African Minerals (LON:AMI) founder and chairman, Frank Timis, is one step closer to securing a deal to purchase London Mining’s (LON:LOND) Marampa iron ore mine in Sierra Leone.
The founder’s private company, Timis Mining Corp, is said to have secured $20 million in financial backing from Australia’s Cape Lambert Resources to acquire the mine, which toppled into administration last week after failing to find a buyer.
Funding for the acquisition will take the form of a 12-month $8 million loan and a $12 million royalty purchase, which gives Cape Lambert $2 for each ton of iron concentrate sold by the mine. The funding package is contingent upon Timis Mining securing the assets from the administrator.
Marampa, which employs around 1,300 people, is expected to produce approximately five million to seven million tons of iron ore a year. At this rate, the annual royalty for Cape Lambert is $10 million to $14 million or as much as $56 million over the term of the deal.
As London Mining’s only operating mine, Marampa reported a first-half loss due to slumping iron ore prices and the worst Ebola outbreak in history for Sierra Leone. The mine slipped into administration last week after it ran out of funds and failed to secure a buyer for the company.
The acquisition makes sense for African Minerals. The company’s Tonkolili project in Sierra Leone is about 120 kilometers from Marampa and is expected to enter into a joint venture with the mine.
According to Investec analysts, African Minerals seemed to be the natural acquirer for the Marampa mine, given its significant infrastructure in the region.
"... It is interesting that it is Timis' private company purportedly doing the bidding, perhaps because it can more readily realize the funding to make the offer.”