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

Client
Shandong Iron & Steel Group, or SISG (25%) has acquired the remaining 75% stake in the Tonkolili iron-ore mine from mining company African Minerals for more than $170-million.

SISG now has 100% of equity in Tonkolili, and will also own the associated infrastructure company African Port and Railway Services.

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 expanding 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 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.

SISG will provide further funding, including $600-million to progress Phase 2 of the Tonkolili Project.

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
SISG has acquired the remaining 75% stake in the Tonkolili iron-ore mine from African Minerals.

In March this year, African Minerals said it had appointed administrators after failing to repay Shandong, which was its lender and partner in the Tonkolili project.

African Minerals has been battered by a rout in iron-ore prices and costs related to the Ebola outbreak in West Africa.

SISG has said that it intends to return the mine to full production and protect the assets against the imminent wet season.

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.