Cadence Minerals (LON: KDNC) is closer to reopening the Amapá iron ore operation, located in the namesake state in northern Brazil, which was owned by Anglo American (LON: AAL) and Cliff Natural Resources until late 2013.
The mining company now has bank credit committee approval for its secured bank creditors to execute a settlement agreement that would grant it a 20% stake in the project. Inked in 2019, the $6 million deal allows it to acquire up to a 27% stake in Amapá from Indo Sino.
Cadence must invest $2.5 million to gain 20%, then $3.5 million for the further 7% interest in the joint venture company.
Mining at Amapá was suspended and its entire staff laid-off in February 2015, when then owner Zamin filed for bankruptcy in Brazil. By then it had produced an average of 6.1 million tonnes of iron ore per annum.
Prior to its sale in 2012, Anglo American valued its 70% stake in Amapá at $866 million, which dropped to $462 million after an impairment charge.
On the effective date of the settlement agreement between Cadence and Indo Sino, the company will own 99.9% of Amapá and the port’s current owner DEV Mineração.
“In my time working with commodity projects around the world, I have rarely if ever seen a lapsed mining project with this sort of potential,” Cadence non-executive chairman, Andrew Suckling, said in the statement. “Today’s announcement is a landmark for Amapa, both in terms of certainty for DEV employees, the wider Amapa community and for Cadence shareholders.”
The Amapa project consists of an integrated mine, processing plant, railway and privately owned port.
Based on available historic mine plans and an independent consultant review, Amapá was expected to have a full production mine life of 14 years and will target up 5.3 million tonnes of iron ore a year once at full capacity.