African Minerals, the developer, operator and 75% owner of the Tonkolili iron ore project in Sierra Leone has secured an agreement from its Chinese partner to release almost $13 million, which will be used to pay December salaries and taxes.
The company has suffered a financial hit due to increased costs associated with the Ebola outbreak in West Africa and the drop in iron ore prices last year. This forced the company to mothball Tonkolili due to a lack of working capital after its Chinese partner Shandong Iron and Steel Group failed to release the funds that had been reserved for the project’s next phase of expansion.
In its efforts to secure additional short-term funding, African Minerals has continued discussions with Shandong, its partner and 25% owner of the project. As part of these discussions, Shandong has agreed to the release of $12.96 million of the earmarked funds from the project’s restricted bank account in Hong Kong.
The released cash will allow the company to make some urgent payment, and has specifically been applied to the payment of December salaries and accumulated taxes due in Sierra Leone, but the situation remains critical.
“Negotiations continue between African Minerals and Shandong regarding a funding solution. These discussions remain the company’s utmost priority and while the board continues to make every effort to advance them, there can be no certainty of future releases of funds,” African Minerals said in a statement.
African Minerals’ shares were suspended in November after losing 95% of their value last year following failure to make a repayment due to lenders on a $250 million loan. Shares will
Shares in African Minerals, which has failed to make a repayment that was due to lenders at the end of November on a $250 million loan, lost 95 percent of their value last year until the company’s ordinary shares where suspended in November.
The shares will remain suspended while there remains a fundamental uncertainty in the financial position of the company. Tonkolili will remain under care and maintenance until a funding solution is achieved, African Minerals revealed.