11 December 2019
Framework agreement between Jumelles Limited and China Overseas Infrastructure Development And Investment Corporation Limited
Zanaga Iron Ore Company Limited ("ZIOC" or the "Company") (AIM: ZIOC) is pleased to announce that a Framework Agreement ("FA") has been entered into between China Overseas Infrastructure Development And Investment Corporation Limited ("COIDIC") and Jumelles Limited ("Jumelles") (together the "Parties") the joint venture company between ZIOC and Glencore, for potential cooperation between them in respect of mining related infrastructure for the Zanaga Iron Ore Project (the "Zanaga Project") located in the Republic of Congo.
The FA reflects the Parties' intention to explore co-operation opportunities for progressing the infrastructure and financing requirements for the Zanaga Project, both in the near term and the longer term, and its integration with objectives of the Pointe-Noire Special Economic Zone ("SEZ") as well as other opportunities relating to the development of the Zanaga Project.
Highlights
· Framework Agreement outlines the process for co-operation between the Parties in the development of mining related infrastructure for the Zanaga Project
· Infrastructure to be evaluated will include rail, port, power, processing plant, road haul, and mining activities relating to the Zanaga Project
· Priority initiative is to assess the option for development of approximately 2Mtpa of iron ore production at the Zanaga Project which will be delivered to the Pointe Noire SEZ in the Republic of Congo in order to support the proposed development of a steel production facility
· The parties intend to develop a joint initiative to introduce funding partners for the Zanaga Project and its related infrastructure, with the aim of securing debt and equity financing
Background
The Zanaga Project is a project for the development and exploitation of the Zanaga iron ore resource comprising iron ore deposits located in the Zanaga mining licence area, in the western part of the Republic of Congo in the Lékoumou Department. It represents one of the largest iron ore reserves in the world with 6.9 billion tonnes of iron Ore Resource and 2.1 billion tonnes of iron Ore Reserve. The Project is planned to be divided in several stages, namely from 1Mtpa up to 30Mtpa. The Zanaga Project is investigating and preparing the option to commence production in the near-term with 1-5Mtpa of iron ore being transported via upgrades to existing road, rail and port infrastructure.
COIDIC is a company specialized in the early stage development of energy and infrastructure projects in Africa, including Congo-Brazzaville, and in regions of China's Belt and Road Initiative. COIDIC's Founding shareholders include some of China's leading institutions such as China-Africa Development Fund (CADFund), a subsidiary of China Development Bank, as well as China Gezhouba Group International Engineering Co. Ltd., China Civil Engineering Construction Corporation (CCECC), China ENFI Engineering Corporation (China ENFI) specialized in mineral and mining, China Telecom International, Hebei Construction & Investment Group Co Ltd. (HCIG), and Changjiang Institute of Survey, Planning, Design and Research.
COIDIC has entered into arrangements with the Republic of Congo regarding the development of the Pointe-Noire SEZ and its related infrastructures facilities, including plans for the development of a Multi-Purpose Terminal ("MPT") within the existing port of Pointe Noire and a connecting highway between the SEZ and MPT.
Objective and scope of co-operation
COIDIC and Jumelles intend to explore developing, financing, engineering and operations solutions regarding the Zanaga Project and its related infrastructure projects, including logistic solutions (such as the use of the MPT being developed by COIDIC in Pointe-Noire), as well as the potential introduction of a steel manufacturing plant into the SEZ and/or export of direct reduced iron.
Priority scope
A key objective of this FA is to enable both Parties to cooperate closely in relation to the proposed development of the Zanaga Project, targeting from 1 to 5 million tonnes of iron ore production annually (1-5 Mtpa) as a near-term development option. As part of this objective and as a priority, the Parties intend to explore the development of an initial production solution that will involve the construction of a steel mill plant in the Pointe Noire SEZ capable of taking delivery of approximately 2Mtpa of iron ore from the Zanaga Project. The scope of the work to be considered includes logistics and civil infrastructure, stockpiling facilities for iron ore, port facilities for the export of Zanaga iron ore not utilized locally in the SEZ area from Pointe Noire via COIDIC's proposed MPT and logistical solutions for the export of Zanaga iron ore to Chinese steel mill customers.
