TIDMAMI
RNS Number : 4670Y
African Minerals Ltd
01 December 2014
1 December 2014
African Minerals Limited
("African Minerals", "AML", or "the Company")
Financing and Operations Update
African Minerals Limited, the developer, operator and 75% owner
of the Tonkolili Iron Ore Project (the "Project") in Sierra Leone,
today provides a financing and operations update.
Summary
Operations to be put on care and maintenance until such time as
$102m restricted cash is released and/or, AML secures additional
short term funding.
Controlled shut down initiated at operations in Sierra Leone due
to insufficient working capital, severely impacted by low iron ore
prices, which has prevented implementation of cost reduction
strategies.
The Company's ordinary shares will remain suspended while there
remains a fundamental uncertainty in the financial position of the
Company.
Q3 export sales of 4.4Mt (Q2 2014: 4.3Mt); average direct cash
costs of $36/t (Q2 2014: $38/t) and all-in cash costs of $45/t (Q2
2014: $47/t).
Further to the announcement on 20 November 2014, the Company
announces that the $102m of restricted cash has yet to be released
due to continued disagreements between AML and Shandong Iron and
Steel Group ("SISG"). AML continues to use its best efforts to
obtain SISG's authorisation to release these funds, however there
remains no certainty of this, or of its timing.
As previously announced AML commenced a process to sell down a
partial interest in its stake in the Tonkolili mine. AML is talking
to several groups who have expressed strong interest, and
discussions are being progressed as quickly as possible, though
there is no certainty a transaction will be forthcoming.
In the absence of sufficient working capital AML has commenced a
temporary controlled shut down of its operations in Sierra Leone.
Without a significant injection of working capital, AML is unable
to initiate the cost reduction strategies which would return the
operations to cash flow positive status even at recent low iron ore
prices.
The receipt of funds from shipments in recent weeks, including
from SISG, provides the operating companies with sufficient funds
to meet critical payments necessary to maintain the security,
safety, and, to the extent necessary, evacuation of staff and
contractors in Sierra Leone, and to maintain salary payments in the
short term. This plan allows for the continued safeguarding of the
Company's assets and will allow for a rapid ramp up and resumption
of operations when a financial solution is achieved.
With all available funds being used for the security and safety
of personnel and assets during this temporary shutdown, the
Company's subsidiaries have not been able to make in full the
repayment under the PXF Facility due at the end of November. The
Company is in discussions with its Lenders about this and future
obligations under the PXF Facility, however these discussions are
only likely to progress successfully once AML and SISG as
shareholders of the Project have agreed a financial solution.
Alan Watling, Chief Executive Officer of African Minerals,
said:
"Initiating a temporary shutdown of operations towards care and
maintenance in Sierra Leone, while extremely regrettable, is a
necessity given the Company's financial status and uncertainty over
the timing of the release of the restricted funds. While the
operating performance of the Project has been impressive during
2014, with Q3 exports of 4.4Mt at an average direct cash cost of
$36/t, in spite of the wet season, the fall in iron ore prices and
the operational challenges caused by the Ebola disease outbreak has
meant the Project has continued to operate at a loss. While
management is convinced Tonkolili remains a world class low
operating cost asset, the absence of sufficient working capital has
prevented the Company from implementing the cost cutting strategies
required to return the Project back to a cash flow positive status
even in the current depressed iron ore price environment.
Management is doing everything possible to procure the agreement
of a funding solution between AML and SISG. The Company greatly
appreciates the support shown by the Government of Sierra Leone,
our local suppliers and communities, and all our contractors during
what we hope is only a temporary suspension of operations."
Frank Timis, Executive Chairman of African Minerals, said:
"Following my visit to Sierra Leone last week I wish to thank
the Government of Sierra Leone and all our local suppliers and
communities in which we operate for their continued support and
understanding of the situation. We are very grateful that the
Government has pledged its assistance to help secure the safety and
security of our people and assets in these difficult times. We have
allocated all available funds to these critical activities and to
keeping the operating assets in a condition that operations can be
quickly restarted, which is of fundamental interest to all
stakeholders. As part of this, local staff will continue to be
employed on normal wages and will be allocated to care and
maintenance activities."
Q3 Production and Exports Summary
Despite Q3 being the traditional heaviest part of the wet
season, the Company's wet season strategies performed well. 5.2Mt
of DSO was mined, along with 1.0Mt of other material, principally
saprolitic hematite in readiness for Phase 2 expansion. 4.9Mt of
this material was treated to produce 3.3Mt of product - 1.7Mt of
lump, 1.3Mt of fines and 0.3Mt of A32, a notable decrease in A32
tonnes from the previous quarter which saw 0.9Mt of A32 being
produced.
Total tonnage exported in Q3 was 4.4Mt, a 3% increase from the
previous quarter. Dry tonnes shipped were 3.9Mt of DSO.
In Q3, 32% of production tonnage was delivered into the 6.5Mt
SISG Discounted Offtake Agreement ("DOTA"), while a further 16% was
SISG Equity ore.
Average direct cash costs in Q3 were $36/t, a reduction from
$38/t in Q2. All-in cash costs were also down to $45/t, from $47/t
in Q2.
Also during the quarter, Plant 1G plant was successfully
commissioned and was ramping up to its intended capacity. Together
with the 1B and 1D plants, the processing capacity at the mine is
now in excess of 27Mtpa.
Contacts:
African Minerals Limited
+44 20 3435 7600
Matthew Hird / Francis O'Neill
Tavistock Communications
+44 20 7920 3150
Jos Simson / Nuala Gallagher / Mike Bartlett
Jefferies
44 20 7029 8000
Nick Adams / Alex Collins
About African Minerals
African Minerals operates the Tonkolili Iron Ore Project (the
"Project") in Sierra Leone, with a JORC compliant resource of
12.8Bnt. The Project, which currently has a 60+ year mine-life, is
being developed in a number of staged expansions. In 2013, African
Minerals completed sales of 12.1Mt to its customers.
Phase II expansion contemplates the production of an expanded
tonnage including the establishment of a high grade concentrate
product with the project ramping up to 25Mtpa.
The Company has also developed significant port and rail
infrastructure to support the operation of the Project, via its
subsidiary African Rail and Port Services (SL) Limited ("ARPS"), in
which the Government of Sierra Leone ("GoSL") has a 10% free
carried interest.
The Project companies are currently owned 75% by AML, and 25% by
Shandong Iron and Steel Group ("SISG"), except for ARPS, which is
currently owned 75% by AML and 25% by SISG, with the GoSL having
the right to a 10% free carried interest from AML.
www.african-minerals.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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