
The result of these discussions is that there is considerable support for the Mbalam-Nabeba Project from the above-mentioned institutions, including Western and Chinese providers of equity and debt capital.
Sundance has commenced work with Standard Bank and Mota-Engil to convert the indicative term sheets to credit-approved term sheets by the end of this calendar year, with an aim to achieve Financial Close by mid-2015, once all conditions precedent are satisfied.
“We have worked with Mota-Engil on projects in the past, and we firmly believe they have the experience, credibility and capacity to put together a consortium that will succeed in building this project within the timeframe and budget outlined in their tender,” Standard’s Head of International Client Coverage, Rob Bessinger, said.
“Moreover, Standard Bank is confident in our ability to raise funds for the construction phase of the project.”
Sundance, with the assistance of Standard Bank, will proceed with delivering the equity funding strategy.
This involves parties which have previously expressed interest in the Project subject to confirmation of an EPC price and debt solution. The provision of project equity is expected to be finalised in parallel with reaching financial close by mid-2015.