Name and Location
Zanaga iron-ore project, Republic of Congo (RoC).

Client
The project is a joint venture (JV) between Glencore (50% plus one share) and the Zanaga Iron Ore Company (ZIOC) – 50% less one share.

Project Description
The Zanaga project is located 30 km west of Zanaga, a regional centre of the Lekoumou department of the RoC.

The project has probable ore reserves of 2.5-billion tons grading at 34% iron. A feasibility study completed on the project envisages a multistage development of the mine.

Stage 1 involves development to an initial 12-million tonnes a year of high-quality iron-ore product, while Stage 2 will entail an 18-million-tonne-a-year expansion to 30-million tonnes a year of total product.

Stage 1 has been designed as a standalone business case and does not rely on or require the Stage 2 expansion. The Stage 1 operation will mine the higher-grade upper hematite ores over a 30-year mine life, producing a 66% iron content and premium-quality iron-ore pellet feed product with low impurities.

The initial openpit mining operation will use contractor mining to exploit free-dig material with a very low strip ratio, with simpler processing requirements resulting in low initial power demand. The ore will be upgraded into a high-grade pellet feed using conventional gravity and flotation concentration methods before being pumped to the port through a slurry pipeline. The project's onshore port facilities and infrastructure will include a filter plant to dewater the concentrate, and a covered ore storage facility, located at a proposed new third-party port that will be built 9 km north of the existing Port of Pointe-Noire.

Stage 2 will involve openpit mining of the magnetite orebody. The strip ratio will be lower than that of Stage 1, as the upper hematite cap will have been mined. The processing plant will be expanded, with a second concentrator using magnetic separation to produce a blended 67.5% iron content, premium-quality iron-ore pellet feed product. The increased power requirements will be supplied by planned power generation expansion projects in RoC. A second slurry pipeline will be constructed to transport the ore to port, where the port facilities will be expanded as part of the proposed deep-water port development.

The staged development approach adopted by Glencore in the feasibility study has demonstrated significant advantages over the prefeasibility study announced in November 2012, which considered a single-stage 30-million-tonne-a-year development at a capital cost of $7.5billion.

Net Present Value/Internal Rate of Return
Not stated.

Value
Stage 1 is expected to cost $2.2-billion, including contingency, and Stage 2 $2.5-billion.
The first-stage operation could potentially finance the second-stage expansion through project cash flows, limiting the level of additional equity required for the operation.

Duration
Front-end engineering and design is expected to start in early 2015.

Latest Developments
In light of changing iron-ore market conditions, the ZIOC plans to reduce the cost base of the Zanaga iron-ore project in 2015 while continuing to advance key preparatory work.

Following the completion of the feasibility study, award of the Zanaga mining licence and signature of a mining convention, the project's ongoing activities will be conducted using a substantially reduced cost base. The value-adding activities to be progressed include the establishment of port and power agreements, the validation of the environmental permit, and the ratification of the Zanaga mining convention by the RoC’s government. These are important preparatory steps for the project that will place the project in a position to seek financing once market conditions stabilise and become more favourable. ZIOC and Glencore continue to work closely with the RoC government on the conclusion of these workstreams.

During the funding round initiative conducted jointly by the ZIOC and Glencore, several entities expressed interest in discussing investment in the project, together with the JV partners. While engagement with interested entities is expected to continue, the ZIOC believes that current iron-ore market conditions need to stabilise before formal discussions can resume.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
DRA (process plant study).

Contact Details for Project Information
ZIOC corporate development and investor relations manager Andrew Trahar, tel +44 20 7399 1105 or email info@zanagairon.com.
DRA, tel +27 11 202 8600 or email info@DRAglobal.com.