African Minerals seeks $2.6bn to finance Tonkolili iron ore mine

African Minerals is talking big numbers on its Tonkolili iron ore project in Sierra Leone saying capex to develop would be $2.6 billion and that the resource could total 10 billion tonnes

BANGALORE (Reuters) - 

African Minerals Ltd said it expects $2.6 billion in capital expenditure at its flagship iron ore project at Tonkolili in Sierra Leone and forecast production to start in 2013.

The capital expenditure forecast includes costs for the mine and the building of a railroad and a deep-water port, Chief Executive Alan Watling told Reuters by phone.

Earlier in the day, the company said it raised 63.8 million pounds by selling shares to institutional investors for funding further drilling activities and develop infrastructure at the project.

The company, formerly known as Sierra Leone Diamond Co Ltd, said it sold 25.5 million shares at 250 pence apiece, which represents a premium of 4 percent to the stock's Wednesday closing price of 240.25 pence.

The company's second largest investor Prudential Group Plc bought 2.4 million shares for 6 million pounds as part of the placing, taking its stake to about 14 percent in African Minerals.

The Tonkolili deposits have the third-largest magnetite resources in the world, Watling said, adding that the company was targeting to take the resource target to 10 billion tonnes from 5.1 billion tonnes over the next six months.

The CEO estimated the Tonkolili project of being currently worth about $5 billion to $10 billion.

Renaissance Capital Ltd was the book runner for the placing.

Shares of the company were trading up 1.25 pence at 241.5 by 1210 GMT on the London Stock Exchange.

© Thomson Reuters 2009 All rights reserved

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