Zanaga Iron Ore to Reduce Cost Base of $2.2 Billion Iron Ore Project

By Alex MacDonald

LONDON--African iron ore explorer Zanaga Iron Ore Company Ltd. (ZIOC.LN) said Tuesday that it plans to reduce the cost base of its initial $2.2 billion Zanaga iron ore project in the Republic of Congo in light of the lower iron ore price environment.

Iron ore prices have more than halved since the beginning of the year, imperilling some of West Africa's existing iron ore operations. Sierra Leone's London Mining PLC filed for bankruptcy earlier this year while African Minerals Ltd. (AMI.LN) halted its operations in the same country as it struggled to secure funding to keep its mine operational.

Clifford Elphick, non-executive chairman of Zanaga Iron Ore, said; "we are cognisant of the need to reduce the annual cash costs of the Project. Fortunately, the most costly work programs required for the assessment of the Zanaga Project have already concluded alongside the completion of the Feasibility Study, and the Project's key value-adding activities will now be conducted off a much lower cost base."

He added that Zanaga remains confident of the robust economics of the project even in the lower iron ore price environment.

Zanaga owns 50% minus one share in the project while Glencore PLC (GLEN.LN) owns the remaining shares. Zanaga said the two companies are continuing to engage with interested parties with regard to an investment in the project but iron ore prices need to stabilize before formal discussions are able to resume.

The company said it has secured a mining license for the project and signed a mining Convention. The company will now focus on establishing port and power agreements, validating the environmental permit and seeking ratification of the mining Convention by Congo Brazzaville's parliament.

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