Zanaga's Multi-Billion-Dollar Cameroon Iron Ore Project Impaired to $80 Million

By Alex MacDonald

LONDON--Zanaga Iron Ore Co. (ZIOC.LN) said Thursday the value of the Cameroon iron ore project, which it jointly owns with Glencore PLC (GLEN.LN) and in which the partners had planned to invest $4.7 billion, has been written down to $80 million as a result of a continued collapse in iron ore prices.

The project, which had already suffered several impairments before to $100 million in 2014, was written down by a further $20 million in 2015. This contributed to Zanaga's $17.6 million loss last year, which was narrower than the $165 million suffered in 2014.

The U.K.-listed miner, which owns 50% minus one share in the project while Glencore owns the remaining stake, said it continues to work on reducing costs and preparing the project to secure financing in anticipation of its view that iron ore supply and demand will return to a more balanced level in the future.

The benchmark iron ore price has fallen from a peak of more than $190 a ton in 2011 to $53.4 a ton on Wednesday, having hit a decade low of $37 a ton in December. Prices for the steelmaking ingredient have been hit by a sudden wave of new supply emanting from years of investment in mine expansions that came to fruition just as a decade-long commodities boom began to sputter. Iron ore demand has also taken a hit due to slackening demand from China, the world's largest iron ore consumer and steel producer.

Zanaga and Glencore had previously planned to spend $4.7 billion to develop the project in two phases, according to a Zanaga study published in May 2014. The partners planned to spend $2.2 billion to build an operation capable of producing and transporting 12 million tons of iron ore a year. The partners then planned to invest another $2.5 billion to increase iron ore production by 18 million tons a year to 30 million tons a year. The mine is expected to operate for 30 years.

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(END) Dow Jones Newswires

June 30, 2016 04:51 ET (08:51 GMT)

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