Guinea iron ore miners years away from using Liberian railway -Arcelor

Fri Apr 11, 2014 11:02am EDT

* Arcelor to expand rail capacity to 20 mln T/year by end 2015

* Rail will not have spare capacity even after Arcelor expansion

* Liberia says rail has 50 mln T/year potential capacity

* Arcelor to produce 5-6 mln T of ore in Liberia next year

By Maytaal Angel

LONDON, April 11 (Reuters) - Mining companies in Guinea such as Sable Mining, who need a means to begin exporting iron ore, will have to wait years to make use of an existing rail link through Liberia, the railway's operator ArcelorMittal said on Friday.

Liberia, which neighbours Guinea, has an existing rail link to the Buchanan port on the Atlantic. This offers a far shorter and cheaper export route for deposits such as Guinea's Mount Nimba than a potential route across Guinea itself, which would take years to develop and require heavy investment.

The export route is vital for mines to be profitable at current prices. .IO62-CNI=SI

While ArcelorMittal, the world largest steelmaker, is open to sharing the railway, it says it will not have any spare capacity even after it expands the line to an annual capacity of 20 million tonnes by the end of next year.

"I'm sceptical that we will see ore flow from Guinea through Liberia in the next two years, I think it will take longer than that, but I think it's a good thing for Guinea and Liberia to make this happen," ArcelorMittal's head of government and community relations, Joe Matthews, told Reuters.

The billions of dollars required to build rail or road connections have frozen many West African iron ore projects and rendered others all but impossible in an environment of uncertain prices and tough access to cash.

Co-operation with neighbours is crucial for Liberia - an emerging iron ore producer - and for Guinea, one of the world's poorest countries whose giant untapped reserves could help it prosper.

Liberia's deputy minister of operations at the ministry of mines, Sam Russ, told Reuters on Wednesday that he expected to see Guinea's ore flowing through his country in the next couple of years.

"We're looking at a very aggressive schedule. The framework has not been worked out (but) the heads of state of Guinea and Liberia are in agreement. I think in a year or two we'll see the project going on stream," Russ said.

CONSTRAINTS

ArcelorMittal exported around 5 million tonnes of iron ore from Liberia last year using all the current capacity on its rail line.

It expects to export the same amount this year, and around 5-6 million tonnes next year, with the railway's capacity expansion scheduled for completion only towards the year-end.

It said that just assembling the equipment to expand the line took 18 months.

For Sable to use the line in two years' time, it would need to assemble equipment, expand the line and build an unloading facility at the port all within that timeframe.

In addition to these technical challenges, there could be financial as well as legal delays in concluding the framework under which stakeholders Guinea, Liberia, ArcelorMittal, Sable and other miners will operate.

"I don't know what Sable's financial capabilities are but if they have to get ready in the next few years they must have done lots of work already in Guinea," said Matthews, speaking on the sidelines of a West Africa mining investment conference in London.

He added that Liberia and Guinea are very constrained in terms of funds to help expand the railway, and want miners to take on all the related costs.

Liberia's Russ remained optimistic: "Feasibility studies have shown that the potential capacity of the line is 50 million tonnes per year. Depending on signal rearrangement you can increase capacity. If you have sidings where trains can move off you can increase capacity."

Aside from Sable Mining, export through Guinea is also critical for the other Mount Nimba deposit owned by major miner BHP Billiton and gold miner Newmont.

Brazilian mining firm B&A Mineracao recently pulled out of talks to buy BHP Billiton's stake in Mount Nimba amid questions over Guinea's political stability and whether the government will allow firms to export through Liberia. (Reporting by Maytaal Angel; Editing by Anthony Barker)

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