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The move has come after the London Stock Exchange halted trading of the miner’s shares on Thursday November 20 amid concerning over its financing.
African Minerals said late on November 20 that talks with major shareholder and project partner Shandong Iron & Steel Group (SISG) – concerning the drawdown of $102 million of restricted funds to keep the company going – had not been resolved.
Alternative sources of funding to keep Tonkolili going until its operations started to generate cash were “unlikely to materialise in the near future”, African Minerals said.
It was in talks with both SISG and other parties regarding the sale of part of its 75% holding in the Tonkolili mine, it added.
“Such a disposal may result in release of the restricted cash by SISG and/or allow African Minerals to inject additional funds into the project, as well as potentially strengthening the company’s own financial position,” the company said.
Standard Bank, the miner’s adviser and one of its offtake partners, would not be able to restructure African Minerals’ debt due to the further deterioration of market conditions, the miner said.
Its shares were suspended from trading on London’s Alternative Investment Market (AIM) at 7.55am on Thursday.
Iron ore price fall
Iron ore producers across the globe have been hit hard by a dramatic fall in seaborne iron ore prices over the past year.
Benchmark 62% Fe prices have fallen by nearly 50% from the beginning of the year, from levels in excess of $130 per tonne to just above $70 per tonne on November 21.
“We see little reason for Shandong Iron & Steel to pay up for the Tonkolili asset, since the restricted cash belongs to them,” analysts at SP Angel said in a research note on Friday.
“SISG could in theory take over the whole company and then release its own cash to keep the mine going. The only reason for it not to do this is if it wants the operational expertise of the current African Minerals team on the ground,” they added.
Sierra Leone’s iron ore producers have been hit especially hard by the iron ore price crash, having started production when prices had already started coming off historical highs of nearly $190 per tonne, reached in early 2011.
Costs have also been affected by the recent outbreak of the deadly ebola virus in the West African region, which has killed more than 5,000 people across Guinea, Liberia and Sierra Leone.
The outbreak was cited by fellow Sierra Leone iron ore miner London Mining as one of the factors that contributed to it entering receivership last month.
African Minerals founder Frank Timis has since acquired London Mining’s Sierra Leone mine, Marampa.
Cash-strapped Sierra Leone miner African Minerals is considering the sale of a stake in its Tonkolili iron ore mine in an attempt to raise enough funds to continue operations.