LONDON (Alliance News) - Sable Mining Africa Ltd saw its shares hit their highest level for more than four months on Monday, after its West Africa Exploration SA subsidiary signed a long-awaited deal with the Liberian government that will allow it to transport ore from the Nimba Iron Ore project in Guinea across Liberia to port for export.
"This is a step forward toward securing the access to the rail at the port, so it is a massive step of progress for the company... It's a very important deal for us," Chairman Jim Cochrane told Alliance News in a telephone interview.
Under the deal, West Africa Exploration and Liberia's government have reached agreement on the development, ownership, rights, financing, use and operation of the rail and port infrastructure in Liberia needed to facilitate the export of iron ore from the Nimba project.
Over the 25 year agreement, Sable will invest a total of USD1.3 billion into Liberia. Within the first five years of the deal, Sable is expected to invest a minimum of USD300 million, mainly in infrastructure, with a further USD1 billion investment over the remaining 20 years of the deal.
The iron ore will be transported from the Nimba project in Guinea, which has a JORC reserve of 54 million tonnes of ore at a grade of 61.6% iron, through Liberia using a rail line already in place in the country linking Yekepa to the Port of Buchanan. The existing rail line is owned and operated by steel giant Arcelor Mittal, and will now be shared with Sable so it can transport its iron ore.
As part of the agreement, Sable will construct a new 30 kilometre rail line that will extend Arcelor Mittal's existing rail line to the border of Guinea and Liberia. Sable will also be constructing a new road which will fill the gap between the border to the Nimba project to allow iron ore to be transported to the train line.
Arcelor Mittal will not be using the new part of the rail line to be constructed by Sable.
"Now we really need to negotiate a commercial relationship with Arcelor Mittal because they operate the rail road, and as part of the agreement, the government will make that happen. They will facilitate and ensure that the infrastructure is utilised at a maximum and reasonable rate," Cochrane told Alliance News.
The Liberian government said the deal would involve West Africa Exploration paying a signature fee of USD250,000 upon signing of the agreement. On an annual basis following this, the company will make an annual contribution to a social fund for the country's population affected by the deal of no less than USD2.5 million and will pay a variable annual concession to the government of USD1.5 million to USD5 million once shipments start.
Under the agreement, Sable can transport up to 10 million tonnes of iron ore a year through Liberia to the port, which is expected to begin immediately after production starts in the second half of 2016.
"The first stage of the project is to get to 3 million tonnes. We have indicated that our feasibility study would be completed in the first-half of this year, but we are reviewing that now in terms of the impact of Ebola and ensuring all the elements of the project are aligned. But from the time you have completed the feasibility and raised the money, it is around an 18 month ramp up to get to 3 million tonnes," Cochrane told Alliance News.
Sable also has an iron ore concession in Liberia, the Kpo Range, which has potential to benefit from the relationship between the company and the government of Liberia in the future.
"I think the reality is that the port of Buchanan does have a limited capacity. The agreements that are in place for Nimba do not necessarily mean that other projects in Liberia can piggy back on the back of it, but for sure the most important thing is the attitude and desire of the government and level of co-operation between the governments ... The government of Liberia is keen to facilitate the use of infrastructure and the exploitation of the resources to build the economy," said Cochrane.
"The signing of this IDA is truly a momentous occasion for Sable Mining and the countries of Guinea and Liberia and is the result of many months of hard work by the company, its partners, and numerous Government ministers, staff and representatives in both Liberia and Guinea," said Sable Chief Executive Andrew Groves.
The deal with the Liberian government has been a long-time in the making. Groves had told Alliance News back in October 2013 that Sable was hoping to get rail access from the Liberian government, as well as an export permit from the Guinean government, by the end of that year.
Groves told Alliance News that once the problem of getting Sable Mining's product out of the country had been resolved, he was looking to export to Europe as well as China, which is the main destination for West African iron ore.
Sable shares were up 9% to 2.18 pence on Monday morning, having hit a high of 3.50 pence earlier in the trading session, the stock's highest level since mid-September.
By Sam Unsted and Joshua Warner; samunsted@alliancenews.com; @SamUAtAlliance; joshuawarner@alliancenews.com; @JoshAlliance
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