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African Minerals, a London-listed company, has shipped the first batch of iron ore from its mine in central Sierra Leone, marking the war-battered country’s first export of the commodity in nearly 30 years.
Sierra Leone’s president, Ernest Bai Koroma, called the shipment a “significant milestone” for the West African nation as it looks to establish itself as a major player in the mining industry.
“Its achievement is further evidence that the redevelopment of Sierra Leone and its economy continues to progress,” Mr. Koroma said.
The 40,000 metric ton shipment, which left the deep-water port at Pepel last week, is now on its way to China. The ore will soon be in the hands of Shandong Iron and Steel Group, the world’s ninth-biggest steelmaker, which is based 250 miles south of Beijing.
Under a deal negotiated over the summer, Shandong has agreed to pay $1.5 billion for a 25 percent stake in the African Minerals project. The deal, which should be approved by Chinese authorities before the end of the year, also guarantees Shandong a 25 percent take of the mine’s output.
Global consumption of iron ore, a key ingredient in steelmaking, has spiked in recent years, thanks largely to growing demand from China, which produced 44 percent of the world’s steel in 2010.
African Minerals' Tonkolili mining complex, with its 12.8 billion metric tons of iron ore, is one of the world’s largest defined reserves of the commodity.
African Minerals began extraction in December of last year and stockpiled the ore as it finished building a 120-mile railway and refurbishing the port at Pepel to handle the exports. The company estimates that annual production will reach 20 million metric tons by 2013.
“We will shortly become the largest fully integrated exporter of iron ore in West Africa,” said African Minerals CEO Frank Timis.
Three companies – Vale, BHP Billiton, and Rio Tinto – have long dominated the global market for iron ore, a key ingredient in steelmaking. But African Minerals and a handful of other junior companies are starting to get in on the game in West Africa. In addition to Sierra Leone, new projects by minor companies are also underway in Guinea, Liberia, and Cameroon.
But analysts say that Tonkolili will never rival the major mines found in places like the Pilbara region of western Australia, which accounts for roughly 40 percent of global seaborne trade in iron ore.
“It will never be the same scale, and it’s nowhere near the same quality,” says Damien Hackett, a metals and mining analyst at the investment firm Canaccord Genuity. West African iron ore is of a much lower grade than what comes out of western Australia, he says, which means it’s much more expensive to process.
But African Minerals has done well in overcoming the enormous infrastructure challenges that can derail big projects in West Africa, Mr. Hackett says. The company’s first shipment comes just 14 months after it signed the paperwork that authorized the project.
“That’s a pretty remarkable performance,” says Hackett. “I can’t think of anybody who’s done it quicker than that.”