Sundance Resources' 40 million mt/year iron ore project in Congo
Brazzaville and Cameroon looks set to resurface following years of
adjustment, with the expected signing later this month of a mining
accord by the Cameroon government, a project investor said.
Like another major African iron ore project, Simandou Blocks
1&2, the $6 billion Sundance project is to be be developed mainly
with Chinese financial backers who will provide infrastructure, and all
the ore was expected to go to China.
Aime Emmanuel Yoka, managing partner of Singapore-based Marys
Capital Investments, one of the partners in the project, told S&P
Global Platts in an interview the Cameroon government was set to renew
its Mbalam Convention by the end of this year.
That will allow Sundance's various foreign partners to operate in Cameroon and get necessary permits.
On the Congo Brazzaville side, everything was in place, Yoka said. A
new mining convention was ratified in 2016 and the country's parliament
is fully open to foreign investment.
Sundance, a direct shipping iron ore (DSO) project with mines 40 km
apart in Congo Brazzaville and Cameroon, has suffered disruptions and
uncertainty following a helicopter crash in which the entire board of
the original project died in 2010.
Feasibility studies were nonetheless completed in 2012. The project
was further held up by a subsequent fall in commodity prices and delays
in Congo and Cameroon establishing a mining convention.
Iron ore's price surge in 2019 signaled a distinct market for
high-grade ore which can help reduce emissions in the steelmaking
process, improving prospects for Sundance's high-grade project.
Following the expected renewal of the Mbalam Convention, the project
will still need approval from both Australian and Chinese authorities.
According to an agreement signed on July 5, Sundance's majority
stakeholder partner will be AustSino, a company registered on the
Australian Stock Exchange (ASX). Funds and resource companies currently
with holdings in Sundance are Marys Capital Investments, D&E Shaw,
Seringan, Noble Resources, Blackstone and Wajin, while strategic
partners include the China Railway Construction Company CRCC, Shenzhen
Yantian Port, steelmaker Baowu and stainless steel producer Tsingshan.
The strategic partners were expected to put up 30% equity for the
project, with 70% being put up by their banks as debt, involving
agreements and transactions that need to be finalized post June 2020,
according to Yoka.
"I am 70% sure this will go ahead," Yoka said.
Infrastructure hurdle
Sundance's partners have already invested $500 million in
exploration and feasibility studies and the mine installations are
partly built.
The big hurdle is infrastructure. A $3.4 billion, 540 km railway
from Cameroon, with a 40 km branch line to the mine site in Congo
Brazzaville, is required for efficient shipping to an existing port at
Kribi in Cameroon, where another $800 million will be required to
construct a Sundance terminal.
The railway and port terminal were expected to take three years to
build, meaning first production from the mine was foreseen in 2024.
Energy supplies are also needed.
Yoka envisaged that once infrastructure was in place, Sundance could
produce 15 million mt DSO of 62% Fe quality in its first year of
operation, rising to its full 40 million mt/year in the second year.
The project is greenfield and open pit, with enough DSO reserves
(517 million mt) for 13 years and then a further 6 billion mt of
itabirite reserves that could give the mine a total 25 years mine life.
The idea is to mine at both the Cameroon and Congo Brazzaville sites
and blend the two ores before shipping to guarantee payback, Yoka said.
Resource nationalism may, however, pose risks to the project,
especially as the Chinese operators may be expected to wish to bring in
some of the labor for the project, which may clash with local labor
laws.
The project was expected to create some 5,000 direct jobs, represent
15% of Congo Brazzaville's GDP for the years of its operation and 10%
of Cameroon's.
"The Chinese investors know that the local population represents a significant risk to the project," Yoka said.
"It will be a tough battle to get the percentage of local and
percentage of Chinese labor sorted out. But our job is to ensure that
all parties, investors and populations alike benefit from the project."
