JOHANNESBURG (miningweekly.com) – London-listed African Minerals, which owned 75% of the Tonkolili iron-ore mine in Sierra Leone, had started the controlled shutdown of operations at the mine, as it moves to put the operation on care and maintenance owing to insufficient working capital.

The company noted on Monday that the operation would remain on care and maintenance until $102-million in cash, due to it by Shandong Iron and Steel Group (SISG), was paid or until it could secure additional short-term funding.

African Minerals had been in discussions with SISG over the timing of the release of the $102-million in cash, which SISG had, in August, agreed to provide to the company.

“Initiating a temporary shutdown of operations towards care and maintenance in Sierra Leone, while extremely regrettable, is a necessity, given the company's financial status and uncertainty over the timing of the release of the restricted funds,” said CEO Alan Watling.

He assured shareholders that management was doing everything possible to secure the agreement of a funding solution with SISG.

Further, the company noted that it had, as announced last month, started the process to sell a partial stake in the Tonkolili mine as a means to deal with its short-term financing issues.

“[African Minerals] is talking to several groups who have expressed strong interest, and discussions are being progressed as quickly as possible, though there is no certainty a transaction will be forthcoming,” it pointed out.

The company warned that, without a significant injection of working capital, it was unable to initiate the cost reduction strategies, which would return the operation to cash flow positive status.

“The receipt of funds from shipments in recent weeks, including from SISG, provides the operating companies with sufficient funds to meet critical payments necessary to maintain the security, safety and, to the extent necessary, evacuation of staff and contractors in Sierra Leone, and to maintain salary payments in the short term.

“This plan allows for the continued safeguarding of the company's assets and will allow for a rapid ramp up and resumption of operations when a financial solution is achieved,” African Minerals noted.

Chairperson Frank Timis added that the company had allocated available funds to keeping the operating assets in a condition that would allow for operations to be quickly restarted.

“As part of this, local staff will continue to be employed on normal wages and will be allocated to care-and-maintenance activities,” he said.

Meanwhile, African Minerals reported that 5.2-million tonnes of direct shipping ore had been mined at Tonkolili during the third quarter of the year. Of the mined material, 4.9-million tonnes was treated to produce 3.3-million tonnes of product.