Name and Location
Zanaga iron-ore project, Republic of Congo (RoC).

Client
The project is a joint venture (JV) between Glencore (50% plus one share) and the Zanaga Iron Ore Company (ZIOC) – 50% less one share.

Project Description
The Zanaga project is located 30 km west of Zanaga, a regional centre of the Lekoumou department of the RoC.

The project has probable ore reserves of 2.5-billion tons grading at 34% iron. A feasibility study completed on the project envisages a multistage development of the mine.

Stage 1 involves development to an initial 12-million tonnes a year of high-quality iron-ore product, while Stage 2 will entail an 18-million-tonne-a-year expansion to 30-million tonnes a year of total product.

Stage 1 has been designed as a standalone business case and does not rely on, or require, the Stage 2 expansion. The Stage 1 operation will mine the higher-grade upper hematite ores over a 30-year mine life, producing a 66% iron content and premium-quality iron-ore pellet feed product with low impurities.

The initial openpit mining operation will use contractor mining to exploit free-dig material with a very low strip ratio, with simpler processing requirements resulting in low initial power demand. The ore will be upgraded into a high-grade pellet feed using conventional gravity and flotation concentration methods before being pumped to the port through a slurry pipeline. The project's onshore port facilities and infrastructure will include a filter plant to dewater the concentrate, and a covered ore storage facility, located at a proposed new third-party port to be constructed 9 km north of the existing Port of Pointe-Noire.

Stage 2 will involve openpit mining of the magnetite orebody. The strip ratio will be lower than that of Stage 1, as the upper hematite cap will have been mined. The processing plant will be expanded, with a second concentrator using magnetic separation to produce a blended 67.5% iron content, premium quality iron-ore pellet feed product. The increased power requirements will be supplied by planned power generation expansion projects in RoC. A second slurry pipeline will be constructed to transport the ore to port, where the port facilities will be expanded as part of the proposed deep-water port development.

The staged development approach adopted by Glencore in the feasibility study has demonstrated significant advantages over the prefeasibility study announced in November 2012, which considered a single-stage 30-million-tonne-a-year development at a capital cost of $7.5billion.

Net Present Value/Internal Rate of Return
Not stated.

Value
Stage 1 is expected to cost $2.2-billion, including contingency, and Stage 2 $2.5-billion.
The first-stage operation could potentially finance the second-stage expansion through project cash flows, limiting the level of additional equity required for the operation.

Duration
Front-end engineering and design is expected to start in early 2015.

Latest Developments
The Zanaga iron-ore project has been granted a mining licence and its operators have entered into a mining convention with the country’s government.

The 25-year operating licence, which can be renewed for further periods of 15 years, covers the proposed staged development of the project.

In terms of the mining convention, the RoC government will receive a 10% nondilutory stake in the project.

The JV will be subject to a 3% royalty, but will also receive a five-year tax holiday, with a corporate tax of 15% being implemented thereafter.

The next step will be for the RoC government to approve the convention as law. This process is expected to be completed by December 31.

With the receipt of the mining licence and the confirmation of the project’s fiscal regime through the mining convention, the project is well positioned to advance to the next stage of financing discussions.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
DRA (process plant study).

Contact Details for Project Information
ZIOC corporate development and investor relations manager Andrew Trahar, tel +44 20 7399 1105 or email info@zanagairon.com.
DRA, tel +27 11 202 8600 or email info@DRAglobal.com.