JOHANNESBURG (miningweekly.com) – West Africa is emerging as the next significant iron-ore province after Australia’s rich Pilbara and is attracting the attention of global majors and the Chinese, says the London-Aim-listed West African Minerals.
Major diversified miners are attracted to the area by the potentially large, high-grade deposits generally with low impurities and low processing costs.
London mining analyst firm Liberum Capital calculates that West Africa’s “buy” projects are coming in at a cheaper $100/t to $120/t, compared with the more capital-intensive $150/t “build” iron-ore projects in Australia and Brazil.
The combined market capitalisation of all of the West African iron-ore explorers and developers put together is a fraction of the market capitalisation of Fortescue, the smallest of the Western Australian iron-ore mining majors.
Africapractice risk consultant Tom Wilson tells Mining Weekly Online that in Gabon, Cameroon and Republic of Congo, governments are keen to diversify away from a dependence on a single commodity and have so far been prepared to offer attractive commercial terms and to facilitate market entry.
West African Minerals is led by CEO, Stephen Dattels, who has founded and funded mining ventures including the Areva-acquired UraMin, and executive vice-chairperson Brad Mills, the former Lonmin CEO.
The company intends to focus on higher-value direct shipping ore (DSO) and high-grade ore and has innovative quick-to-market logistics schemes for its close-to-port Cameroon and Sierra Leone properties.
Two potential DSO targets in Cameroon – Binga and Minko – are close to the planned deep-water port at Kribi.
“The number of targets identified, and their geophysical signatures, confirm that the licences in Cameroon are highly prospective and suggest the company has the potential to be a significant iron-ore producer in West Africa,” says Dattels.
West Africa Minerals aeromagnetic results indicate that the company could be sitting on a property larger than Sundance’s adjacent Mbalam project on the Mbarga deposit.
“Preliminary geophysical interpretation of this data has highlighted a number of large, demagnetised areas that are highly prospective for hematite DSO ores. The significant size, abundance and quality of these aeromagnetic anomalies are extremely encouraging,” Mills tells Mining Weekly Online.
Next steps will involve drilling to test the most prospective of the targets plus a fixed-wing gravity survey to better define the thickest concentrations of hematite mineralisation.
Ten iron-ore transactions have been concluded in Guinea, Sierra Leone, Congo, Cameroon, Gabon and Mauritania since January 2010, the month that China Railway Materials paid $250-million for 12.5% of African Minerals and agreed a 20-year offtake from the Tonkolili project in Sierra Leone.
Last week, China Railway Materials took its convertible bond investment in African Minerals to $400-million and expressed satisfaction in African Minerals' bringing Tonkolili into production.
In April 2010, Brazil’s Vale paid $2.5-billion for 51% of the Beny Steinmetz Group’s Zogota and Simandou Blocks One and Two, plus offtake and marketing entitlements.
A month later, Severstal of Russia paid $55-million for 16.5% of Core Mining, the developer of the Avima project in Congo, and the Kango project in Gabon.
In May 2010, China International Fund invested $2.7-billion in rail and port construction for Bellzone’s Kalia project in Guinea to acquire the right to buy all of the iron-ore mined.
The next month, the Aluminium Corporation of China paid Rio Tinto $1.35-billion for 47% of the Simandou iron-ore project in Guinea.
In the same month, Shandong extended the Chinese involvement by investing $1.5-billion for 25% of African Minerals and ten-million tons yearly offtake from Tonkolili at discounted prices.
In November 2010, Xstrata bought three Mauritanian iron-ore projects from Sphere Minerals for $508-million and a year later China’s Hanlong paid Sundance Resources $1.7-billion for Mbalam in Cameroon/Congo.
In January this year, South Africa’s JSE-listed Exxaro paid $356-million for African Iron, developer of the Mayoko project in the Congo, and in the next month, BHP Billiton reached agreement on the Belinga iron-ore concession with the government of Gabon.
Consolidation is expected to be an ongoing theme in African iron-ore and China's investment in the sector is likely to continue owing to that country's stated goal of owning half of all the foreign iron-ore resources that it imports by 2015.
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)