AFRICAN Minerals has finalised a £1.5bn deal with China’s Shandong Iron & Steel, handing over a 25 per cent stake in its flagship Tonkolili iron ore project in Sierra Leone.
Shandong, one of the world’s largest iron and steel groups, will also purchase iron ore at a discounted price under an off-take arrangement, and has the option of buying up to 25 per cent of annual iron ore production from each of Tonkolili’s three production phases.
The funding will help AIM-listed African Minerals to press on with the second phase of its expansion project and repay a $417m (£255.8m) loan.
Shandong, which first signed a memorandum of understanding with African Minerals last year, still needs to secure Chinese government approval before it can go ahead with the funding.
Deutsche Bank analyst Grant Sporre said in a note that, if approved, the deal significantly de-risks the projects as it “is a significant vote of confidence in Sierra Leone by China”.
African Minerals, run by the controversial Romanian businessman Frank Timis, was previously known as the Sierra Leone Diamond Company.