Long Term Scope
Construction and operation: the Parties also intend to explore specific aspects of the 30Mtpa staged development of the Zanaga Project, comprising Stage One production of 12Mtpa and subsequent expansion to 30Mtpa. These aspects include mining and processing the Zanaga orebody, logistics and civil infrastructure (including the pipeline, port, rail (where applicable) and roads) and power infrastructure (including COIDIC's planned SEZ natural gas power plant as well as hydro power solutions under development or being planned by COIDIC's partners).
It is the intention of the Parties mutually to utilize the expertise of COIDIC's shareholders acquired in delivering large scale infrastructure projects in an accelerated manner, with the aim of significantly reducing the investment needs of the Zanaga Project and shortening the construction duration of the Project.
Equity and Debt financing: it is the intention that with COIDIC's assistance, seeking and obtaining equity and debt financing for the Zanaga Project could be facilitated. The parties intend to develop a joint initiative to introduce funding partners for the Zanaga Project and its related infrastructure, with the aim of securing debt and equity financing.
Aspects of the cooperation
The Parties envisage that if discussions progress in a mutually beneficial way, there is the opportunity for them to agree and enter into a number of agreements, including separate Joint Development Agreements, for specific aspects of the relevant area of the Zanaga Project and also a capacity agreement with MPT (including tariff provisions and usage of port facilities).
The cooperation could also include the generation of technical and other studies for the development of the Zanaga Project and its infrastructure needs and developing an investment model for the Project.
General
Save in limited circumstance, the term of the FA is for two years and this can be extended by agreement of the Parties. With the exception of certain provisions relating to, for example, the duration and termination of the FA and the process of interfacing with COIDIC and its shareholders, the FA is not legally binding.
Early Production Project
As a result of the appraisal work being undertaken on the EPP Project, significant progress has been made in taking steps towards potentially repositioning the Zanaga Project to be developed initially on the basis of a smaller start-up with a relatively low capital cost investment requirement. This appraisal work, including an assessment of the economic viability of the EPP, is ongoing and is subject to the review of the Jumelles board. The objective is to establish a viable way of bringing the Zanaga resource into production at an early date.
As a result of the process underway with COIDIC for the advancement of infrastructure projects in the Republic of Congo, including the Pointe Noire SEZ, the Zanaga Project Team have been assessing the opportunities that might arise in relation to these initiatives in the context of the advancement of the infrastructure needed in relation to the Zanaga Project.
The EPP Project, if utilising an export route through Gabon, has typically been constrained by maximum available tonnage of 1Mtpa on the Transgabonais railway line. However, the COIDIC initiative has the potential to unlock larger logistics transportation capacity within Republic of Congo and as a result the Zanaga Project team are working to adjust the EPP Project's economics in light of the potential for greater production scale and potentially lower operating costs through a Congo logistics solution.
In light of the engagement with COIDIC on a Congo logistics route for the Zanaga Project, the Company intends to provide an update to shareholders in Q1 2020 on the progress relating to these discussions and the options being evaluated.
Clifford Elphick, Non-Executive Chairman of ZIOC, commented:
"We are delighted to announce that a process is underway with China Overseas Infrastructure Development And Investment Corporation Limited to advance the Zanaga Iron Ore Project.
COIDIC is undertaking a transformational initiative by developing the Pointe Noire Special Economic Zone, which has the potential to provide critical infrastructure to the Republic of Congo.
The Zanaga Project Team is impressed with the extensive experience that COIDIC and its shareholders have in developing large scale infrastructure projects in Africa including railways, process plants, power plants, ports, and transshipping operations.
The discussions to be undertaken with COIDIC could potentially substantially improve the development prospects of both the EPP Project as well as the 30Mtpa staged development project through debt and equity financing solutions, accelerated development timeframes for key logistics infrastructure, and collaboration on power and port alternatives associated with the Zanaga Project.
We look forward to updating our shareholders on these exciting developments as they progress."
The Zanaga Iron Ore Company Limited LEI number is 21380085XNXEX6NL6L23.
For further information, please contact:
Zanaga Iron Ore
Corporate Development and Andrew Trahar
Investor Relations Manager +44 20 7399 1105
Liberum Capital Limited
Nominated Adviser Andrew Godber, Edward Thomas
and Corporate Broker +44 20 3100 2000
About us:
Zanaga Iron Ore Company Limited (AIM ticker: ZIOC) is the owner of 50% less one share in the Zanaga Iron Ore Project based in the Republic of Congo (Congo Brazzaville) through its investment in its associate Jumelles Limited. The Zanaga Iron Ore Project is one of the largest iron ore deposits in Africa and has the potential to become a world-class iron ore producer.
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
