African Minerals raises £80 mln for infrastructure at Tonkolili iron ore project, Sierra Leone

African Minerals Limited (AIM: AMI) has raised £80 million through a cash placing to fund the construction of key infrastructure for phase 1 of its flagship iron ore project at Tonkolili in Sierra Leone.

The company will place a total of 20 million at a price of £4 per share.

The infrastructure to be built includes a 120 kilometre haul road to transport hematite iron ore from the Tonkolili mine site to the rail head at Lunsar and a pre-order of major long-lead items for the refurbishment of Pepel Port and the railway to Lunsar for a load-out capacity of 8 million tonnes of iron ore per annum.

Closing of the placing, which is conditional on completion of due diligence by underwriters and entering an underwriting agreement, is expected to occur before 11 February 2010, when shares would start trading on AIM.

“The proceeds will allow us to expedite the construction of critical infrastructure required for the first phase of construction of our flagship iron ore project. This fund raising, together with the conditional CRM equity deal and two off-take agreements, places the Company in a very strong position to realise iron ore production from Tonkolili during the first quarter of 2011,” said executive chairman Frank Timis.

The company entered into a conditional strategic agreement with state-owned China Railway Materials Commercial Corp (CRM) earlier this month in respect of the Tonkolili project and the related infrastructure projects.

CRM will enter into two long-term off-take agreements with AML, both for a minimum of 20 years, with an option to extend for a further five years, for iron ore production from Tonkolili. Under the off-take agreements, CRM will purchase between five and 8 Mt (million tonnes) per annum of hematite iron ore from AML's first stage of production at Tonkolili for a minimum of 20 years, expected to commence by 2011 and a minimum of 10 Mt per annum of magnetite iron ore production from AML's second stage of production at Tonkolili for a minimum of 20 years, expected to commence by 2013.

CRM will subscribe for approximately 30.5 million new common shares of AML at £5.00 per share, for a cash consideration of approximately £152.6 million representing 12.5 percent of the enlarged issued share capital. In addition to that, CRM has been granted an option to subscribe in cash for up to 2.88 million shares in the latest placing representing 14.4% of the total offering.

Shares in African Minerals last traded at £3.99.  http://www.proactiveinvestors.co.uk/companies/news/12467/african-minerals-raises-80-mln-for-infrastructure-at-tonkolili-iron-ore-project-sierra-leone-12467.html