Tianjin Materials & Equipment Group Corp. of China will buy a stake in Sierra Leone’s largest iron-ore mine for almost $1 billion.
African Minerals Ltd., the country’s biggest producer of the steelmaking ingredient, agreed to sell 17 percent of its Tonkolili mine to the Chinese commodities importer, known as Tewoo, for $990 million, it said yesterday in a statement.
The deal boosts financing at the miner, which had shelved a $2.5 billion expansion after missing sales forecasts. For China, the world’s biggest steelmaker, it increases access to iron ore to feed growth in construction and cars.
“This transaction will provide African Minerals with almost a billion dollars of additional funds at the corporate level, significantly strengthening our balance sheet, and will provide flexibility in financing options for the company’s future development,” Chairman Frank Timis said in the filing.
Tianjin Materials’ offer values Tonkolili at $6 billion, the filing shows. The deal, approved by the boards of both companies, will be accompanied by a 20-year offtake agreement for 10 million metric tons of iron ore, African Minerals said. State-owned Tewoo, which already imports iron ore from Australia, Brazil and Indonesia, was unable to comment when Bloomberg News called.
African Minerals jumped 44 percent to to 225 pence by the close in London trading yesterday, the steepest gain since February 2009.
African Minerals began exporting ore from Tonkolili in 2011 and has since been dogged by operational setbacks. The London-based company cut its 2013 forecast for sales from Sierra Leone to a range of 11 million to 13 million tons from as much as 15 million tons, having also reduced output targets a year ago.
Former Chief Executive Officer Keith Calder and Chief Financial Officer Miguel Perry quit last month and 40 percent of London head-office staff were fired, cutting costs by $15 million a year. The company deferred a planned expansion of mine, port and rail facilities at Sierra Leone’s Pepel project after consulting Chinese partner Shandong Iron & Steel Group Co., which invested $1.5 billion in African Minerals last year.
“Hats off to management for pulling a rabbit out of the bag,” Numis Securities Ltd. said yesterday in a note to investors. “The market cap of African Minerals is $800 million and you would have to question why Tewoo would not just buy the whole project in partnership with Shandong.”