By Alex MacDonald
LONDON--Anglo American PLC (AAL.LN) and its majority-owned iron
ore unit Kumba Iron Ore Ltd. (KIO.JO) have signed an agreement with
African mining explorer Ferrex PLC (FRX.LN) to fund exploration at
the Mebaga iron ore project in Gabon, west Africa.
Under the agreement, Anglo American and Kumba Iron Ore will fund
the exploration of Mebaga and surrounding areas over a two year
period, Ferrex said Thursday in a statement.
The agreement includes a provision to refund Ferrex for the
majority of its exploration spend to date and allows Anglo American
and Kumba to move to full ownership of the project if desired.
Exploration will be managed by Anglo American and Kumba, using
Ferrex's in-country exploration team already in place.
The agreement comes after Anglo American announced last week
plans to recalibrate its project pipeline in a bid to deliver $300
million in additional cashflow annually starting next year. The
FTSE-100 miner recently completed its exit from the Alaskan copper
and gold Pebble project and is now revisiting the scope of its
Peruvian Quellaveco copper project to extract more value from the
project.
Anglo American is also taking steps to revitalize its iron ore
business, which has suffered from lower output as rivals BHP
Billiton and Rio Tinto ramp up production. Kumba is implementing a
turnaround plan for its main Sishen iron ore mine, South Africa's
largest, in order to restore it to full production capacity.
Meanwhile, Anglo American confirmed last week that it remains on
budget and on time to start production from its $8.8 billion
Brazilian Minas Rio iron ore project by the end of next year.
The agreement signed with Ferrex is still subject to board
approval from all parties, including the Gabonese government, and
final due diligence. Ferrex's Managing Director Dave Reeves said
the due diligence is set to be completed in February, at which
point the full commercial terms of the agreement will be
disclosed.
The Mebaga project has set an exploration target of between 90
million to 150 million metric tons of ore with 35% to 65% ferrous
content and 550 million tons to 900 million tons with 25% to 40%
ferrous content.
Write to Alex MacDonald at alex.macdonald@wsj.com
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