African Minerals Limited

Creating major iron ore projects in Sierra Leone

Since its founding by Gibril Bangura, African Minerals Limited has seen success as a business that holds a large portfolio of mineral rights in Sierra Leone, which it has been investing in since 2003. Formerly known as Sierra Leone Diamond Company Limited, the company changed its name to African Minerals Limited in August 2007.

Sierra Leone is a mineral rich country that has not been largely explored. The ex-British colony gained independence from Britain in 1961 but has been marred with years of civil war starting in 1991 and ending in 2002. Since the end of the civil war it has been predominantly peaceful and crops of businesses have started to show interest in the area. Michael Jones, Head of Corporate Development and Investor Relations for African Minerals, says, “It is a new place to do business and the country is blessed with natural resources, a fertile environment, good people, and benign weather and topography.”

The company today has an impressive market capitalization of £1.5 billion and an experienced team of managers with a proven track record in development of major mining projects. Today, the company is driven by Executive Chairman Frank Timis (12.5 per cent) and co-founder Gibril Bangura (2.4 per cent) as well as a number of various long standing bluechip shareholders. When the company’s previous promoters came to the U.K., Timis provided funding for the company in its private stage. The company’s main focus today is its flagship project, the Tonkolili Iron Ore, which has one vertically integrated infrastructure system to support three planned phases of production development.

Tonkolili Iron Ore project

When the company went into IPO in 2005 it was searching extensively for diamonds. After the course of two to three years of diamond exploration in Sierra Leone, the diamond exploration work was phased out when the company was unable to find the source of the significant diamonds that had come out of Sierra Leone in the past. Jones says, “The company then turned to other minerals that had been identified during the country-wide geophysical surveys carried out by SLDC, and the Tonkolili project was born. In the 1950s and 1960s, Tonkolili was already known as an iron ore deposit but they didn’t have any idea what was beneath the top.” African Minerals put the first rediscovery hole in the deposit in 2007 and discovered a massive amount of magnetite underneath it.

Since its rediscovery African Minerals has been actively working on the project. “It was developed first to a 5.1 billion tonnes resource in late 2008 and in early 2010 to 10.5 billion tonnes and in late 2010 to 12.8 billion tonnes,” says Jones. Since the discovery hole was drilled, African Minerals has done almost 200,000 metres of drilling to delineate the resource which is 11.6 billion tonnes of magnetite—the principal body—overlain by 1.1 billion tonnes of saprolite. On top of the saprolite is 126 million tonnes of saleable direct shipping iron ore.

“Once we discovered there was saleable iron ore on the top we put together a three phase process to fast track the project into commercial production,” says Jones. Phase 1 is the direct shipping ore, Phase 2 being the saprolite material and Phase 3 is the magnetite.

Jones notes that the magnetite is a multi-generational project and foresees a fruitful future with Tonkolili. The current planned rate is 45 million tonnes of magnetite product that will run itself for over 60 years. “The saprolite ore body on top of that would have a life of 20 years for its planned 23 million tonnes per annum of forecast production, and the direct shipping ore deposit on top of that will have a lifeline of nine years on its own,” he says.

To date the company is on Phase 1 of the project which takes $1.1 billion, due for completion of its first revenue in quarter four of this year. It is designed to attain a production capacity of 12 million tonnes per annum of product. The deposit is fortunate to be situated in an ideal location for development Jones says, “The deposit is blessed in its geography by being relatively close to the coast. It is 200 kilometres away from the coast which is one of the largest deep water harbours in the world. It can bring cape sized vessels right up alongside within a few hundred metres of our planned second phase port.”

The first phase port is smaller but already exists from previous iron ore companies and is a solid base for the infrastructure. A railway already exists from the original mine at Marampa and African Minerals will use 74 kilometreS of its length and build 126 kilometres of new rail to the mine.

The project is expected to be low cost due to a number of reasons including location and previous infrastructure. “By virtue of being close to the coast our transportation is limited, and the shape of the ore body leads to a very low stripping ratio which means the mining costs are low. Also because of the existing port our capital costs are much lower and in Phase 2 our transhipping costs are removed because we will be able to bring the largest vessels right into the port,” says Jones.

Key strengths

African Minerals boasts a strong and experienced management team that contributes a solid atmosphere for development in Sierra Leone. “The six guys who are leading the effort from the CEO to the COO and the various heads of different departments including logistics, rail, port and mine are the key to the company’s strength,” says Jones.

Jones notes that within its combined experience they have a 160 of years of industry knowledge and have been involved in a number of similar projects before, building on its expertise. To date, African Minerals’ focus remains on the promising Tonkolili Project and it hopes to move forward into Phase 2 of the ore body in the near future.

Corporate social responsibility and environment

The corporate social responsibility for African Minerals is at the heart of its commitment and it puts a large focus on this aspect of the company. It has worked on a governmental level to set aside funds for community and environmental purposes in Sierra Leone. Victoria Sherwood, Vice-President of Services for African Minerals, says, “At the strategic level, one of the most unique things we’ve done is work with the government to set aside two additional funds. One for community purposes and one for environmental purposes.”

The company has established a governance structure and regulatory committee that will comprise members of the government, representatives from the local community and from African Minerals who collectively will determine how best to spend the money. “From a strategic level that’s probably one of the most significant things we are doing in terms of social responsibility,” says Sherwood.

From a grassroots level, the company is also involved in a number of initiatives like creating employment opportunities. “There are varying layers of employment opportunities at African Minerals. There is the direct employment which is the actual job of working for African Minerals,” says Sherwood. “The next layer is working as one of the many subcontractors in Sierra Leone, building civil infrastructure for railways, refurbishing ports and building infrastructure for the mine. We have employed  a significant number of Sierra Leoneans—as much as 80 per cent of African Minerals employees being from Sierra Leone and 60 per cent of subcontractors being local Sierra Leoneans.”

The third tier is creating jobs needed to support subcontractor operations including electricians, people selling cables, providing food and food services for the camp and construction teams. “It’s within that layer that we have been driving quite a lot of work and small business incubators. For example we work with farmers to help the initialization of commercializing foods near the mine. If they can maintain consistency and quality for example, bringing 100 bananas every Friday to the mine site, then we will purchase it from them and help them establish an achievable local, commercial business,” says Sherwood.

From an environmental standpoint, African Minerals is working with the Sierra Leone Environmental Protection Agency. The company did a complete baseline audit across the entire operational footprint. “We are increasing our institutional strengthening with agencies to increase awareness around the environmental components,” says Sherwood.

The company also works with outside organizations such as Kew Gardens in London, U.K. to help identify species to be reintegrated into Sierra Leone and it is helping to redevelop and research these species in the country.

With its strong level of corporate social responsibility and environmental awareness integrated into its projects like the Tonkolili Iron Ore Project, African Minerals has become a major iron ore player in the market place. As a company that not only values and maintains projects like the Tonkolili Iron Ore, it is founded on strong values and integrity which is exemplified in everything it accomplishes.

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