African Minerals to produce more iron ore from Tonkolili
The world class Tonkolili project hosts a 12.8 billion tonne JORC resource. African Minerals (LON:AMI) today confirmed that the Tonkolili iron ore mine in Sierra Leone will have a capacity of 15 million tonnes per annum (Mtpa) rather than 12 Mtpa.
However it also revealed that phase one of the project will now cost an additional US$284 million – including US$132 million to increase capacity – on top of the original cost of $1.1 billion.
AMI also revised its sales outlook for the mine’s ramp up period. It now expects to sell 1.2 million tonnes of direct shipping ore this year (cut from 2.5 million tonnes) while next year it expects to sell 12 million tonnes (up from 10 million tonnes).
Tonkolili is still on course to deliver its key development milestone, of first ore on ship (FOOS), in the fourth quarter of this year. To achieve this AMI expects to commission its rail link from the mine by the end of September.
Today it confirmed that excavation and civil works for the railway and the port stockyard are complete now complete. This has effectively de-risked from any adverse effects of the rainy season, AMI said.
“Overall the board is pleased with the achievement of the increase in Phase I capacity from 12Mtpa to 15Mtpa, with a very low capital intensity of this expansion of just US$44 per annual tonne, allowing African Minerals to take advantage of the continued strong markets for iron ore,” said chairman Frank Timis.
“The overrun costs of the project are in part due to the steps that we have taken to de-risk the construction of the rail and port ahead of the rainy season, to deliver the project on schedule by Q4 2011.”
AMI also told investors today that it has now secured a US$90 million credit facility for equipment, from Standard Bank Ltd.
The company confirmed that as a result of increased capex, slower production ramp up, and its revised sales forecasts, it now expects to have cash headroom of US$20 million – rather than its previous expectations of having US$71 million in cash.
by Jamie Ashcroft
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