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African Minerals CFO confident for Q4 output

African Minerals CFO confident for Q4 output

LONDON (Reuters) – Iron ore developer African Minerals is confident of starting commercial production in the fourth quarter from its Tonkolili project in Sierra Leone.

“The mine is already in production, the key is completing the rail in time before the rains come,” Chief Financial Officer Miguel Perry told Reuters on Tuesday.

“We are doing very well at the moment, we are about 68-70 percent complete and everything that we are seeing at the moment says that we are going to get there,” he added.

Phase I of Tonkolili is fully funded and at full capacity is expected to produce 12 million tonnes of iron ore a year once it ramps up from initial production in the fourth quarter.

“We believe the possibility of delivering a working rail link by June of this year should go a long way to removing the current market discount on this project,” Canaccord Genuity said in a note.

Shares in African Minerals, the largest company on London’s junior AIM market, were up 1.8 percent at 0811 GMT, valuing the group at $2.8 billion. The stock outperformed a 2.4 percent decline in a British mining index.

The company is considering two funding options for Phase II of Tonkolili: internal cash flow and about $1 billion of debt or via a deal with strategic partners such as Shandong Iron and Steel Group.

“We are likely to generate EBITDA next year of somewhere in excess of $800 million assuming iron ore prices stay reasonably bouyant,” said Perry.

Phases II and III are expected to boost production by 23 million tonnes a year and 45 million tonnes per annum respectively. Tonkolili is estimated to contain about 12.8 billion tonnes of iron ore.

Perry said no talks have been held regarding the terms of its mining licenses in Sierra Leone. The country’s president told Reuters last month that Sierra Leone needs to revise recent large-scale mining leases to get a better deal for its people.

“There is absolutely no discussion around changing the terms of the mining licences,” said Perry. “There has been no hint from the government that they intend to do so, they have been nothing but supportive.”

“We will contribute a significant proportion of the country’s GDP within the next five years,” he said.

Earlier on Tuesday, the company reported that its full-year losses had widened and that it had cash of around $372.4 million at the end of 2010.

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