West Africa emerging as new Pilbara as miners race to develop iron-ore projects

5th October 2012 By: Joanne Taylor

The ‘new’ iron-ore deposits in West Africa – which have attracted interest from some of the world’s major miners – could be as abundant as those in Australia’s Pilbara region.

In fact, some analysts have remarked that West Africa is emerging as the next significant iron-ore region, with global mining majors like BHP Billiton, Rio Tinto and Kumba Iron Ore, as well as Chinese companies, pursuing iron-ore projects in the region.

The iron-ore deposits in West Africa are said to be of a high grade, with low impurities and entailing low processing costs – which is important for mining companies that prefer direct shipping ore (DSO). DSO is favoured among mining companies, as it eliminates the need to beneficiate the ore before it is exported.

However, the recent drop in iron-ore prices has raised questions about whether investments in West Africa will decrease until prices stabilise. The price drop reflects limited interest among steel mills in restocking the steelmaking raw material, given the uncertain outlook for steel demand. Iron-ore with a 62% iron content dropped 2.5% on September 21.

But independent minerals economist Tendai Furamera explains that the West African iron-ore projects are due to start in and after 2018 and, as investment decisions are based on long-term real price estimates for iron-ore, current spot prices will have little impact. “The investments are based on assumed cost of marginal production from 2018 and beyond.”

Meanwhile, Africa-focused Australian iron-ore developer Equatorial Resources MD John Welborn said at the 2012 Africa Down Under conference, in August, that China wanted to import half of its iron-ore from Chinese-owned mines elsewhere in the world to broaden its supplier base. “China is the dominant buyer of seaborne iron-ore and imports more than 650-million tons a year, which is 63% of the total global seaborne iron-ore demand,” he said.

Further, he said it was almost certain that increased production from the traditional regions, such as Australia, would not fill the gap, so it was likely that projects in Central and West Africa would be developed to meet the demand. Raw iron-ore in China has an iron content of about 15%, compared with the 60% iron content of the iron-ore produced in West Africa, Australia and Brazil.

“This has caused a race to production along the West Africa coastline, with companies worldwide aiming to develop iron-ore projects,” said Welborn.

Furamera says another iron-ore frontier in West Africa is likely, but does not believe it will be anywhere near the size of Pilbara.

“There are a number of potential world-class deposits in West Africa, such as Simandou, in Guinea, and Faleme, in Mali. The ‘new Pilbara’ in West Africa also has the potential for higher lump:fines ratios (the selling price of fines is lower than that of lump iron-ore), compared with Australia’s Pilbara Mara Mamba mine’s ores, which makes the resources [more] valuable,” he says, adding: “The potential for single large-scale mines in West Africa is estimated to be tens of millions of tons.”

Furamera adds that iron-ore is the most abundant mineral on earth and that its supply is endless, but the issue, however, is the quality of the ore, as a viable iron content is necessary to run blast furnaces. The required standard percentage is more than 60% iron content.

Iron-ore is a bulk mineral and requires large investments in rail and port infrastructure, and the West African mining industry needs major improvements.

Welborn said the challenge to developing an iron-ore mining industry in West Africa was infrastructure, noting that the region needed to develop its railways, ports and mines. He noted that new production was only coming on stream in West Africa where high grade, near-surface iron-ore bodies were in close proximity to existing rail infrastructure.

According to analyst GlobalData, Liberia must improve its road connect-ivity through the construction of an additional 800 km of regional roads and 1 500 km of national roads to meet connectivity standards and fully capitalise on its iron-ore mining potential.

And neighbouring Sierra Leone needs additional rail and port facilities, as there is only one of each to serve the iron-ore industry. Its Pepel port serves the entire sector and has the capacity to handle 16.2-million tons a year. The current production rate is 16.5-million tons a year, which is expected to increase to 67-million tons a year by 2020.

Current Developments

BHP Billiton currently has a 41.3% interest in a joint venture (JV) that holds the Nimba Mining Concession and four prospecting permits in south-east Guinea. The JV is undertaking a prefeasibility study into the develop-ment of the concession and associated transport infrastructure. The mine expects to deliver high-grade DSO to international markets.

BHP Billiton – the world’s largest resources company – has a 100% interest in a Mineral Development Agreement with the Liberia government. This enables further exploration and development of its Liberian iron-ore mineral leases, which are near existing rail and port infrastructure. Exploration at these leases continues, with drilling taking place on selected targets.

South Africa’s Kumba Iron Ore, an Anglo American subsidiary, also has its eyes on West Africa’s iron-ore endowment. “Kumba’s growth strategy has evolved into an Africa-focused one and its aim is to create a second mining footprint in Africa in partnership with Anglo American, but will not bet on West Africa and will wait for the right opportunities,” says communication and brand manager Gert Schoeman.

Kumba and Anglo American have signed a Liberian exploration deal with Jonah Capital, in terms of which they will spend $10.5-million in the JV over three years at Gbarnga and Kalasi.

“At this stage, Kumba is assessing a broad spectrum of options, ranging from near-development projects to early-stage greenfield opportunities in several target countries in Central and West Africa,” he says.

Rio Tinto CE Tom Albanese said in June that the company would invest $501-million for further infrastructure development at the Simandou iron-ore project, in Guinea.

The Simandou project will comprise a mine, about 700 km of trans-Guinea railway and a port south of Conakry, the capital city. After the five-year ramp-up, it is expected that up to 95-millon tons a year of iron-ore will be exported and first shipment is expected in 2015. Rio Tinto expects Simandou to become the largest integrated iron-ore mine and infrastructure project in Africa.

“Further investment will be made as the Guinea government progresses its financing strategy and grants approvals for the next steps in developing rail and port infrastructure,” Albanese added.

First commercial production is expected in mid-2015 and the project is expected to become a long-life, low-cost operation, producing one of the highest-grade iron-ore on the market.

West African Minerals previously told Mining Weekly that it intended to focus on DSO and high-grade ore and had innovative quick-to-market logistics schemes for its close-to-port Cameroon and Sierra Leone properties. Further, the company’s aeromagnetic results indicated that it might be in possession of a property larger than Sundance Resource’s adjacent Mbalam project on the Mbarga deposit, in Cameroon.

Sundance CEO and MD Giulio Casello said at the Africa Down Under conference that its Mbalam project was a pioneer project for the region. He added that environmental approvals had been received for the port, rail and mines in Cameroon and that infrastructure development included a 510 km rail line for transporting iron-ore and a 70 km spur line from Nadeba. There would also be a deepwater port, capable of taking bulk iron-ore carriers of up to 300 000 deadweight tons.

Investing in, exploring and developing iron-ore projects in West African countries will result in people who are affected by mining activities benefiting from the upliftment of communities through the improvement of clinics, hospitals and education, which miners are obliged to provide. They will also provide skills training and job opportunities and will help to develop the much-needed infrastructure.

The ‘new Pilbara’ iron-ore deposit that spans West Africa will provide enough iron-ore to match the projected future global demand. The recent drop in iron-ore prices has had little effect on major mining companies’ exploration and development activities in West Africa because they plan according to projected prices based on when the mines will start to produce.