* Pan African Mining developing manganese mine in Burkina Faso
* Burkina Faso PM says rail link to go to new mine
* Bollore source says still has contract for passengers, freight
By Daniel Flynn
DAKAR, Feb 4 (Reuters) - Burkina Faso and Ivory Coast have decided to turn over operation of the Abidjan-Ouagadougou railway to mining company Pan African Minerals, and the line will be extended to its planned manganese mine, Burkina Faso's prime minister said.
Burkina's premier Luc Adolphe Tiao told Reuters that French conglomerate Bollore's contract to operate the 1,260 km railway from the Ivory Coast port of Abidjan to Burkina's capital Ouagadougou had expired.
"We've decided to create a new railway company. This company will be in charge of rehabilitating and operating the line," Tiao said in a recent interview.
Pan African Minerals, which is developing a large manganese mine at Tambao in the northeast of Burkina Faso, will control 55 percent of the new operator, Tiao said.
The start-up of production at Tambao is a priority for the government of Burkina Faso as it seeks to diversify its economy and tax revenue away from reliance on gold and cotton.
Tiao said the governments had sent a letter to Bollore last week to notify it of their decision. The railway currently handles 40 freight trains and 12 passenger trains a week, according to Bollore's Web site.
Bollore will hold 25 percent in the new rail operator, and the two governments will each control 10 percent, he said.
A spokesman for Ivory Coast's Transport Ministry confirmed that a letter was sent to Bollore last week with the plans for the new company.
An official spokesman for Bollore Africa Logistics, the transport and logistics division of the French conglomerate in Africa, could not immediately be reached for comment.
A source at the French firm confirmed, however, that a new company would be created, in which Bollore would hold 25 percent and Pan African minerals 55 percent, to renovate the railway line and extend it as far as the town of Kaya, which lies some 100 km northeast of Ouagadougou and 210 km south of the Tambao mine.
The source said the contract for Bollore's Sitarail unit to provide freight and passenger services on the Abidjan-Ouagadougou line runs until 2035. The new operator will be in charge only of manganese shipments from the mine, the source said.
The prime minister said that Pan African Minerals, which is controlled by Romanian-British entrepreneur Frank Timis, was expected to start production at its manganese mine in 2017.
An extension of the rail link from Ougadougou to Tambao should be completed by 2017 in time for the start of production, he added.
The Tambao mine has raised its estimate of reserves to a total of 100 million tonnes of manganese and will produce 5 million tonnes per year, Tiao said.
The extension of the Abidjan-Ougadougou railway is part of ambitious regional plans to create a rail networking linking several capitals in West Africa.
Technical studies are underway to extend the planned line from Kaya to Niger's capital Niamey, according to the government of Niger. The study is due to be completed in March 2014.
Studies are also underway to extend an existing line in Benin, which runs from the port of Cotonou to the town of Parakou, as far as Niamey.