JOHANNESBURG – The Liberian iron-ore interests of diversified major BHP Billiton have been acquired by Cavalla Resources, a wholly-owned subsidiary of investment holding company Jonah Capital, a private company with a portfolio of assets primarily in the mineral resource sector in sub-Saharan Africa.
Cavalla has been granted the exclusive rights over the four exploration areas of Goe Fantro, Kitoma, St John River South and Toto, as Jonah Capital’s exclusive iron-ore holding company.
Work has begun at Goe Fantro and the development of the other assets will follow in a phased approach.
Scoping studies indicate that Goe Fantro can be brought into production by 2018 at a capital cost of between $160-million and $230-million to produce five-million tons a year of 58% to 62% iron at an estimated operating cost of $22/t, free-on-board at Buchanan port.
“We look forward to working closely with government and the local communities where we operate, to contribute towards the continuing growth of the Liberian economy,” Jonah Capital and Cavalla executive chairperson Sir Sam Jonah said in a media release to Creamer Media’s Mining Weekly Online.
Sir Sam, who began his career in mining at Obuasi gold mine in Ghana in 1969 as a $73-a-month shovel boy, is a former Ashanti Goldfields CEO who helped to form the JSE- and NYSE-listed AngloGold Ashanti with current Business Leadership South Africa chairperson Bobby Godsell.
The combined defined 1.9-billion ton resources are calculated to include 132-million tons of direct shipping ore (DSO) at 57% iron.
Jonah said he hoped that the transaction would serve as a catalyst for attracting further investment to Liberia, where the development of the mineral resource sector was well under way.
Cavalla, which also has a further exploration license at Kitoma II as well as the right of first refusal over three additional exploration areas, now has the opportunity to become a low-cost producer of quality iron-ore, with minimal logistics and infrastructure risk.
The transaction is also said to enjoy the full support of the Liberian government as it fosters economic growth following the eradication of the Ebola virus in the country.
In an interview with Warren Dick, editor of mineweb.com, John Barton-Bridges, CEO of Cavalla Resources Limited, and Fidel Jonah, the Chief Operations Officer of Cavalla Resources, talked frankly about their newly acquired Liberian iron ore assets and their excitement over these acquisitions. The interview follows:
WARREN DICK: Good day I’m Warren Dick the editor of mineweb.com and joining me on the podcast today is John Barton-Bridges, he is the CEO of Cavalla Resources Limited, and joining him, is Fidel Jonah, the Chief Operations Officer of Cavalla Resources. Good to have you with us gentlemen.
So obviously the event is that cavalla has now bought the iron ore assets from BHP Billiton in Liberia with effect from 29 October. You’ve got the consent from the government of Liberia and I guess the question would be, just tell us a little bit about these assets. Let’s start with you John.
John BARTON-BRIDGES: Sure Warren. The market at the moment presents significant opportunity and this has been one that Cavalla has executed on. Let me give you a little bit of a background as to how this came about. BHP took a decision in early 2012 to exit all of its non-Australian iron ore business, and at the same time took a view to sell off several other assets that were deemed to be non-core and we’ve seen that through the creation of South32 this year. So what it does for Cavalla is it gives us very significant, well-defined iron ore assets that can be brought into production as low-cost producers. And that is obviously key, but there’s a number of assets there that enable us to look at the full-term, medium-term and long-term in terms of development.
WARREN DICK: Okay, and what I should have done is painted the picture a little bit better. Cavalla Resources is obviously a 100% privately owned company of Jonah Capital…
FIDEL JONAH: Correct.
WARREN DICK: …and what I wanted to do is just talk about the assets. So as it stands at the moment, you have four exploration licenses that you’ve acquired through this transaction. You have 1.9 billion tons of JORC compliant resources and that includes 130 million tons of direct shipping ore at 57% iron ore content. So I guess the big question is many of our audience will be familiar with what’s been going on in the iron ore market at the moment. It appears to be massively oversupplied – why is Jonah Capital interested in this particular asset, and perhaps Fidel could answer that question.
FIDEL JONAH: I think that your audience will be pretty familiar with the iron ore market right now and quite simply there’s blood on the dance-floor in the market. And when you have blood on the dance-floor a couple of things happen. There are (far) less dancers, and those that remain can win. And we think now the race is one of thoroughbreds and acquiring this huge key asset we look to our Goe Fantro assets which is a high grade asset located 70km from an existing port with existing infrastructure in place, i.e., a road and we think that project is a thoroughbred worth backing.
