China Investment Fund to Invest $2.7 Billion in Infrastructure for Kalia Iron Project in Guinea

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Researched by Industrial Info Resources (Sugar Land, Texas)--China International Fund (CIF) (Hong Kong) intends to invest $2.7 billion in the infrastructure required to develop the Kalia Iron Project in Guinea, West Africa.

CIF has signed a binding memorandum of understanding with Bellzone Mining plc (LSE:BZM) (St. Helier, Jersey), the company developing the estimated 2.4 billion-ton-per-year joint ore reserves committee (JORC) resource. JORC is a measurement scale developed in the late 1960s to indicate both the amount of mineral in the ground, together with a level of confidence in the estimate.

Bellzone intends to develop the estimated $4.45 billion mining project at Kalia to a final production level of 50 million tons per year by 2018 in a two-stage approach. The first stage is expected to be completed in 2014 and have a production capacity of 20 million tons each year.

Under the memorandum of understanding, CIF will supply the funding for the complete infrastructure required for the Kalia project. This includes bulk-storage facilities; a port, including port-loading facilities and services; power development; and a 286-kilometer rail system, including rolling stock, linking the mine with the new port.

In return for the funding in the infrastructure, CIF has gained access to several important mineral rights from Bellzone. Subject to the agreement of the Minister of Mines and Geology in Guinea, Bellzone will transfer to CIF an area equal to about 50% of the adjacent Kalia 2 iron-ore prospect and 100% of the nearby Faranah permit.

CIF is required to form a company, before June 6 this year, that is solely dedicated to the infrastructure works. Upon incorporation, CIF is required to transfer $40 million to the new company, 100% of which initially will be owned by CIF. Once all the agreements have been finalized, CIF will transfer 10% of the share capital to Bellzone.

Bellzone also has agreed that CIF will have the right to purchase 100% of the mining operations at the Kalia prospect at market price, but this excludes any of the proceeds resulting from the Kalia 2 prospect that will be transferred to CIF.

In a further agreement, Bellzone and CIF will form a 50:50 joint venture company to develop the CIF-held Forecariah permits, which are located close to the coast and along the probable rail system route to be developed for the Kalia prospect.

The rail system will interest other mining giants with interests in Guinea. The Brazilian mining company Vale S.A. (NYSE:VALE) (Rio de Janeiro, Brazil) is involved in the development of the Simandou deposits, which it acquired for $2.5 billion this month and is expected to favor a rail export route through Liberia.

Another global miner, Rio Tinto plc (NYSE:RTP) (London, England), which also plans to develop rights at Simandou with the Aluminium Corporation of China Limited (NYSE:ACH) (Beijing, China), is expected to follow Vale's route.

The military government of Guinea, which came to power in 2008 following a coup, will not stand at the elections to be held in the country on June 27 this year. It has prioritized the development of the country's infrastructure in its negotiations with organizations looking to develop the enormous mineral reserves in the country.

CIF and its associated companies in Singapore have invested a reported $20 billion in Africa in recent times. Just last year, the company signed an agreement with the government of Guinea to invest $7 billion in infrastructure projects in return for mining, oil and gas rights.

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