African Minerals Ltd Tonkolili Iron Ore Project funding and operational (0822S)
September 19 2014 - 2:03AM
UK Regulatory
TIDMAMI
RNS Number : 0822S
African Minerals Ltd
19 September 2014
19 September 2014
African Minerals Limited
("African Minerals", "AML", or "the Company")
Tonkolili Iron Ore Project funding and operational update
African Minerals Limited, the developer, operator and 75%
shareholder of the Tonkolili Iron Ore Project ("the Project") in
Sierra Leone, notes the recent volatility in the share price and in
response to this provides the following update.
As previously announced the Project's operations remain
unaffected by the Ebola Virus Disease outbreak. The Company does
not expect there to be any material impact to the Project from the
planned four day curfew that the Government of Sierra Leone intends
to apply over the coming weekend.
The Company reiterates guidance of 16-18Mtpa for full year 2014,
with C1 cash costs in the range $34-36/t.
Following his appointment as CEO in August, Alan Watling has
presented to the Board of the Project Companies an assessment of
the current financial position and a financial recovery plan, with
recommended actions to make the Project cash flow positive on a
sustainable basis by the end of 2014, even given the ongoing
weakness in iron ore prices. The Board of the Project Companies has
approved this plan, and the associated actions and budgets, to
increase export volumes, reduce costs, enhance revenues, and seek
refinancing to strengthen the Project Companies' balance
sheets.
In support of these plans, and in line with the commitments made
in August 2014, $82m has already been drawn down from the Project's
Hong Kong funds (which totalled $284m at the end of June 2014), and
has been used primarily for working capital purposes. The Board of
the Project Companies has now approved the draw down of a further
$161m in September and October for further essential payments,
including to fund the approved cost reduction initiatives, to
finance working capital and to cover operating losses and debt
repayments until the Project becomes cashflow positive.
Furthermore, the Board of the Project Companies has resolved
that a revenue enhancement strategy should be pursued, such that
all future shipments (after those for which ships are already
confirmed) should be sold at a fair market price. To that end, and
supported by Shandong as the principal offtaker, we will be
communicating with our customers not only to temporarily defer the
current price influencing factors (including, but not limited to,
discounts, agency fees, marketing fees, freight subsidies, etc),
but also to require a premium for the low silica nature of our DSO
product. SISG has provided an assurance that, should these
discussions with our customers be successful, they will also
comply.
The Company will provide a further update in its half year 2014
financial statements scheduled for publication on 30 September
2014, including an update on the status of its refinancing
plans.
CEO Alan Watling stated:
"After four weeks at the helm of this Company, I believe deeply
in the value of this world class asset. The work currently underway
including the commissioning of the 1G plant, the commissioning of
our de-sliming circuits, increase in export volumes, and a number
of additional near term cost reductions and revenue enhancements,
leads me to expect that this project will become cashflow positive,
assuming that the iron ore price environment remains broadly
unchanged, by the end of this year.
This will firmly establish Tonkolili as a low cost producer,
with strong cashflow growth as we move into friable hematite
concentrate production, even at current prices.
With the demonstrated support of the Project Companies' Board
and our 25% partners Shandong Iron and Steel Group, and the
provision of access to short term funds to meet our immediate
commitments and plans, I am confident that the Project will achieve
financial stability in the near term, and will put us in a strong
position to implement appropriate medium and longer term financing
strategy to support the goals of both the Project and the
Company."
Contacts:
African Minerals Limited
+44 20 3435 7600
Mike Jones
Tavistock Communications
+44 20 7920 3150
Jos Simson / Nuala Gallagher
Jefferies
+44 20 7029 8000
Nick Adams / Alex Collins
About African Minerals
African Minerals operates the Tonkolili Iron Ore Project (the
"Project") in Sierra Leone, with a JORC compliant resource of 12.8
Bt. The multi-generational Project is being developed in a number
of staged expansions. In 2013, African Minerals completed sales of
12.1 Mt to its customers. The current year sales guidance is for
16-18 Mt of exports as the operations focus on operating at the 20
Mtpa run rate design capacity.
Phase II expansion will see exports increase to 25 Mtpa, and
will incorporate production of a high grade concentrate product.
Concentrate production is expected to begin in 2015 and will
eventually displace current DSO production as concentrate volumes
increase and the DSO resource depletes over time.
The Company has also developed significant port and rail
infrastructure to support the operation of the Project, via its
subsidiary African Rail and Port Services (SL) Limited ("ARPS"), in
which the Government of Sierra Leone ("GoSL") has a 10% free
carried interest.
The Project companies are currently owned 75% by AML, and 25% by
Shandong Iron and Steel Group ("SISG"), except for ARPS, which is
currently owned 75% by AML and 25% by SISG, with the GoSL having
the right to a 10% free carried interest from AML.
www.african-minerals.com
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
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