Sierra Leone-focused iron ore miner African Minerals has obtained $248m in cash through an agreement with its Chinese partner, Shandong Iron and Steel Group, that has also seen its chief executive resign, following losses of around 90% loss in the company’s share value this year.
Under the agreement with the Chinese steelmaker, the company will gain immediate access to $284m for its sole project – the Tonkolili mine in Sierra Leone – investing a sum that had already been earmarked for the second phase of the project’s expansion.
A statement from the company noted that, “both shareholders have agreed to access the funds in the Hong Kong joint project account … not only for construction capital, but also for general working capital purposes, with immediate effect.”
Access to the funds will significantly aid African Minerals, particularly as it struggles with lower iron ore prices. However, in allowing access to the funds Shandong did request management changes, leading to the resignation of Bernard Pryor as CEO, and the appointment of Alan Watling in his place.
The Chinese group also requested that the project’s financial and operational management be separated from that of African Minerals, potentially increasing its influence. Shandong Iron and Steel Group holds a 25% stake in Tonkolili, while African Minerals holds the rest.
Roger Liddell, a senior director at African Minerals, said: “The last few weeks have thrown up a perfect storm of low iron ore prices and heightened concern over the serious Ebola virus disease … the second quarter has seen our received price fall, putting pressure on our working capital requirement.”
He also reiterated its production guidance of 16 to 18 million tonnes for 2014, with C1 cash costs (on-site costs and general expenses) in the range $34-36 per tonne, adding, “the wet season has started aggressively, but we are pleased to report that production and export sales have been unaffected, with nine million tonnes already exported in the first half of the year.”