[miningmx.com] – AUSTRALIAN-listed Equatorial Resources attempted to put clear blue water between its iron ore project in the Republic of Congo (RoC) and the venture Exxaro Resources said it would impair, possibly by up to R5.3bn.
“Equatorial is developing a stand-alone project at Mayoko-Moussondji,” said Equatorial Resources MD and CEO, John Welborn who added that the firm’s “pathway to production” did not rely on Exxaro developing its Mayoko-Lekoumou enterprise.
“Equatorial has no requirement to, and will not be making, any write-down or impairment of the company’s investment in Mayoko-Moussondji,” said Welborn in an announcement to the Australian Stock Exchange.
He added, however, that Equatorial Resources may be interested in buying or leasing some of the capital goods – such as locomotives – that Exxaro said it would sell in order to recoup some of its lost investment.
Equatorial Resources’ announcement comes days after Exxaro said it may not proceed with the development of its iron ore project in RoC following a failure to sign a rail and port agreement with the government.
It said it could write-down its two-year investment but was hopeful of reaching a new agreement with the government.
“We wish to assure you that Exxaro continues to work with the RoC government and will maintain the support to the surrounding Mayoko community,” said Exxaro Resources CEO, Sipho Nkosi earlier this week. “We are committed to a new rail and port deal that will make it [Mayoko] viable,’ he said.
“If the agreement is favourable, then Exxaro will be in position to consider the next steps regarding the future. Therefore, the way forward is for Exxaro to finalise all definitive agreements as soon as possible. We will engage the RoC government as this remains an important project for Exxaro and the economy of the RoC,’ he said.
Welborn also alluded to possible cooperation between the two projects saying they may be stronger together. His comments come amid further controversy that the real reason for Exxaro’s problems with Mayoko-Lekoumou may be geological.
A report by Macquarie Research on June 25 said that the write-down related to problems that were more “technically fundamental” than a failure to agree a rail or port tariff or the decline this year in the iron ore price.
“Essentially, in order to build a project of sufficient scale (i.e. 12mtpa) and life, more magnetite ore (of lower grade) than initially thought was required to be mined – with significant implications for both capex required (magnetite requires a lot more processing kit) and operating costs, thus making the project return unacceptable,” said Macquarie Research in its report.
It added that there was little chance the project would be developed and that Exxaro’s hope it could revive port and rail negotiations was “… largely rhetoric aimed at softening the blow for a RoC government which will now be under immense pressure to try to make the project work”.
Welborn said Equatorial Resources hoped to finalise a mining convention with the government of RoC shortly which, combined with a pre-feasibility report, would take the development of its project forward.
“Equatorial continues to investigate opportunities for collaboration and partnership with significant mining houses and potential funders in order to fast track the financing and development of Mayoko-Moussondj,” he said.
