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viewZanaga Iron Ore Co Ltd

Zanaga Iron Ore has one of the most significant undeveloped iron ore projects on the market

Snapshot

A huge undeveloped iron ore project in the Republic of Congo could be about to come to life

Gem Diamonds Limited -

Quick facts: Zanaga Iron Ore Co Ltd

Price: 5.5 GBX

AIM:ZIOC
Market: AIM
Market Cap: £16.12 m
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  • Huge undeveloped iron ore resource
  • Significant work already completed
  • Major partners involved in infrastructure plans

 

What does the company do?

Zanaga Iron Ore Co Ltd (ZOIC) is an iron ore development company run by seasoned mining industry professionals, including Clifford Elphick, the founder of Gem Diamonds Ltd (LON:GEMD).

What does the company own?

Zanaga’s principal asset is the Zanaga iron ore project located in the south west of the Republic of Congo, which it owns in joint venture with Glencore PLC (LON:GLEN).

Several different production scenarios remain under consideration for the Zanaga project, including an option to mine as much as 30mln tonnes of ore per year. That scenario would involve a two-stage development, with initial production set at 12mln tonnes per year, and a further 18mln tonnes to be added later, once cash flow starts coming in.

There’s also potential for a direct shipping ore operation, mining at the rate of two million tonnes per year. This could lead to early cashflow, and would involve lower up-front costs.

How will development be funded?

With potential capital expenditures of upwards of US$2bn, finding funds for development will be key to Zanaga in the months and years ahead. As things stand, the company has helped put in place a framework agreement for infrastructure development with the major players in the area, specifically Glencore and the Chinese Overseas Infrastructure Development and Investment Corporation (COIDIC).

The parties intend to develop a joint initiative to introduce funding partners for the Zanaga Project and its related infrastructure, with the aim of securing debt and equity financing.

In June, Zanaga said it has also entered a subscription agreement with Shard Merchant Capital, under which some 21mln shares will be issued in up to three tranches.

How it's doing

In its results for the year ended December 31, 2019, Zanaga reported a pre-tax loss of US$1.88mln compared to a US$1.86mln loss in the prior year, while the company ended the year with a cash balance of US$800,000.

Over the year, the company said it has agreed a work programme and budget for 2020 with a subsidiary of Glencore and that the coronavirus pandemic had not had a “material impact” on the group.

What does the boss say: chairman Clifford Elphick

In its final results, Elphick hailed “a rise in global investment into large scale iron ore projects”, which he said provides a strong investment case for the company’s project.

He also said iron ire prices had been resilient and premiums for “high quality iron ore products” had been maintained, further bolstering the company’s investment case.

The chairman noted that “significant progress” had been made to “unlock logistical challenges” associated with the company’s 30mln tonnes per annum (Mtpa) staged development project at the site as well as an early production project focused on 1-5Mtpa production scenarios which are currently under investigation and focusing on processing facilities and suitable logistics solutions through the ROC and/or the Republic of Gabon.

“The efforts of the project team are now bearing fruit and we are enthusiastic about the prospects for further value enhancements to be concluded during [the second half of 2020]”, Elphick said.

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