London - Sierra Leone-focused iron ore miner African Minerals has named a new chief executive and obtained access to $248 million in cash through an agreement with Chinese partner Shandong Iron and Steel Group (Shandong).
Access to the funding will give African Minerals some breathing space as it grapples with lower iron ore prices and the Ebola crisis in West Africa, which have put pressure on its finances.
Its shares have lost about 90 percent of their value this year.
Under the agreement with Chinese steelmaker Shandong, the company will gain immediate access to $284 million for its sole project, Tonkolili in Sierra Leone - money that had been earmarked for the second phase of the project's expansion.
African Minerals has a 75 percent stake in Tonkolili, and Shandong holds the remaining 25 percent.
“Both shareholders have agreed to access the funds in the Hong Kong joint project account... not only for construction capital, but also for general working capital purposes, with immediate effect,” African Minerals said on Friday.
In agreeing to allow access to the funds, however, Shandong requested some changes in management. In response, African Minerals announced the appointment of Alan Watling as its new chief executive after the resignation Bernard Pryor.
The Chinese steel mill also requested that the project's financial and operational management be separated from that of African Minerals, effectively increasing its influence over the project.
“The last few weeks have thrown up a perfect storm of low iron ore prices and heightened concern over the serious Ebola virus disease ... the second quarter has seen our received price fall, putting pressure on our working capital requirement,” Roger Liddell, an African Minerals director, said in a statement.
“With immediate funding secured ... we expect that the operations will continue to grow to their potential.”
Shandong, which has an offtake agreement with Tonkolili, has also made a claim that African Minerals had offered better pricing terms to other Chinese steelmakers, which goes against a clause in its offtake agreement.
African Minerals said it was working with Shandong to agree on the amount, the timing and method of a payment to repair this issue, if required.
The mining company, whose debt amounted to $391 million as of end-March, also said it was looking to refinance an expensive $250 million loan.
“The company continues to evaluate opportunities regarding an optimum capital structure over the medium to longer term,” it said in the statement. “The new management will also be reviewing and putting in place an appropriate longer-term structure and funding for African Minerals.” - Reuters