The economy of the ebola-hit West African state, Sierra Leone faces a major additional hurdle should London Mining’s Marampa iron ore mine shut down. With Marampa’s debt-ridden operating company, London Mining, in administration, and with apparently little hope of survival as a corporate entity all eyes are now on whether the iron ore mine itself can survive.
As an indicator of the importance of this mine to the national economy, Sierra Leone’s Finance Minister, Kaifala Marrah, flew into the UK this weekend in an attempt to salvage the mining operation from the London Mining wreckage. According to the UK’s Sunday Times the mine itself employs 2,400 workers directly, but an additional tens of thousands depend on it financially. It is one of the country’s bigger export earners with an output which was due to rise to 6.5 million tonne/year this year. Marampa has a mineral resource of over 1 billion tonnes of iron ore including a Probable Reserve of 539 million tonnes grading 31.1% Fe, sufficient for over 40 years of mine life.
Pre-ebola, Sierra Leone was one of the poorest countries in Africa and in the World, but had been showing relatively strong growth since the end of a devastating civil war which ended in 2002. While subsistence agriculture is the primary employer, mining is important to the economy, with diamonds the principal earner and iron ore beginning to be an important sector. While Marampa is a relatively small operation by world standards it is significant in Sierra Leone’s case, although is dwarfed by African Minerals’s Tonkolili iron ore mine which is building up to mine 35 million tonne/year iron ore and has a resource of over 12 billion tonnes. According to the World Bank, the country has a GDP of only around $5 billion and vast unemployment but the economy had been growing recently at double digit levels.
Talks in the UK with London Mining, its administrators and potential investors, is revolving around the future of Marampa rather than of London Mining itself which is seen as doomed. According to the Sunday Times there are two parties potentially interested in taking on the mine. The first is JSW Steel, a subsidiary of India’s Jindal Steel group but there are worries here that it might close down the operation while it invests in new infrastructure on site.
Entrepreneur Frank Timis, who is Executive Chairman of African Minerals, is also reported to be interested in taking over the mine and has proposed investing in a 4km rail spur to link Marampa to African Minerals’ rail link to the coast which would improve Marampa’s economics in the face of the big recent fall in the iron ore price.
But all this is happening at the worst possible time, with the ebola threat limiting investor interest in the country as a whole and adversely impacting logistics, and the low iron ore price having a severely adverse effect on iron ore mine profit potential. Finance Minister Marrah is also reported as considering nationalising Marampa should other talks fail and there is still hope that the mine, which is still operating, can be kept as a going concern, although the economics of so doing are fragile.