African Minerals Looks To Blend Iron Ore And Beat A Stagnant Market
African Minerals announced plans to blend its iron ore with that of Timis in a move aimed at producing a higher grade of iron. The companies also hope to become more competitive in the European steel industry.
African Minerals and Timis are looking to blend their iron ore to better compete in the European steel market.
As the slumping iron ore price continues to affect companies around the world, African Minerals (LSE:AMI) has announced plans to blend its iron ore with that of a newly acquired partner. In a corporate update released on Monday, the company said it will look at blending iron ore from its Tonkolili mine in Sierra Leone with material from Timis' Marampa project to produce higher-grade iron ore. The goal? To hopefully lure more European consumers. Friends with benefits Established and owned by Frank Timis, executive chairman of African Minerals, Timis acquired the Marampa mine from PricewaterhouseCoopers on Monday. The plan for Timis and African Minerals is to take the 65 percent iron product from Marampa and the 58 percent iron product from Tonkolili and combine them. At its current state, the low-grade iron ore from Tonkolili doesn't sell well when it's shipped to China. The additional benefit of combining the two and finding European buyers is that freight costs to Rotterdam and other European centers are about $12 per tonne lower than shipping costs to China. "It is expected that, subject to the agreement of commercial terms, AML and ARPS will benefit substantially from lower infrastructure costs by virtue of higher tonnage, as well as the opportunities that will become possible through blending our combined products, accessing new markets in Europe and reducing our combined freight costs as a result," said Alan Watling, CEO of African Minerals, in a statement. All about the gains Taking a more in-depth look at the proposed arrangement, Reuters notes that ore from West Africa usually sells at a discount to the benchmark 62 percent iron ore price. Lower iron prices have not helped the sector either — the iron price has dropped roughly 40 percent from this time last year.