Unlocking the new Pilbara

Equatorial Resources (ASX:EQX), an Australian explorer and developer has ambitious plans to be the next major iron ore producer in Africa and the goods to back such aspirations up – two 100 per cent owned large-scale iron ore projects in the mining-friendly Republic of Congo.

Both projects come with high expectations.

The Mayoko-MoussondJi Iron Project has seen 39,456m of RC (reverse circulation) and diamond drilling completed as of the end of the September quarter and there are expectations of a maiden JORC resource estimate to be completed during the first quarter of the New Year. Metallurgical testing has demonstrated the near surface mineralisation, which will form the bulk of the maiden resource, has the potential to deliver a 64.1 per cent Fe premium iron fines product.

Not only is the prospect apparently bursting with potential, it’s in the enviable situation of being almost on top of the ideal transport corridor – a happenstance almost unheard of in infrastructure-starved Africa. The project is within half a kilometre of a rail line that then, in a stroke of good fortune, connects to a deep water port – a relic of the manganese mine that operated in the area for decades.

Such a high value ore body next to an existing pathway to market gives Equatorial a “tremendous advantage,” says managing director and chief executive officer John Welborn.

“It’s almost bizarre; to find a bulk commodity and 500m away someone’s conveniently built a railway that runs all the way to a deep water port.”

Equatorial’s other project, Badondo, is potentially richer than Mayoko-Moussondji but not as well-positioned for exploitation along a handy pathway to market.

The prospect, which Welborn describes as “a mountain of iron sticking out of the jungle in the middle of a swamp in the middle of nowhere,” was identified in the 1950s, despite its remote location, by virtue of its sheer mass. The deposit, “effectively a 10km-long mountain ridge,” gave up rock chips that graded at an impressive 65 per cent. Subsequent drilling turned up 50m intercepts “of very high-grade mineralisation of exceptional purity, so we’re increasingly excited that we’ve got a globally significant asset in that region.”

While the more accessible Mayoko-MoussondJi site has seen a lot of progress, and now has a camp, an airstrip, 300 people on the ground and a maiden JORC resource in the offing, the Badondo project offers a very different but equally exciting opportunity for Equatorial. The project is more remote from infrastructure but it sits within a cluster of proven, world class iron ore projects, lead in particular by Sundance Resources which has been in the headlines this year as a result of a Chinese takeover bid to acquire the company for $1.4 billion.

“There are other companies doing really good work in the region and it has the potential to be a really major hub and the most exciting thing is that we are just getting started and we have already had considerable exploration success.”

Of course, those other companies are also seeking out transport solutions for their projects and it is here that the much-heralded idea of this region as the new Pilbara, gains traction.

The new Pilbara

Welborn sees Equatorial as holding a “monster iron ore asset in an area that I think is a time bomb in terms of unlocking value,” – the parallels between the region around Badondo and Australia’s iron-ore rich Pilbara region in its pre-boom days are clear. This area of Africa could represent the last great untapped region of high quality, massive-scale DSO iron and emerging economies such as China want to see it developed.

Welborn believes that the real opportunity is “to develop a unified transport solution and project focus for the entire region rather than project specific initiatives. We need to get together with other companies and the governments and look at the whole area and capitalise on the ability to blend products and build an efficient and significant transport hub. The investment banker in me sees an obvious synergy in infrastructural development to unlock the region and railway corridors through areas of large projects”.

In the interim, the Mayoko-MoussondJi project – with its advantageous location, premium product potential and access to market – has the ability to generate near-term cash flow for Equatorial. “It’s great to have exposure to both of our projects – it is allowing us to build expertise and capital and cash flow and build a sustainable long-term business.”

Mining friendly

While Equatorial’s point of differentiation is the fact of access to existing infrastructure and the attendant pathway to market that was so fortuitously proximate to Mayoko-MoussondJi – and while Mayoko-MoussondJi has great potential to produce and ship up to 5 million tonnes per annum on that existing infrastructure – for that property to become a large-scale producer, advances on the current infrastructure would have to be made.

“For much larger tonnages to be produced from Mayoko-MoussondJi, the challenge, similar to the one we face for Badondo, is the development of new large-scale infrastructure, the likes of which we have in the Pilbara.”

While the engineering challenges are considerable, the appetite of the local governments for exactly this type of progress is heartening. The Republic of Congo – already a notable oil producing nation – is “very keen to diversify [its economy] and the best way they’ve got to do that is through the mining industry,” says Welborn.

A new mining code passed in 2005, with that mining-friendly attitude in mind, heartens Welborn.

“The government of the Republic of Congo is very keen to promote development and investment and that’s why you’re seeing us and others having a lot of success – there are plenty of examples of many companies putting lots of capital in because it’s a very pro-mining location.”

Welborn concludes on an upbeat note.

“There’s always challenges with big projects but opening up a new iron ore province Is relatively simple; in the end, it’s big boys in the sandpit with Tonka trucks; its good fun.”

www.equatorialresources.com.au