Sundance Resources (ASX: SDL) says it has made further progress in the June quarter in selecting a partner to help develop its Mbalam-Nabeba iron ore project, straddling the borders of Cameroon and the Republic of Congo. It has held a number of meetings in China with private and state-owned enterprises and steel mills, at which Mbalam-Nabeba’s high-quality ore was a feature. The investment potential should improve next year. Cash costs continue to be cut.
Sundance Resources Limited (ASX: SDL) (“Sundance” or “Company”) provides the following information about activities for the quarter ended 30 June 2017:
On 31 July 2017 Sundance announced that it had reached an agreement with the Government of Cameroon to initially extend the Mbalam Convention by 6 months to 26 January 2018. A further 6 month extension will be given if Sundance can show progress on funding the Mbalam Iron Ore Project (“Project”) either by itself or with a credible partner.
This agreement was reached after cooperative discussions between Sundance and representatives of the Cameroon Government. Both parties were driven by the common desire to advance the Project in the shortest possible time while understanding the state of the current iron ore market.
Sundance’s subsidiary Cam Iron SA (“Cam Iron”) has a mining permit application over the land covered by Exploration Permit (“EP92”). In order for the Government of Cameroon to grant the mining permit application, the conditions precedent referred to in the Mbalam Convention need to be satisfied by the CP Long Stop Date. With the agreement of the Government of Cameroon to extend the Convention, Cam Iron now has an initial 6 months to satisfy these conditions precedent.
EP92 has expired as it has reached the maximum number of extensions possible under the Cameroon Mining Code. Cam Iron has completed all exploration work required to progress to a mining permit.
With the extension of the Mbalam Convention and with Cam Iron’s mining permit application over the land area covered by the previous EP92, Cam Iron believes it has priority over that area for the purposes of having the mining permit granted to it.
Port and Rail infrastructure
As previously announced in early 2016, the signing of the agreed EPC contract between the selected Chinese EPC contractor and the Government of Cameroon was delayed due to the market conditions and the desire to advance financing further. Sundance and the Government of Cameroon have continued to have discussions with the contractor however, even though the contractor has continued to express confidence in Cameroon and the Mbalam-Nabeba Project, the EPC contract remains unsigned.
Discussions in China and Cameroon have occurred during the quarter with a number of alternative EPC contractors and infrastructure providers including both private Chinese companies and State Owned Enterprises. Discussions will now continue during the coming quarter.
The search for a partner to work with Sundance to develop the Project continued during the quarter.
A number of meetings occurred in China between representatives of Sundance and private and State Owned Enterprises (“SOE’s”), steel mills, traders and sovereign funds. The following observations were made:
- The Mbalam-Nabeba Project is held in very high regard especially due to the high quality ore and low operating costs;
- The steel industry in China continues to face a number of challenges related to consolidation of the industry; environmental issues, previous investment decisions and the political situation in China which is impacting decision making especially with SOE’s; and
- 2018 is seen as a year of improvement in investment potential.
The extension of the Mbalam Convention long stop date will assist these discussions during the coming quarter.
Sundance further reduced its costs during the June 2017 Quarter. Total cash outflow from operating activities for the period was $613,000 down from $630,000 in the previous quarter. This cash flow included the annual insurance premium. Sundance ended the June 2017 Quarter with $794,000 in cash and deposits.
The Pro-forma appendix 5B – Statement of Consolidated Cash Flows is provided in a separate report.