Name and Location
Tonkolili iron-ore project, Sierra Leone.

Client
African Minerals (75%) and Shandong Iron & Steel Group, or SISG (25%).

Project Description
The project entails the development of a 45-million-tonne-a-year direct shipping ore (DSO) hematite operation.

The project has a DSO resource estimate of 142.1-million tonnes, grading 57% iron, up from the 2010 estimate of 126.5-million tonnes of DSO, grading 58.1% iron. The resource comprises 99.6-million tonnes measured, 33.9-million tonnes indicated and 8.5-million tonnes inferred, with 2.9% silica, 6.6% alumina and 0.08% phosphorus.

The project, which has a 60-year life-of-mine, will be conducted in three phases, with the potential to increase capacity to 75-million tonnes a year in a fourth phase.

Phase 1 involved the complete reconstruction of the Pepel port and the 74 km of existing railway, the completion of a new 126 km narrow-gauge railroad and the establishment of a mine.

Processing will principally be through a 15-million-tonne-a-year wet plant, supplemented by other semimobile plants.

The resource will be capable of supporting production in Phase 1 for about seven years at an expected cost of $27.50/t of product.

Phase 2 will result in the expansion of the mine by 30-million tonnes a year to 50-million tonnes a year. This entails the development of a new purpose-built port at Tagrin Point.

The new port will have the ability to load Capesize vessels alongside the quay, avoiding the costs of using transshipment vessels.

At the mine, a new major concentrator will be built, producing 30-million tonnes a year of high-grade hematite concentrate.

This phase will be capable of supporting this expanded production for about 15 years at an estimated cash cost of $21/t.

Phase 3 involves the production of magnetite concentrate from the primary magnetite mineralisation, following the construction of a series of large-scale magnetite concentrators on site.

Net Present Value/Internal Rate of Return
Not stated.

Value
Phase 1 – $1.7-billion.

The capital costs, operating costs and construction schedule for Phase 2 are being developed by African Minerals’ engineering partner – China Communications Construction Corporation. Previous assessments of capital intensity for Phase 2 suggested a capital cost of about $3-billion.

The capital costs and maximum production tonnage for Phase 3 are yet to be determined.

Duration
Phase 1 entered into production in the fourth quarter of 2011 and ramped up to 20-million tonnes a year of DSO from May 2013.

Phase 2 is expected to enter production in 2016.

Latest Developments
Another $6.7-million has been released from the Tonkolili iron-ore project’s restricted bank account, in Hong Kong, to pay January salaries and taxes due in Sierra Leone, African Minerals has reported.

SISG agreed earlier this month to release $12.96-million of the funds to pay December salaries and accumulated taxes due in Sierra Leone.

African Minerals has warned, however, that there is no certainty of the balance of $82.4-million within the restricted bank account being released.

However, SISG and African Minerals will continue discussions regarding a long-term solution, after Tonkolili was placed on care and maintenance in December, pending a $102-million cash payment from SISG or securing additional short-term funding.

The company will also evaluate potential funding solutions with other parties, including a partial sale of African Minerals’ stake in the project.

Key Contracts and Suppliers
African Railway & Port Services (rail infrastructure); Prudential Group (investor); SRK Consulting (estimation services); China Railway Materials Commercial Corporation and Standard Bank (finance); SISG (investor); WorleyParsons Europe (definitive feasibility study and front-end engineering design) and Sprott Resource Lending Partnership with Dundee Resources (lead financial arrangers).

On Budget and on Time?
Not stated.

Contact Details for Project Information
African Minerals, tel +44 20 7104 2280.
Prudential, tel +44 20 7220 7588.
SRK Consulting, tel +44 29 2034 8150 or fax + +44 29 2034 8199.
China Railway Materials Commercial Corporation, tel + 86 010 51895188.
WorleyParsons Europe (head office), tel +44 208 326 5000 or fax +44 208 710 0220.
Sprott Resource Lending Partnership, tel +1 416 943 4698.