Sundance Resources' Mbalam iron ore deposit in the Republic of Congo

Congo, CameroonSundance Resources announced last week that it has made further progress in its strategy to develop its flagship Mbalam‐Nabeba iron ore project, which straddles the boarders of  Cameroon and the Republic of Congo, during the quarter ended  March 31, 2015.

During this quarter, Sundance increased the nameplate capacity of Stage One of the project from 35 Mtpa to 40 Mtpa.

Sundance Resources' Mbalam iron ore deposit in the  Republic of Congo
Sundance Resources’ Mbalam iron ore deposit in the Republic of Congo

In order to verify the upgraded capacity, the company commissioned a new and more sophisticated pit‐to‐port dynamic simulation model.  This model confirmed that the nameplate capacity can be increased with the addition of one passing loop together with an additional railway siding feeding into the car dumper at a total capital cost of around $10 million.

The results from this increase in annual tonnage include an annual revenue increase of $295 million per annum and a reduction in the unit operating cost for Stage One of the project.

Onsite operations

Work on the implementation of the Declaration Utility Publique (DUP) for the railway corridor continued during the quarter and was 35% complete at the end of the period. The work entailed holding public consultation meetings along the railway corridor, carrying out a cadastral survey to physically demarcate the previously approved railway corridor on the ground and agreeing the cadastral survey with the government.

This was followed by an assessment to identify any affected private property and any social, historical or culturally sensitive areas along the railway corridor and to assess any compensation and/or resettlement necessary.

Sundance said in a statement that the work would continue over the coming months and is an essential component of protecting the assets in country and ensuring that the project will comply with required international standards when given the go‐ahead.

Cash projections

The quarter saw a reduction in cash expenditure of approximately 40% from the previous quarter.

Actual costs incurred during the quarter were approximately $7.7 million, with a total cash outflow during the quarter of approximately $9 million due to payments of creditors accrued during the previous quarter.

This was accomplished while continuing the expenditure on the DUP and in‐country community and environmental work.

Sundance expects to spend approximately $7 million during the June 2015 quarter on progressing the DUP work, project development and administration expenditure, which is expected to be complete in the September quarter this year.

Safety

During the quarter, Sundance recorded one lost time injury (a contract employee was bitten by a snake) and currently has a lost time injury frequency rate of 6.5.  Sundance also reported no environmental non‐conformances in Cameroon or the Republic of Congo during the quarter.

Going forward

The focus for Sundance in 2015 is signing up the required strategic equity investors for the Project (in particular, for the port and rail infrastructure) and arranging the required debt funding package.

Whilst acknowledging the current environment is challenging, the Project is a world‐class high grade iron ore deposit and Sundance has been seeking to ensure it is competitive throughout price cycles and any market conditions.

Progress in this regard has been made with the confirmation of the Project capacity being increased to 40Mtpa which improves the Project economics further.

To fully capitalise on Sundance’s project economics, it has been working on increasing its DSO Ore Reserves. “This work is currently undergoing independent review and we expect to announce an increased Reserve in the coming weeks, Sundance reported.

Sundance has also been working with the Government of Cameroon and Chinese debt and equity providers to fund the infrastructure separately from the mines. Chinese debt providers will more than likely require substantial Chinese participation in construction activities and the procurement of Chinese equipment where appropriate. Discussions with the Government of Cameroon, including discussion on the extension of Exploration Permit EP92 and the convention long stop date, have progressed well with significant progress having been made.

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