Development and exploration company Ferrex notes that its West African and Southern African iron-ore projects are set to generate significant value for their shareholders this year.

Having secured an 82% holding in the 309 km² high-grade Mebaga direct shipping ore (DSO) iron-ore deposit in Gabon, West Africa, in January 2013, Ferrex signed a term sheet in December with multinational mining company Anglo American and iron-ore supplier Kumba Iron Ore to fund the development of Mebaga for a two-year period.

“We were awarded the Mebaga DSO iron-ore project last year and, during this time, we completed our first drilling programme, which has defined a sizeable exploration target,” says Ferrex chairperson Brian Moritz.

The term sheet executed with Anglo American and Kumba Iron Ore highlights a £2.2-million fundraising, completed in February 2013, and a further £0.7-million fundraising, completed in December 2013.

Moritz highlights that Anglo American and Kumba Iron Ore diligence teams are conducting a study on a geological and logistical level. He adds that the investment of both companies underpins the quality of Mebaga being an asset.

Mebaga is the nearest DSO iron-ore project to the Atlantic Ocean in Africa and can use two infrastructure routes – an existing rail line that runs 200 km to the Port of Qwendo, in Gabon, which currently exports 3.5-million tons a year of manganese concentrate and barging the ore 300 km along the Oougue river to the Port of Gentil, also in Gabon.

Based on available magnetic data and reconnaissance geological mapping undertaken by Ferrex, geophysical consulting company Core Geophysics estimated an exploration target of 90-million tons to 150-million tons at 35% to 65% iron oxide and 540-million tons to 900-million tons at 25% to 40% iron.

Meanwhile, Moritz notes that the company has also upgraded its exploration target at its Malelane iron-ore project, in South Africa, from 1.6-billion tons to 2.0-billion tons, which the company believes illustrates its ability to expand the project in the future.

Three distinct banded iron formation horizons have been identified on the property, with a combined length of 14 km and mapped horizontal widths of up to 300 m.

“We have only completed drilling over 1.1 km of the 14 km strike, which has resulted in the inferred resource being 139-million tons at 37% iron. “A scoping study of this strike illustrates the robust economics of developing Malelane as an initial 1.8-million-ton-a-year openpit, low-strip-ratio operation, with a 57% iron product over a 16.6 year life-of-mine,” he points out.

At these production rates, Moritz states, the project has a net present value of $523-million at a discount rate of 10% and an internal rate of return of 72%. The project also has a capital cost of $139-million and capital intensity of $77/t, which places it in the lowest quartile for cap- ital intensity of new iron-ore projects worldwide.

“Work is now under way on the prefeasibility study and the environmental studies, including the drafting of the social and labour plan in preparation for the submission of a mining lease application. “The results of current and planned programmes will provide the basis for the devel- opment plan to construct an iron-ore processing operation,” he concludes.