Court ruling marks major milestone for reopening of Amapa iron-ore mine

14th April 2020 By: Mariaan Webb - Creamer Media Deputy Editor Online

The Commercial Court of São Paulo has ruled that DEV Mineração, the owner of the Amapá iron-ore project could start shipping stockpiled iron-ore, marking a major milestone for the reopening of the iron-ore mine that once belonged to diversified miner Anglo American.

London-listed Cadence, which is buying a stake in Amapá, announced the court ruling on Tuesday, and said that the project’s joint venture (JV) partners were in discussions for potential offtake contracts to begin shipments "as quickly as possible".

The first shipment from the stockpile should be in late in the second quarter or early in the third quarter of this year. These timelines were dependent on the ongoing and future impacts of Covid-19, Cadence cautioned.

There are 1.39-million tonnes of iron-ore stockpiled at the port, with an average grade of about 62.12%.

“The shipment of the iron-ore stockpile at the Port of Santana will now trigger long overdue payments to hundreds of local ex-employees and small creditors. It will assist with funding the necessary recommissioning studies required to reopen the mine, which will, in turn, rejuvenate the regional economy and provide significant employment, health and educational benefits for its people,” said Cadence CEO Kiran Morzaria.

The permission to export the iron-ore was granted by the court, as a result of a petition filed by DEV and supported by the judicial trustees of DEV, KPMG Brazil and the creditors committee.

The court ruled that DEV is permitted to export sufficient iron-ore to realise a $10-million profit from the Amapá stockpiles at the port. The first of the net revenues from the sale of the stocks shall be used to pay historic small and employee creditors. Thereafter, funds will be used to begin recommissioning studies on the asset including plant, railway and port and to start maintenance and monitoring of the current tailing dam facilities and provide ongoing working capital and historic finance obligations.

There remains only one major precondition for Cadence to make its investment in the Amapá project and release $2.5-million currently held in escrow in a judicial trust account. This precondition requires DEV to reach a settlement agreement with the secured bank creditors. On satisfaction of the prerequisites and the release of the escrow monies, Cadence will become a 20% shareholder in the Amapá project through its JV company, which will own 99.9% of DEV.

In the meantime, the JV partners continued to work with DEV to advance the restart of the Amapá project using the proceeds of the iron-ore, accelerating the production from the Amapá project.

Anglo American and Cliffs Natural Resources once owned the Amapa project, which consists of a large-scale iron-ore mine, beneficiation plant, railway and private port. In 2012 the operation produced 6.1-million tonnes of iron-ore concentrate. Before its sale, Anglo American valued its 70% stake at $462-million.

The total historical mineral resource contains an estimated 348-million tonnes of ore at 38.9% iron content. The ore is beneficiated at the mine to 65% iron pellet feed and 62% iron spiral concentrate. Based on available historic mine plans and an independent consultant review, it is expected that at full production the Amapá project has a mine life of 14 years and at full capacity is targeting to produce up to 5.3-million tonnes a year of iron-ore.