Cameroon – Sundance Resources has revealed it will no longer be overseeing or financing the development of the rail and port infrastructure required to support its undeveloped 40 Mtpa Mbalam-Nabeba iron ore project Cameroon and the Republic of Congo.
According to the ASX-listed junior, the Cameroon government will look to fund 100% of the capital requirement for the rail and port infrastructure and secure this funding via a loan from China and possibly other friendly countries. As previously announced by Sundance, the value of the infrastructure is US$3.5 billion, including a 510 km railway line.
Sundance is confident that this funding for the infrastructure will be obtained by the Cameroon government and this will allow the company to concentrate on funding and the development of the Mbarga and Nabeba mines.
A transition agreement with the Cameroon government was signed yesterday in Yaounde, Cameroon incorporating the following key items:
- Exploration Permit 92 will be extended to 24 July 2017;
- The Mbalam Convention long stop date has been extended to 26 July 2015 and, subject to satisfaction of the conditions precedent to the transition agreement, will be extended to 24 July 2017;
- The Cameroon government will own 98% of the rail and port infrastructure entities and in recognition of the capital invested to date by Sundance’s subsidiary Cam Iron S.A. (Cam Iron) and the on-going support that Sundance will provide towards the development of the rail and port infrastructure, Cam Iron will obtain a 2% free carried interest in these entities until the date of first commercial production. Cam Iron will not be required to provide any equity or debt funding for the construction of the rail and port infrastructure;
- Sundance subsidiaries, Cam Iron and Congo Iron S.A., will enter into take or pay agreements incorporating a commercial tariff for each ton transported and loaded using the infrastructure;
- Sundance is required to achieve a financing commitment for the mines no later than nine months (or such later date as agreed) after the Cameroon government achieves its financing commitment for the infrastructure. If this is not achieved within the timeline or any agreed extension, Cam Iron may, at the request of the Cameroon Government, be required to transfer EP92 to a nominee of the Cameroon government for no consideration;
- Sundance will provide technical support to the Government Ministries as requested; and
- Sundance will conclude the work currently being undertaken on the DUP.
This transition agreement becomes effective on the satisfaction of conditions precedent.
The Cameroon government has commenced a process to select an EPC contractor for construction of the rail and port infrastructure to support its application for a loan from financial institutions. It is anticipated it will take 6-12 months for the Cameroon government to secure their financing commitment.
Last year Sundance announced the appointment of Mota-Engil to undertake the project. This significant change regarding the infrastructure development would indicate Mota-Engil is no longer involved in the project at this stage.
“The execution of the transition agreement will allow Sundance to focus on funding, constructing and operating the mines at Mbarga and Nabeba. We believe this is the best outcome for our shareholders as the mines will be globally competitive, low cost producers of high quality iron ore. This will ensure the economic viability of the overall project through a broad range of iron ore prices,” says Sundance CEO, Giulio Casello.
Sundance will now progress the funding of the mines in parallel with the work being undertaken by the Cameroon government.