Sundance Resources in talks to sell stake in African iron ore project
Western Australian iron ore company Sundance Resources is holding negotiations with companies including commodities trader Glencore International to sell a stake in its Mbalam Iron Ore Project in central Africa.
The Australian firm is currently in the process of divesting its assets to China's Hanlong Mining, but fears the company may not be able to complete the takeover, reports the Wall Street Journal.
By selling a stake in the core project, the Australian Stock Exchange-listed Sundance plans to raise sufficient funds to ensure its development in case the deal with Hanlong Mining fails.
Any company that is interested in acquiring an equity in the Mbalam project wouldn't be required to buy a stake in Sundance.
The Mbalam project, which is located on the border of Cameroon and the Republic of Congo, is expected to cost around A$5bn ($5.18bn) to construct and will have an annual output of 35 million tonnes of iron ore.
Hanlong Mining initially offered A$1.6bn ($1.66bn) to buy Sundance, but later lowered the price to A$1.38bn ($1.43bn) and finally completed a deal in August 2012.
China Development Bank and China Everbright Bank are expected to issue term sheets to Hanlong Mining to indicate their approval to fund the acquisition by 26 March; however, a source told The Wall Street Journal that it is not clear if Hanlong will be able to meet this deadline.
The demand for iron ore, which is used to manufacture steel, has been steadily growing in China due to an increase in construction of high rise buildings in its major cities.
Headquartered in Perth, Western Australia, Sundance owns 90% of Cam Iron, a subsidiary company in Cameroon and 85% in the Congo Iron, a subsidiary company in the Republic of Congo in central Africa.
Image: Production at the Mbalam mine is expected to begin in 2014.