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Tonkolili mine standstill looks to be long-term

South African firm Grindrod has recovered the locomotives it leased to the Tonkolili iron ore project in Sierra Leone, suggesting that production is unlikely to resume for the foreseeable future.

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Work at the mine was halted in 2017 because of prolonged low iron ore prices. This leaves the Sierra Leone’s Port of Pepel in a difficult situation, although the 24 x 72t locomotives could all now be leased elsewhere.

 

Grindrod said that the operating company, which had held the mine licence since 2012, defaulted on its lease hire and maintenance payment obligations. Shandong Iron and Steel Limited acquired the mining licence after African Minerals collapsed.

 

The engines had to be recovered by a combination of road and rail using bogies and a mobile crane sourced in neighbouring Guinea, in a challenging operation using some unsurfaced roads to allow them to be shipped from the Port of Freetown to Durban. Pepel was not sufficiently deep to serve a large enough vessel to carry the locomotives.

 

In a statement, Grindrod said: “The recovery of the locomotives will allow for the realisation of their value through deployment into new contracts.” Four of the locomotives have already been delivered to a client at the port of Matadi in the Democratic Republic of Congo, and Grindrod expects to lease the remaining 20 by the middle of next year.

 

Ten more locomotives leased from Grindrod have been retained in Sierra Leone at the request of that country’s government, which is attempting to restart its iron ore industry. “Depending on the success of those efforts these locomotives will either be entered into new long-term contracts there, or will be shipped back to South Africa at the end of the year,” a Grindrod spokesperson said.

 

The future of Sierra Leone’s iron ore sector looked even bleaker when the government withdrew or suspended several iron ore licences, including Shandong’s license to mine iron ore and operate rail and port services. However, it has been reported that the license holders are challenging the government’s move in the courts.

 

The government said that Tonkolili had failed to pay its licence fees and the most recent royalty payment. The country’s National Minerals Agency said that Shandong’s local subsidiary had failed to meet its statutory obligations relating to both the mine and its rail and port lease agreements.

 

The government also complained that the company had failed to submit its Phase 2 development plan on schedule, although this seems reasonable, given that the project had halted all production. It will be interesting to see how the situation develops if the recovery in iron ore prices continues.

 

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