Sometimes described as
“the rail line to nowhere”,
the Pointe Noire railroad
may become part of a
major iron ore export route
Perth, Australia — 11 June 2012 – Australian-listed iron ore exploration firm Equatorial Resources says it anticipates negotiating with Exxaro Resources “’ a South African-based and JSE-listed mining group “’ regarding a rail-infrastructure share scheme in the Republic of Congo (RoC).

Miningmx reports that the two companies are investigating iron ore projects either side of an existing 465km, 10Mtpa railway line. The line runs from Mayoko, near the ROC border with Gabon to Pointe Noire on the RoC coastline, which has a port. The line, however, requires refurbishment.

Both Equatorial Resources and Exxaro Resources have agreements with the RoC’s transport utility, CFCO, to freight 5Mtpa each on the line – although it is thought Equatorial Resources has the better government relationship owing to its time on the ground.

“Exxaro has made it clear that it is coming to the end of a first phase of seeing what it has in the country, and where it will go with it. Once they do that, we will have a substantial discussion,” said Equatorial Resources CEO John Welborn in a telephonic interview. Welborn recently attended an iron ore industry conference in Cape Town, where he said the sentiment about the industry’s prospects was overwhelmingly positive.

Given Exxaro’s background and formation, it had a culture of collaboration and cooperation, Welborn said. This is a far cry from events earlier this year when it looked like Equatorial Resources might resist Exxaro’s R2.8 billion bid for African Iron, the firm in which Equatorial Resources had a 20.5% stake. It was thought at the time that Equatorial Resources was either holding out for a bigger premium, or would force Exxaro to make a consolidatory bid for itself.

It seems, however, that there’s been a thawing in the relationship. “We accepted the Exxaro bid, even though we could have kept a bit of leverage,” said Welborn. “We’re now definitely in the camp of cooperation,” he added. Selling its African Iron stake to Exxaro netted Equatorial Resources A$65 million and took total cash resources to A$84 million, but the expense of helping to refurbish the line could he heavily mitigated by a transport joint venture, Australian broker Bell Potter said in a report in March.

According to the Australian broker, capital expenditure, which would include port development, could amount to US$500 million for 10Mtpa on the line. This would break down to US$150 million for rail development, US$300 million for development of the port, and the balance of US$50 million being working capital, Bell Potter said.

Source: Miningmx. For more information, click here.