Shandong Iron & Steel invests US$1.5 billion in African Minerals' Tonkolili Iron Ore Project
African Minerals, the exploration and development company run by mining entrepreneur Frank Timis, has announced it is receiving US$1.5bn investment from the Chinese. The tie-up with Shandong Iron & Steel will see AML hand over a 25 per cent stake in its flagship Tonkolili prospect in Sierra Leone in a three stage deal.
The news lit a fuse under the share price of African Minerals in London, which rose 84.25p, or 22 per cent, to 469.25p.
The cash injection will allow the group to speed up development of
phase one two of the west African project.
Timis said: "Our partnership provides African Minerals' shareholders with significant funding for the project, accelerating its delivery, and it provides SISG with a long term supply of iron ore and a 25 per cent interest in what we believe is a world class project that has many opportunities for future expansion. The new partnership will also bring great benefits to our hosts, the people of Sierra Leone."
The investment in Tonkolili will be accompanied by an off-take agreement
for a 10 million tonnes a year.
Meanwhile, the funding also allows AML to bring a rail line in rather than hauling out the ore by road, which means shipments won’t now be interrupted by the wet season.
The track is expected to be finished in the third quarter of next year and will connect the site to Pepel Port, in the north west of the country.
The injection of cash means that phase one production will rise from the estimated 8 million tonnes of hematite to 10 million tonnes.
The Chinese investment will be paid in three tranches and at the end of each funding stage, Shandong can elect to receive either iron ore production or a dividend cheque.
The first phase of the deal will see Shandong subscribe for new shares in AML's wholly-owned subsidiaries Tonkolili Iron Ore, African Railway & Port Services and African Power.
Initially it will receive a 13.3 per cent stake in each of the
subsidiaries while handing over US$800 million to AML.
Stages two and three will see SISG receive a further 11.7 per cent of the subsidiaries in return for two separate payments of US$500 million and US200 million.
This investment from the People’s Republic values Tonkolili at US$6 billion.
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