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Kumba resumes Faleme drilling
Allan Seccombe
Posted: Thu, 15 Feb 2007

[miningmx.com] -- KUMBA Iron Ore has resumed limited drilling of the Faleme iron ore deposit in Senegal, winning a breather from the government in an impasse over the project, management said on Thursday.

Kumba, which reckons the project has been set back by about a year, is doing diamond and reverse circulation drilling on the northern ore bodies, which could be the source of a 20 million tonnes per annum (mtpa) mine in the future.

Kumba’s board had approved a bankable feasibility study into developing a mine at the deposit in southeast Senegal and the associated infrastructure to get the ore to the coast some 750 km away.
not too delayed by protracted discussions
However, Miferso, a state-owned project development company, which owns the deposit and with whom Kumba had an agreement, subsequently signed a memorandum of understanding with Mittal to develop the deposit.

Kumba and Miferso had signed an agreement in July 2004, exploring the potential for a mine at Faleme. Kumba’s board had given the nod to a bankable feasibility study for the project.

Contact was broken off with Kumba and exploration drilling was stopped. Given the hold up at Faleme and questions whether Kumba can resolve the dispute, analysts say the project is not reflected in Kumba’s share price.

“We have not made progress on the legal impediments and nor have we reached a conclusion to the impasse,” Kumba CEO Ras Myburgh said.

However, relations with the government appear to have thawed after recent talks have resulted in Kumba, South Africa’s largest iron ore producer at nearly 30mtpa, returning to the project to do more drilling.

“Discussions progressed to such an extent that we were exchanging alternative options. We proposed that we continue doing some exploration drilling so that the project is not too delayed by protracted discussions,” Myburgh told Miningmx.

A diamond core drill is probing the unexplored lower-grade magnetite deposits in the northern ore bodies. This magnetite will play an important role in bringing production up to 20mtpa.

The 4,000 metres of diamond core drilling will be finished by the end of March.

The southern ore body has an indicated resource of 250 million tonnes of hematite and the north an inferred resource of 120 million tonnes of hematite.

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The magnetite could possibly bring the total up to 600 million tonnes.

A 10,000 metre reverse circulation drilling programme on the northern ore bodies will be used for modelling purposes and should be completed by the end of February.

The three southern deposits have enough hematite to support a 12mtpa mine and Kumba has been thinking about taking this up to 18mtpa, but for that it will need to include the northern deposit.

If the magnetite is there is any quantity, the Faleme project could be raised to 20mtpa.

While Kumba is willing to keep talks amiable in the hope of resolving the issue, but it will reach a point when it will pursue its legal rights. It is confident it has a solid legal case.

“We believe we have a very strong legal case and we are confident that we have performed according to an agreement we signed there,” said Christo van Loggerenberg, Kumba’s head of projects.

Kumba has told the Senegalese government it could develop the entire project, which would cost about $2bn to build a mine, install 340km of rail, refurbish another 400km and develop port export facilities at Dakar, he said

The original thinking was that the government would assist in the development of infrastructure but then Mittal apparently came in with a proposal to fund the entire project.

Kumba would be willing to let a partner take a minority stake in the Faleme project to assist with the $2bn funding, van Loggerenberg said. Such a partner could come from Japan, China or another Far East country.

“We believe commercial funding is available for a stake in the project from China or Japan,” he said.

Kumba wants a majority stake to give it operational and management control of the project.