Standard Bank Group (SBG) has entered into two five-year loan deals totaling US$130-million, which will help boost the Sierra Leone economy. It has backed African Minerals Ltd's (AML) development of the first phase of the Tonkolili iron ore project, which in the past few days saw the first shipment of iron ore from the mine to China successfully completed.
The first loan for US$40m is to local South African manufacturer RRL Grindrod, part of the JSE listed Grindrod group, to supply 20 locomotives on lease to AML, and was insured by the Export Credit Insurance Corporation of South Africa. The second, for US$90m, is to AML for the purchase and supply of ore wagons and other mining equipment.
The locomotives and wagons will be used to haul iron ore along a 200km rail line, of which 130km has been newly constructed in the past 10 months, linking the mine in the Tonkolili district in northern Sierra Leone to the port of Pepel. Under Phase 1, up to 15-million tonnes of iron ore a year will be exported. Sierra Leone becomes the third African country to produce significant volumes of iron ore after South Africa and Mauritania.
Conservative estimates put the potential revenue to be generated by Phase 1of the project for Sierra Leone and AML, at about US$2bn a year.
Sierra Leone holds some of the largest iron ore reserves in Africa. Tonkolili's resources are over 12-billion tons. However, to date the country has been unable to benefit fully from this resource because of insufficient rail and port capacity to transport the ore from the mines to export markets. Iron ore extraction is widely seen as one of the engines that will drive the reconstruction of Sierra Leone's economy, which had been ravaged by years of civil war.
AML's ability to fund the mine, rail and port development from the private sector has enabled a significant injection of capital into Sierra Leone, which, as the mine develops into full production, will earn significant royalties and revenue for the government of Sierra Leone.
David Humphrey, Standard Bank Group's Director for Structured Asset Finance and Leasing, says the funding is significant as the locomotives and rail infrastructure upgrade will enable Sierra Leone to resume iron ore exports after they were halted about 25 years ago.
"Sierra Leone is a country that has received marginal foreign direct investment, and we are delighted that by supporting our clients, RRL Grindrod and AML, Standard Bank has been able to inject a substantial sum into Sierra Leone, more than it has received in the past from traditional donor agencies.
"By being able to fund the rolling stock for the newly completed rail line between Tonkolili and the port means we have been able to play a major part in Sierra Leone's ability to export iron ore again," says Mr Humphrey.
According to Mr Humphrey, the increased exports will have a strong multiplier effect on the Sierra Leone economy as the country will benefit from new jobs, taxes and royalties.
"We see this loan as an important catalyst for Sierra Leone's economic growth. Mining and its associated infrastructure is a sector where Standard Bank has globally recognised expertise. This transaction again demonstrates our capabilities to provide such funding for the right projects across borders, even in countries where up to now we do have not had a direct presence. The investment is also a strong example of how Standard Bank supports projects that help unlock Africa's wealth and move the continent forward."
"There are a number of major infrastructure projects underway or planned right across the continent and we are confident that Standard Bank can help in the financing of these initiatives," says Mr Humphrey
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