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LONDON (Alliance News) - Zanaga Iron Ore Ltd Thursday said its sole project will take at least four years to complete from financial closure, which is not close to being achieved, but the miner has agreed a budget with its partner this year and its work programme is fully funded.
The miner, focused on its Zanaga iron ore project in the Republic of Congo, reported a USD17.6 million pretax loss in 2015 - significantly narrower than the USD164.8 million loss booked in 2014.
Zanaga booked a USD110.1 million impairment against its sole project in 2014 to reflect the fall in iron ore prices, which was not repeated in 2015. However, Zanaga did book a USD14.6 million loss from its investment in Jumelles Ltd, but that was still better than the USD94.7 million loss last year.
Notably, that loss from Jumelles was also caused by a USD20.0 million impairment being booked against the Zanaga project in the year, with that USD14.6 million representing its share.
Zanaga holds its stake in the project through Jumelles, the joint venture company that holds the project with commodity giant Glencore PLC, which owns one more share in the venture than Zanaga.
"While financing remains difficult in today's iron ore market, we are conscious of the need to prepare the project for the market's eventual stabilisation and a stable price equilibrium, at which point we are confident that Zanaga will be at the forefront of development opportunities," said Zanaga.
"However, given the level of continued market uncertainty, and lower forecast iron ore prices, a decision has been taken at the Jumelles level to recognise an impairment of the project," said the company.
The focus for 2016 is securing the final permitting and operational agreements for the Zanaga project, which will then allow the project to move into financing discussions to secure the required development finance once market conditions improve, with iron ore prices still under pressure.
Once the project has reached financial closure, Zanaga believes it will take one year to complete the front end engineering and design work followed by three years of construction. Based on the company securing financing by the end of the year, the project would not start up until 2020 at the earliest.
Glencore and Zanaga have agreed a work programme for 2016 and a budget of USD2.3 million for the year, plus a further USD600,000 of "discretionary spend," it said. Zanaga, notably, will contribute the entire budget and just under half of all the discretionary expenditure, if the pair decide to spend it.
Zanaga had USD6.9 million of cash at the end of the year.
Zanaga shares were up 0.9% to 2.88 pence per share on Thursday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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