PERTH (miningweekly.com) – The share price of ASX-listed iron-ore developer Centaurus Metals took a tumble on Thursday on news that the company was having difficulty in securing a life-of-mine offtake partner for its Jambreiro project, in Brazil.

Centaurus has been in discussions with a number of potential offtake partners, but the miner noted that the recent deterioration in market sentiment and conditions in the iron-ore sector had impacted on the company’s ability to finalise a timely offtake agreement.

The market sentiment had also tightened conditions under which financiers and investors would support the development of new greenfield supply.

Centaurus said that it had become evident in recent discussions with financiers that debt funding for the Jambreiro project would remain conditional on offtake arrangements, even at a lower staged production rate and initial capital expenditure.

“Based on a number of discussions with debt and equity providers, it is evident that the current challenging market environment is restricting our ability to secure the necessary development funding without a long-term offtake agreement in place,” said Centaurus MD Darren Gordon.

“While we have a strong belief in our ability to sell ore into the domestic market in Brazil, debt and equity markets clearly want to see a long-term offtake agreement in place first, even for the smaller volumes contemplated by our staged development approach.”

Gordon expressed his disappointment that Centaurus could not proceed with the Jambreiro construction at this point, and in line with the company’s existing development plan; however, he said that the company would continue to press ahead with the funding and offtake discussions in order to achieve a positive outcome for shareholders.

The finalisation of a long-term offtake agreement has been awaiting the restart of construction and the finalisation of development of the Sudeste port development, in south-east Brazil.

Gordon noted that the new port was an important asset for several resources groups in the region, and in the case of Centaurus, provided the opportunity to establish long-term supply arrangements with potential offtake partners for lower cost supply, as a substitute for some of the existing integrated supply, which is likely to be more profitably supplied into the export market.

Construction work on the port resumed during the March quarter, and the port would likely be commissioned later this year.

Gordon said that debt funding for Jambreiro could be finalised relatively quickly in a more favourable market, and with the offtake agreements in place. However, with the current market conditions, the company would not meet its current mid-2014 construction timeline for Jambreiro.

The project was currently fully permitted for a three-million-tonne-a-year operation, and was ready for the development under a staged one-million-tonne-a-year start-up scenario.

Meanwhile, the iron-ore developer had also slashed the estimated timeline for bringing its Candonga project, in Brazil, into production.

At the end of May, Centaurus said that production at Candonga could start within the next nine to twelve months, but the miner had now slashed that timeframe to between six to nine months, owing to the processing plant being a simple modular crushing and dry screening facility, of which several were available in the region.

Based on other similar scale plants in Brazil, the total installed capital cost for a plant of this nature was expected to be less than A$5-million, the company said.

The Candonga project, which is some 33 km from Centaurus’ flagship Jambreiro project, has a maiden Joint Ore Reserve Committee-compliant resource of 11.9-million tonnes, grading 43% iron.

Centaurus had lodged an application with the Department of Mines for a 300 000 t/y trial mining licence at Candonga, marking the next step in the planned development of a small-scale direct shipping ore mining operation.

Centaurus shares were trading at a low of 8.5c a share on Thursday, down from the previous day's closing price of 8.8c a share.