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THE CURRENT STATE OF THE IRON ORE MINING INDUSTRY IN SIERRA LEONE
Freetown – (Thursday, December 4, 2014) The Sierra Leone People’s Party (SLPP) is troubled by news of the impending collapse of the iron ore mining industry in the country. In the last two months, the country has helplessly watched on as two of the nation’s major mining companies have imploded right before our eyes.
Our first shock was the unanticipated collapse of London Mining, a subsidiary of Cape Lambert Resources. According to the Guardian newspaper in London, Frank Timis, the founder of African Minerals Limited (AML) agreed to buy the Marampa mines from London Mining, which went into administration earlier in October. Timis agreed to a $20m (£12.5m) funding deal with Australia’s Cape Lambert Resources to help him acquire Marampa. He is seeking to secure the deal through his private Timis Mining business instead of African Minerals, which is listed in London and has been affected by the Ebola outbreak. A spokeswoman for Timis confirmed details of financing for the deal, released by Cape Lambert Resources to the Australian stock exchange. Cape Lambert will lend Timis $8m for a year and pay $12m for a royalty of $2 for each tonne of iron ore extracted from Marampa for four years if the deal is completed.
On November 20th, 2014, African Minerals Limited (AML) announced that “operations to be put on care and maintenance until such time as $102m restricted cash is released and/or, AML secures additional short-term funding. In the days since that announcement, AML has announced, “the $102m of restricted cash has yet to be released due to continued disagreements between AML and Shandong Iron and Steel Group (“SISG”). AML continues to use its best efforts to obtain SISG’s authorisation to release these funds, however there remains no certainty of this or of its timing”.
Alan Watling, Chief Executive Officer of AML, has also said:
“Initiating a temporary shutdown of operations towards care and maintenance in Sierra Leone, while extremely regrettable, is a necessity given the Company’s financial status and uncertainty over the timing of the release of the restricted funds. While the operating performance of the Project has been impressive during 2014, with Q3 exports of 4.4Mt at an average direct cash cost of $36/t, in spite of the wet season, the fall in iron ore prices and the operational challenges caused by the Ebola disease outbreak has meant the Project has continued to operate at a loss. While management is convinced Tonkolili remains a world class low operating cost asset, the absence of sufficient working capital has prevented the Company from implementing the cost cutting strategies required to return the Project back to a cash flow positive status even in the current depressed iron ore price environment.
Management is doing everything possible to procure the agreement of a funding solution between AML and SISG. The Company greatly appreciates the support shown by the Government of Sierra Leone, our local suppliers and communities, and all our contractors during what we hope is only a temporary suspension of operations.”
These unfolding events in the mining sector need to be brought to the public domain because of the devastating consequences they bear on the country’s economy which is already teetering on collapse.
The SLPP therefore calls on the Government to come out clearly on the current state of affairs that afflict the mining industry and demonstrate leadership in engineering a roadmap that will avert not only the collapse of the industry but also secure the plight of employees and local businesses that are owed huge sums of money by London Mining Company.
The SLPP further calls on Parliament to institute hearings into the status of London Mining Company and African Minerals Limited (AML) and to verify news reports that Mr. Frank Timis founder of AML has or is about to take over control of the Marampa mines previously owned by London Mining. If this news is true we express fear that it carries the hallmarks of creating a monopoly in the iron ore industry. And this we believe defeats the purpose of building a free enterprise economy. End.
Sulaiman Banja Tejan-Si
National Secretary General
UNITY HOUSE, 15 WALLACE JOHNSON STREET, FREETOWN