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Africa’s ‘Pilbara’ needs champion – Investec
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27th March 2013
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JOHANNESBURG (miningweekly.com) – The Cameroon-Congo-Gabon region, often likened to Australia’s iron-ore-rich Pilbara, needs a champion in the mould of Fortescue founder Andrew Forrest to assemble companies, governments, financiers and end-users in a region that could give the iron-ore top-three a run for their money.

Investec Securities analysts Hunter Hillcoat and Marc Elliott speculate whether the possible increased involvement of Glencore could be the start, given the significant expanse of iron-ore mineralisation, including the potential for meaningful direct shipping ore (DSO) volumes.

It offers one of the few opportunities globally for a substantial iron-ore production base outside of that controlled by the top three – Vale, BHP Billiton and Rio Tinto - yet it remains a long way from production.

Last year, Equatorial Resources CEO John Welborn urged junior iron-ore producers in Gabon, Cameroon and the Republic of Congo (ROC) to work together to ensure that export markets could access the region’s minerals, with the Metal Bulletin’s 'Steel First' reporting his view that iron-ore exploration companies Sundance Resources, Core Mining and the government of Gabon needed to consolidate to maximise the potential of the rich craton.

“The Congo craton is the new Pilbara of Africa,” Welborn told 'Steel First' on the sidelines of the Mines & Money conference in London, adding that the “each company for itself” approach of Rio Tinto and BHP Billiton with regard to Pilbara infrastructure was an example of how not to do it.

Consolidation was not only preferable but also inevitable and the optimal solution would see crater operators blending orebodies and sharing infrastructure.

Mining Weekly Online’s Esmarie Swanepoel reports from Perth that the proposed A$1.38-billion takeover of ASX-listed Sundance Resources has found itself on shaky ground after China’s Hanlong Mining gave the Africa-focused iron-ore developer notice that it would miss an important deadline.

Hanlong, which has been struggling to secure a credit-approved term sheet, has given Sundance formal notice that it would not be able to deliver it on deadline.

Sundance told shareholders that the two firms were now required to enter into a five-day good faith consultation period, which would conclude on April 3. If the parties failed to reach an agreement during that period, the scheme implementation agreement could be terminated.

Investec analysts Hillcoat and Elliott believe that none of the many hurdles facing development of the projects in Cameroon, ROC and Gabon is insurmountable.

The key issues include the almost complete lack of infrastructure and the vast amount of capital required to install it, the relatively small sizes of the companies involved, the high sovereign risks, exacerbated by multiple borders, demanding operating conditions, assorted ownerships and generally lower ore quality relative to other product available on the seaborne market.

They see each of the companies involved in the region as lacking the critical mass to justify the capital risk involved in developing its respective asset.

However, they see compelling support for development of the combined asset base, under Forrest-type leadership.

The analysts refer to Sundance discussing the sale of their iron-ore projects in Cameroon and ROC with Glencore, as having significant potential ramifications for the region, in that Glencore is already a shareholder and offtake partner in Core Mining, which owns the Avima project in ROC, close to Sundance’s projects.

Consolidation of the assets, they say, could provide the critical mass to stimulate a development decision, which could generate 50-million tons an hour of DSO production and place a newcomer firmly on the iron-ore producer map.

This would also potentially have a positive read-through to companies with projects close to the proposed rail line to the coast from Sundance's project, which is to allow third-party access, but would have potential negative read-through for the Zanaga joint venture (JV) with Xstrata in southern ROC.

Although Glencore does not produce any iron-ore directly, it markets iron-ore sourced from various operations globally, which totalled 19.8-million tons in 2012, up from 10.3-million tons in 2011.

Glencore’s merger process with Xstrata is still awaiting regulatory approval from Chinese authorities.

Xstrata, which has a stated intention of producing 100-million tons of iron-ore a year by the end of the decade, has acquired 88% of Sphere Minerals, which has iron-ore projects in Mauritania and the Zanaga JV in southern ROC.

The entry of a major player in the region, and the infrastructure it would initiate, could then provide the impetus to kick-start development of the region as a whole.

The solid stars on the accompanying map demonstrate the greatest potential for meaningful volumes of DSO.

Edited by: Creamer Media Reporter

 

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Solid stars indicate enhanced DSO potential
 

Solid stars indicate enhanced DSO potential
 
 
Picture by: Reuters
 
 
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