[miningmx.com] – THE path was open for merger and acquisition activity in Sable Mining’s $250m Nimba iron ore project with GlencoreXstrata, Anglo American, ArcelorMittal and Jindal tipped as possible suitors, said GMP Securities in a note today.
The UK brokerage said Sable Mining could finance the building of Nimba through an offtake deal in which it sold the marketing rights of iron ore from the Guinea project, but it was likely it would follow “a more savvy approach”.
This would involve combining an offtake deal with non-offtake finance. “By doing this, the door remains open to M&A, with Mittal, Glencore, Jindal and Anglo American all having publically expressed their intent to build a West African iron ore business,” said GMP Securities in its note.
Kumba Iron Ore CEO, Norman Mbazima, said in February that the company – which is controlled by Anglo American – would not “rush into Africa”. However, the company has set its sights on diversifying from its South African base and recently established a foothold in West Africa’s Liberia through a $10.5m joint venture with Jonah Capital.
GMP Securities was commenting after Sable Mining announced today it had been awarded an export decree – the first ever by the government of Guinea – which would allow it to transport iron ore from the project through Liberia. First production was expected in 2015.
Andrew Groves, CEO of Sable Mining who has led a number of UK listed mining start-up and development companies, said his team had worked “… tirelessly over the past 18 months” in order to prove up a formidable DSO (direct shipping ore) resource. “I believe we are translating this in-situ value into a commercially attractive pre-production asset,” Groves said.
GMP Securities said it expected Sable Mining to upgrade Nimba’s resource 50% to about 200 million tonnes (mt) by October or November from the current 135mt. A pre-feasibility would then take place ahead of a bankable feasibility study in 2014.
“Nimba’s quality is undeniable, and now we think it is becoming increasingly obvious that both Guinea and Liberia support the asset’s development, not the least because of the benefits both countries will see,” said GMP Securities of the export decree,” said GMP Securities.
Sable Mining announced on October 1 that it had been awarded a mining licence, a development that sees the UK firm succeed where many have struggled. Guinea is involved in a protracted dispute with mining entrepreneur, Beny Steinmetz, whose BSG Resources been accused of illegally obtaining mining rights to a portion of the enormous Simandou project.
Meanwhile, Rio Tinto said recently first production from certain blocks of Simandou it was developing with the Guinea government was only likely to begin by 2018 at the earliest, some three years behind the initial production schedule.
In a meeting in London on June 16 between Guinea president Alpha Conde, Sam Walsh, CEO of Rio Tinto, and Jin-Yong Cai, executive vice-president and CEO of the International Finance Corporation (IFC), there was an agreement to continue finalising an investment framework agreement as well as construction of a transportation link for the Simandou project.
“The partners have previously established a working group to design the investment framework which will be the basis for seeking financing for the project,” Rio Tinto said in an announcement on June 18.
