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LONDON (Alliance News) - Zanaga Iron Ore Co Thursday said the feasibility study it conducted at the Zanaga Iron Ore Project had shown that a staged development process at the site would be better than a single-stage development, and it has now applied for a mining licence and environmental permit for the site in the Republic Of Congo.
The iron-ore processing-and-transport infrastructure company said the feasibility study, which was managed by its joint venture partner Glencore Xstrata PLC, showed the benefits of a stage one 12 million tonnes per year operation followed by a stage two 18 million tonnes per year operation at the site.
Zanaga said the stage one development has been designed as a standalone business case where initial cashflows and project returns are maximised by commencing mining of its higher grade near surface ore for the first eight years of operation.
It said the stage two development has strong economics and should suit the development process of the mine, construction timing and its forecast cashflow generation.
The company said transportation to port would be made through a slurry pipeline in both stages, which should represent a low cost way of delivering its iron ore.
In November 2012, the joint venture parties had announced a pre-feasibility study based on a single stage 30 million tonne per year development at a capital cost of USD7.5 billion.
On Thursday, the company said the staged development demonstrates significant advantages over the single stage option, including substantial reductions in capital costs, lower capital and execution risk, and maximised capital returns.
It said development costs for the project have been reduced to USD2.2 billion for the stage one operation and USD2.5 billion for the stage two expansion, while ultimately achieving the same 30 million tonnes per year production originally planned.
"The results of the feasibility study on the Zanaga Project clearly demonstrate a highly attractive and globally competitive iron ore project producing a high value premium product at bottom quartile operating costs over a long mine life," Chairman Clifford Elphick said in a statement.
"In addition, phasing the capital cost provides the potential to finance the stage two expansion through existing project cash flows to achieve a total 30 million tonnes per year scale operation," Elphick added.
As a result of the completion of its feasibility study, Zanaga has now applied to the country's government for a mining licence and environmental permit for the stage one development.
Zanaga Iron Ore shares were down 12% to 21.12 pence, putting it in the top ten AIM ALL-Share fallers Thursday.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
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