The mine development was to be serviced by a new port and 580km of new railways (Sundance Resources Ltd)

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Cameroon mining infrastructure scheme in doubt as ore price crumbles

18 January 2016 | By GCR Staff | 0 Comments

A Chinese contractor has stalled a major mining infrastructure scheme in Cameroon amid growing signs that plummeting commodity prices are taking their toll on development plans in Africa and elsewhere.

The surprise decision by state-owned China Gezhouba Group is bad news for mining developer Sundance Resources Ltd., of Australia, whose flagship Mbalam-Nabeba Iron Ore Project, spanning Cameroon and the Republic of Congo, was to produce ore for the next 25 years.

The postponement was unexpected for both Sundance and the Government of Cameroon given the recent advances made with the EPC contract ready for execution– Sundance

China Gezhouba Group had been selected as the EPC contractor for the integrated mine, rail and port scheme, which involved building a 510-km railway from big mines in the interior to the coastal city of Kribi, a 70-km spur into the Republic of Congo, and a dedicated mineral export terminal.

But Sundance revealed on 13 January that Gezhouba had postponed signing the contract with the Cameroon government “until market conditions improve and progress on their financing is more advanced”.

Sundance had expected the deal to be signed in December.

“The postponement was unexpected for both Sundance and the Government of Cameroon given the recent advances made with the EPC contract ready for execution,” the company said, adding that both the Cameroon and Congo governments still support the scheme.

In line with slumps in other commodity prices in recent years, iron ore hit $37 a ton in December, it’s lowest price since 2008.

The price fell 40% in 2015, its third annual decline, and some analysts predict it will fall even further in the next two years as shrinking demand in China stokes a worldwide glut.

Mining infrastructure projects in Australia have been hard hit. In December Chinese steel giant Baosteel and its partners mothballed the A$7.4bn West Pilbara mine, rail and port project, citing market conditions and uncertainty about future supply and demand.

And earlier this month shares in Australia’s Gindalbie Metals plummeted on rumours that its partner in the A$3bn Karara mining scheme, China’s Ansteel, was reviewing its commitment to the project.

China Gezhouba’s stalling in Cameroon casts doubts on Sundance’s scheme there. In a quarterly report in October Sundance said that its ability to attract equity investors in China for the project depended on Gezhouba and Cameroon signing the EPC contract.

In addition, the government Cameroon was hoping for a sovereign loan from China to fund the port and rail infrastructure, but that, too, was dependent on the EPC contract, Sundance said.

Map: The mine development was to be serviced by a new port and 580km of new railways (Sundance Resources Ltd)