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 that will be built 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 $7.5-billion.

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
In light of a cost reduction process that took place at the Zanaga project in the six months to June 30, to allow the project to progress with a lower cost base, the project team is confident that it will progress the project to the next phase of development.

During the current period of price weakness and price volatility in the iron-ore market, ZIOC and Glencore have chosen to continue to progress several key preliminary value-adding activities on the Zanaga project. These are important preparatory steps that will place the project in a position to seek financing once market conditions stabilise and become more favourable.

The value-adding activities that are being pursued include the establishment of port and power agreements, the issue of the environmental permit and ratification of the signed Zanaga Mining Convention by the parliament of the RoC. Both companies continue to work closely with government on the conclusion of these workstreams and have reported that the project continues to enjoy strong support.

Further, a process for Stage 1 has been started whereby a number of power developers with transmission and generation capabilities have been approached to assess options to work alongside the Zanaga project team in securing the correct power transmission and access solution for the initial development phase of the project. Shareholders are expected to be updated on the progress of this work programme in the first half of 2016.

However, developments in the global iron-ore market have affected and continue to affect the raising of finance for the development of the project. Once market conditions stabilise and become more favourable, ZIOC believes that the Zanaga project is likely to be in a good position to compete for attracting the finance that is needed to enable the project to be developed.

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.