With just a single asset, AIM-listed African Minerals may be considered by some to be a junior in the mining sector, but its achievements place it in the major leagues writes Laura Cornish.
The African Minerals’ story , and its Sierra Leone-based Tonkolili iron ore mine, is like a fairy tale. While evaluating numerous diamondiferous targets that were identified after a countrywide exploration programme eight years ago, the company stumbled upon what is currently classified as one of the largest defined magnetite iron ore deposits in the world. Realising the financial opportunities associated with such a lucrative asset, African Minerals changed strategic direction, and today is an iron ore focused player.
It took the company only three years, from discovery in 2008 to having “first ore on ship” in 2011. In that time, African Minerals produced its first iron ore from the mine at Tonkolili, built a 125-km railway and replaced an existing 74-km rail connecting the mine to the then defunct Pepel port, and rehabilitated and upgraded the port to triple its original capacity. And last month, the company announced it had ramped up to reached its 20 Mtpa iron export target.
“It is testament to the capability of the team at African Minerals that the practical demonstration of a sustainable run rate of 20 Mtpa has come so soon after the physical installation of capacity. The No 2 Dumper at Pepel was commissioned, with first ore being offloaded on 29 April. Of equal importance is the fact that these operating accomplishments were achieved during the start of the rainy season in Sierra Leone, with 355 mm of rain falling at the port facilities since the beginning of May; an early demonstration of the success of our wet season shipping strategy in 2013,” says CEO Keith Calder, who joined the company in July 2012.
African Minerals is the largest employer in Sierra Leone and is set to become the largest contributor to the country’s GDP. Approximately 80% of the workforce (around 4 000 people) who are employed by the company are from Sierra Leone. During peak construction phase, there were approximately 11 000 people on-site.
The US$1.5 billion (R15.01 billion) Tonkolili mine is a world-class asset, with a declared JORC-compliant resource of 12.8 billion tonnes – 11.6 billion tonnes of magnetite overlain by 1.2 billion tonnes of saprolitic hematite resource (representing 9% of the ore body) and a duricrust cap of 126.5 Mt of direct shipping ore (representing 1% of the ore body). Its strike length runs along four hills and covers 30 km, making it the same size as the entire greater London, African Minerals, head of external communications, Mike Jones explains.
The ore body itself is a banded ironstone formation, but whereas in similar structures in Australia’s Pilbara region where the BIF is subhorizontal and almost completely oxidised, here the formation is subvertical, and the magnetite is only oxidised to hematite right at the surface. The stripping ratio over the mine’s 60+ year life is expected to be less than 1:1, meaning that for every tonne of iron ore mined, less than a tonne of waste has to be moved.
Tonkolili’s 20 Mtpa export only represents the beginning as the company is only currently exploiting the direct shipping ore (DSO) portion of the resource. As the deposit’s hematite material depletes and moves into the saprolite hematite stage, it will be expanded to produce 35 Mtpa (of concentrate) at 64% (high grade) iron. Between 90 and 120 Mtpa of mining and processing capacity will be required at the front end to deliver the target concentrate volume.
Scoping level assessments have already revealed that expanding the necessary infrastructure is viable. “Our expansion goals are realistic. We will build our capacity up through modular, sequentially constructed process plants, the first to start producing in 2016. Each module will increase the capacity until it reaches the 35 Mtpa target in 2019,” Jones outlines.
Early works on this expansion plan have already begun to refine project engineering design, and the company expects to be in a position to provide more detail on capital cost and scheduling in the latter part of H2, 2013.
And while water and electricity are two major factors that can determine a project’s viability, in most countries, they pose no difficulties to African Minerals. “Sierra Leone is a very lush and beautiful place with high levels of rainfall. In terms of power, we currently have 10 MW of diesel generated power at the mine and another 10 MW at port. We need in the region of 150 MW of power for the Phase 2 expansion and we are pleased to note the progress that the government is making with various international construction groups and banks, which would support third party long-term power offtake agreements. The most viable power option is hydroelectric power from the neighbouring Bumbuna and Yiben systems, close to the Tonkolili project.
Jones explains that the construction, rehabilitation and replacement of the full 200-km+ railway line connecting the Tonkolili mine to Pepel port, coupled with the port rehabilitation, upgrade and expansion, equated to approximately three quarters of the entire project cash spend to date.
“The company has a 99-year exclusive lease on the rail, port and other infrastructure corridor areas. We completed the opening up of railway line in July 2011, which included upgrading a portion of it, and have subsequently completely replaced that upgraded section. Rail capacity for our next expansion will have to be increased by adding a double track for about 70% of the distance to accommodate the increased tonnages.”
Considering Pepel port had been lying dormant since the 1970s, rehabilitation was essential. “We had to expand its export capacity threefold (from about 7 to 20 Mt). Today, it has double ship-loading capability with stockyards that can hold about 1 Mt of material. The port will have to be further expanded for the new 35 Mtpa mine capacity – requiring some additional dredging and the construction of a second major ship-loading facility and wagon dumper.
African Minerals’ partners
CRM – China Railways Materials Commercial Corporation has invested almost US$300 million to attain a 12.5% interest in the company with associated agency and offtake agreements. In December 2012, African Minerals agreed to raise CRM’s restriction of share ownership to 15%, which demonstrated its strong support as a cornerstone shareholder.
SISG – African Minerals completed a deal with Shandong Iron and Steel Group whereby SISG has contributed US$1.5 billion to the Tonkolili project level – a portion of which will initially fund the next phase of expansion – to acquire a 25% stake in the project, with associated offtake agreements.