Cameroon to Receive $5 Billion Iron Ore Sales Royalty from Australia's Sundance Resources

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Researched by Industrial Info Resources (Sugar Land, Texas)--Australian mining company Sundance Resources Limited (ASX:SDL) (Perth, Australia) is likely to pay $5 billion in royalties toward iron ore mining and sales to the Cameroon government. Sundance Resources is developing the Mbalam iron ore mine, which is 400 kilometers southeast of the capital city of Yaounde.

Cameroon is expected to receive $5 billion over 25 years from the sale of iron ore products; income tax from the company and individual shareholders; dividends for government equity in the project; employee taxes; and other royalties.

Cam Iron AS, a wholly owned subsidiary of Sundance Resources, has submitted a request to commence drilling activities at the project site. Cam Iron owns 90% of the Mbalam iron ore project. Private investors based in Cameroon hold the 10% balance. Cam Iron has secured exploration licenses 92 and 143, which allow the company to perform drilling activities across 1,800 square kilometers of area. Earlier, Cam Iron completed and submitted a feasibility study report for this project. Environmental and social assessment surveys also have been completed, and the report has been submitted to the Industry of Mines and Technical Development.

The $3.3 billion Mbalam project is considered one of the biggest iron ore deposits in Africa. The project, which is located near the Belinga mine in Gabon, is estimated to have about 2.5 billion tons of itabirite hematite and high-grade hematite. The Mbalam project consists of deposits at Metzimevin, Mbarga South, and Mbarga. Sundance Resources hopes to begin operations by 2012 and export about 35 million to 40 million tons per year.

WorleyParsons Limited (ASX:WOR) (Sydney, Australia) has been awarded a contract to handle project management activities. This includes development of a crushing and screening facility, an open-cut mine, a 490-kilometer railway network, and a port. The port will have the facilities to handle ships with capacities of up to 250,000 dead weight tonnage. In January, the Cameroon government approved the construction of a $160 million export terminal to assist in the development of the iron ore mine.

In April, Sundance Resources raised $16.99 million for the Mbalam project through funds placement. The company recently appointed Deutsche Bank AG (NYSE:DB) (Frankfurt, Germany) as the financial advisor for the Mbalam project. Deustche Bank also was the financial advisor for the acquisition of a 15% stake in Aquila Resources Limited (ASX:AQA) (Como, Australia) by Baoshan Iron & Steel Company Limited (SHA:600019) (BaoSteel) (Shanghai, China), and acquisition of a 17.4% stake in Fortescue Metals Group Limited (ASX:FMG) (Perth, Australia) by Hunan Valin Steel Company Limited (SHE:000932) (Hunan, China). Deutsche Bank is expected to arrange debt and equity funding and secure strategic partners for the Mbalam project.

Industry experts indicate that the global iron ore market is expected to be strong in the medium and long terms. Growth will be spurred by increasing demand in China. The iron ore market is dominated by a few global producers. Sources say that it may become critical for new producers to begin operations to address growth in demand. Commercial operation of the Mbalam project is expected to assist in fulfilling the increase in demand. Sundance Resources has initiated talks for long-term export deals to the Middle East, Europe, India and China.

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