Chinese to invest $1,5bn in West African iron-ore project 0 COMMENTS | ADD A COMMENT PRINT EMAIL |
By: Loni Prinsloo 13th July 2010
Updated 2 hours 37 minutes agoTEXT SIZE JOHANNESBURG (miningweekly.com) - Aim-listed iron-ore and base-metals-miner African Minerals said on Tuesday that it had entered into a $1,5-billion strategic investment understanding with Chinese steel company Shandong Iron & Steel Group (SISG) to fund its flagship iron-ore Tonkolili project in Sierra Leone.
African Minerals executive chairperson Frank Timis said it would use the funds for the construction of infrastructure and mine operations at the project, including a shift from a combined haul-road and rail system to an all-rail transport and logistics system.
In addition to the refurbishment of the existing 74-km Cape gauge rail line between Pepel and Lunsar, the company now planned the construction of a 122-km rail line an extension rail to the Tonkolili project.
Resources which were already mobilised and engaged in clearing of the haul road route, would be used to enable a rapid migration from haul road construction to the construction of the rail extension. Completion of the rail extension was expected by the third quarter of 2011.
"With the availability of the SISG funding and the ability to shift to this all-rail system, we have increased the project's phase-one production target from eight-million tons a year, to ten-million tons a year, expected to be achieved by the fourth quarter of 2011," said Timis.
It also paved the way for a faster ramp-up of phase two, where production capacity would be boosted to 25-million tons a year by the fourth quarter of 2012.
Funding by SISG would be provided in a three-stage subscription agreement in exchange for a long-term supply of iron-ore and a 25% interest in the Tonkolili project. The offtake agreement would be for a total of up to ten-million tons a year of iron-ore at discounted prices.
At the end of each stage of funding, SISG could elect to receive either iron-ore production or a dividend corresponding to its percentage of ownership, which would be at 13,3% after stage one, 21,6% after stage two, and 25% after the funding was completed.
African Minerals would receive the first-stage funding injection of $800-million by the end of September, after which, the schedule for further funding would be determined.
SISG plans to increase its steel output to 20-million tons a year by 2015.
Edited by: Mariaan Webb
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