WARREN DICK: So Fidel, it’s obviously, as you say, lots of blood on the dance-floor at the moment but in terms of this, and we know BHP get involved with very large scale low cost operations that have been their blueprint from the get-go, just tell us a little bit about the location of these four deposits in relation to one another and then perhaps a little bit more around that infrastructure that’s available there in Liberia. I think many of our audience might not be too familiar with not only the physical infrastructure in the country, but also the mining and regulatory environments.
FIDEL JONAH: Okay, let me start from the top. This acquisition gives us a fantastic mix of near-term projects, medium-term projects and long-term projects and it makes us one of the largest holders of exploration assets on the west coast of Africa. Now in terms of location, three out of the four assets we’ve acquired are in the iron ore province of Nimba. And I’m sure all your iron ore enthusiasts know about Nimba, which is a well-known iron ore province which holds some of the largest iron ore assets in West Africa.
Other than them being in Nimba, the existing railway line between Buchanan and the north of the country traverses these assets, so in terms of what you need to succeed in the game today, we have large high grade assets, well defined with the railway lines going right through them all the way to the south. However, the project that we’re going to be working on immediately and we intend to bring into production first is the Goe Fantro asset that we’ve spoken about. In terms of infrastructure, it is 70km from the port, there’s an existing road. We have the full support of the government with regards to access to these things and fundamentally it makes it a low cost producer.
WARREN DICK: Ok, so if I get this right, we’re looking at iron ore at around, I think it’s just dipped this week under $50 a ton. I would, from what you’re telling me this Goe Fantro asset, which you would essentially dig up, put on a truck and send to the Port of Buchanan. I would interpret from what you are telling me that you would be profitable at these prices in terms of where the market is at the moment?
FIDEL JONAH: Yes, yes, we would say so and that is the reason why it is our first pick for development.
WARREN DICK: Ok, great, so that would be Goe Fantro and you say it’s almost something that could come on stream immediately. Let’s just turn our attention to how, I guess and maybe this is one for John, is to come back to a kind of long-term production profile from these assets. What are we expecting in terms of output per annum, say over the next 10 to 15 years?
JOHN BARTON-BRIDGES: Warren, the Goe Fantro Project has already had a scoping study carried out by BHP and that scoping study had five million tons per annum production to start off with. We are looking in the long-term to be north of 10 million tons a year. Certainly we believe that the existing defined resource at Goe Fantro gives us a 20 year project at five million tons, but there’s more than 400 million tons of potential additional resources at Goe Fantro, so while we’ll focus on 100 million tons that is well defined now, we would look to continue exploration to define a larger resource. As Fidel said, the feature of the other licenses is that one of Cavalla’s existing properties called Nimba South is contiguous with two of the BHP properties, and so that gives us a very large area up north that we would probably only look at once we have confidence that the supply and demand balance has returned to the market.
WARREN DICK: Ok, so I think that in terms of the brief here, Goe Fantro can be brought into production by 2018 at a capital cost of $160m to $230m to produce that five million tons per annum. Are we going to see this business listed at some stage or are you going to fund this, you know, just entirely through the resources available to Jonah Capital?
JOHN BARTON-BRIDGES: Look, I think when we look at the corporate finances of the business, listing is certainly an option. You know, we’re in discussions with a number of investors in the short-term. As you all know, Warren, in this market, capital markets are pretty well closed for iron ore, although we do see a lot of interest in people who are looking for alternative sources and we believe that that sentiment will change, and that there are opportunities in this market because we as miners, take a 25, 30 year view and while we’re in a particularly deep and lengthy down cycle at the moment, that will change with time.
WARREN DICK: Right. I guess a last question for either one of you, are there any more assets that BHP or any of the majors have or own in those areas that could be the target for more acquisitions?
FIDEL JONAH: Do you mean for more acquisition by Cavalla?
WARREN DICK: Exactly, yes.
FIDEL JONAH: No, I think we have enough on our plate with what we’ve acquired and we think that in these times only the best assets will make it. We also believe that manageable capital costs are very important in these times and all of the other options that may be available are significantly higher capital costs and we think we will struggle to find funding.
WARREN DICK: Ok, great, we’ll have to leave it there gentlemen. Thanks very much for you time. That was John Barton-Bridges, the CEO and Fidel Jonah the Chief Operations Officer from Cavalla Resources.