Cadence Minerals upbeat on awards of railway concession at Amapa

Cadence Minerals announced on Monday that, following the approval of the judicial restructuring plan announced on 30 August, it has agreed, along with its partners, the reinstatement of a life-of-mine railway concession between the Amapá iron ore mine and the port in Santana, Brazil, with the State of Amapá.

The AIM-traded firm explained that the Amapá Project was owned by Anglo American and Cliffs Natural Resources, and consists of a large-scale iron ore mine, beneficiation plant, railway and private port.

Before its sale in 2012, Anglo American valued its 70% stake at $462m in its 2012 annual report, with the project now 100% owned by DEV Mineração.

It said the reinstatement of the concessions were agreed between Cadence, Indo Sino, and the government of Amapá, including the state secretary of transport, state secretary of planning, state secretary of the environment, the attorney general’s office and the office of the Governor of Amapá.

The concessions would be in force for the life of the mine, and would allow DEV's 100%-owned subsidiary to operate the railway for the primary purpose of the transport of iron ore over 180 kilometres from the mine to its port in Santana.

Cadence said the railway would be maintained and improved to an initial capacity of around 5.5 million tonnes of iron ore per annum, and would provide a passenger and good service.

The concessions also allowed DEV to expand the capacity of the railway to transport other goods, should there be commercial demand.

Cadence said the reinstatement of the concessions represented the satisfaction of one of the two principal preconditions for its investment in the Amapá Project, and the release of $2.5m currently held in escrow in a judicial trust account.

The second precondition was for the firm to reach a settlement agreement with the bank creditors in regards to the secured bank lending, and it said that along with its partners, it was continuing to negotiate with the banks.

On satisfaction of the preconditions and the release of the escrow monies, Cadence said it would own 20% of the Amapá Project via its joint venture company, which would own 99.9% of DEV.

The escrow monies would be used for the payment of former employees and small trade creditors, and on release of the monies, the Government of Amapá would permit DEV to start operations, including those at the port.

“To echo my previous comments, 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,” said Cadence non-executive chairman Andrew Suckling.

“The reinstatement of the life of mine railway concession is the first key step toward rehabilitation of the Amapá Project, and I speak for our board and investors when I say that we expect this to be a company changing event.

“Cadence and Indo Sino, along with the Government of Amapá have worked tirelessly to conclude this key step, and we are grateful for all they have achieved.”

Suckling said that in its previous life, Amapá's output contributed “significantly” to the regional economy.

“It is important to consider the employment opportunities and funding for infrastructure, education and health that a rehabilitated mine will bring to this part of Brazil.”

At 1539 GMT, shares in Cadence Minerals were up 3.23% at 8p.