29 September 2016

 

 

 

INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2016

 

Zanaga Iron Ore Company Limited ("ZIOC" or the "Company") (AIM: ZIOC) is pleased to announce its unaudited interim results for the six months ended 30 June 2016.

Highlights

·   Mining Convention ratified by the Parliament of the Republic of Congo ("RoC"), promulgated by the President of the Republic as a law, and published in the Official Gazette of the RoC

·   Work programme and budget for 2016 together with the 2016 Funding Agreement agreed with Glencore 

·   Additional cost reductions implemented at the Zanaga Project, as well as across ZIOC's corporate costs, to align the cost base with current market conditions

·   Cash balance of US$6.0m as at 30 June 2016 and US$5.7m at 31 August 2016

 

Clifford Elphick, Non-Executive Chairman of ZIOC, commented:

"During the first half of 2016 the Zanaga Project achieved a major milestone in the receipt of its Mining Convention. The Mining Convention was ratified by the Parliament of the Republic of Congo, promulgated as a law, and published in the Official Gazette of the RoC on 28 June 2016; this establishes the fiscal and legal framework for the Project.

We feel encouraged by signs of improvement in the Chinese economy and greater levels of profitability in the Chinese steel industry during 2016. This has led to high levels of iron ore consumption being maintained from the industry's cornerstone customer. On the supply side, we are pleased to see a degree of restraint from the major iron ore producers in their production forecasts. This should ultimately assist in creating an improved, and more sustainable, long term iron ore price environment.

As part of the Zanaga Project team's prudent approach to its operations, further steps have been taken to reduce costs. We have been impressed with the management team's ability to deliver substantial savings while maintaining the ability to pursue the key workstreams that are required to advance the project through the next phase of development.

Finally, the Zanaga Project's significant iron ore Reserve and Resource base has been signed off, and entirely maintained, in accordance with a lower long term iron ore price forecast. This continues to demonstrate that the Project is capable of attracting development finance in the long term."

 

Copies of the unaudited interim results for the six months ended 30 June 2016 are available on the Company's website at www.zanagairon.com.

 

For further information, please contact:

Zanaga Iron Ore

Corporate Development and                        Andrew Trahar

Investor Relations Manager                           +44 20 7399 1105

 

Liberum Capital Limited

Nominated Adviser, Financial                      Richard Crawley

Adviser and Corporate Broker                      and Neil Elliot

                                                                                   +44 20 3100 2000

Bell Pottinger

Financial PR                                                          Marianna Bowes

                                                                                   and Daniel Thole

                                                                                   +44 20 7861 3232

About us:

Zanaga Iron Ore Company Limited (AIM ticker: ZIOC) is the owner of 50% less one share in the Zanaga Iron Ore Project based in the Republic of Congo (Congo Brazzaville) through its joint venture partnership with Glencore. The Zanaga Iron Ore Project is one of the largest iron ore deposits in Africa and has the potential to become a world-class iron ore producer.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

 

Business Review - Operations

 

Cost Reduction Programme, Cash Reserves and Project Funding

As part of the Zanaga Project management team's prudent approach to its operations, further steps have been taken to reduce costs within the Jumelles group, including MPD Congo. We have been impressed with the management team's ability to deliver substantial savings while maintaining the ability to pursue the key workstreams that are required to advance the project through the next phase of work.

ZIOC has also taken further steps to reduce corporate overheads. We expect to deliver these additional cost reductions in the second half of this year, and are pleased with our reduced budget expectations for 2017.

Following the reduction of the cost base at the Zanaga Project, as well as the additional cost reductions associated with the management of ZIOC, we are well positioned to support our operations going forward. As at 30 June 2016, we had cash reserves of US$6.0m and continue to take a very prudent approach to the management of the business.

Mining Convention for the Zanaga Project

With effect from 20 May 2016, the Zanaga Mining Convention has been promulgated as a law of the RoC (Law No 15-2016 of 29 April 2016), following ratification by the Parliament of the RoC and publication in the Official Gazette on 28 June 2016. The confirmation of the Mining Convention as a law further secures the stability the Project's fiscal and legal regime for the life of the mine. (For further details, and key terms of the Mining Convention please refer to ZIOC's announcement on 29 June 2016 and also to page 14 of the 2015 Annual Report which refers to the ratification of the Mining Convention)

The ratification of the Mining Convention demonstrates the Government of the RoC's firm commitment to developing the country's mining sector, is testament to the Project's strong stakeholder relations, and is a major step forward for the Project.

Permitting

The application for the Environmental Permit for the Project's first phase of development has been lodged with the RoC Ministry of Environment and the Project team believes that this is likely to be received during the second half of the 2016 fiscal year.

Reserves and Resources

During the publication of ZIOC's 2015 annual report, on 30 June 2016, the Zanaga Project's significant iron ore Reserve and Resource estimates were each signed off, and entirely maintained, in accordance with a substantially lower long term iron ore price forecast that previously used. We were pleased with this outcome as it continues to demonstrate the Project is capable of attracting development finance in the long term.

Iron Ore Market

We feel encouraged by signs of improvement in the Chinese economy and greater levels of profitability in the Chinese steel industry during 2016. This has led to high levels of iron ore consumption being maintained from the industry's cornerstone customer. On the supply side, we are pleased to see a degree of restraint from the major iron ore producers in their production forecasts. This should ultimately assist in creating an improved, and more sustainable, long term iron ore price environment.

The movements in supply and demand, and the level at which price equilibrium is ultimately reached, are difficult to predict; however there are some signs which indicate that a point of increased stability in the industry might be reached in the medium term.

In addition, the product demand spectrum is increasingly showing an appreciation in pricing of higher quality lump and pellet feed iron ore products. This is encouraging as the Zanaga Project's premium quality products would be well placed to benefit from this pricing dynamic.

Outlook and next steps

At the Zanaga Project we are determined to support steps which maintain progress and advance the Project, but at a prudent level of project expenditure. The Project's ongoing costs have been further reduced, while ensuring that the Project team is motivated to pursue a number of key value adding activities.  We have also reduced  ZIOC's corporate costs.

The value adding activities to be progressed will include the establishment of port and power agreements, and receipt of the Environmental Permit. ZIOC and Glencore continue to work closely with the RoC's government on the conclusion of these workstreams and are pleased to say that the Project continues to enjoy strong support.

The Project is underpinned by a globally significant, well-defined resource and an extensive Feasibility Study. The Project has also been substantially de-risked through the ratification of the Project's Mining Convention by the Parliament of the RoC.

The Zanaga Project's forecast competitive operating costs and premium quality product are important, particularly in a low iron ore price environment. The Zanaga Project is expected to be able to compete, on a benchmark 62% iron ore price equivalent basis, with some of the lowest cost mining operations in Australia and Brazil. This means that the Project is capable of attracting development finance in the long term, making it attractive when compared to many competitor projects globally.