Project Mballam: CamIron could lose its exploration permit

An internal and external audit stated that CamIron could lose its exploration due to the inability of Sundance Resources, parent company of Cam Iron, to mobilize financing.

The bad news occurred on the side of the Cameroonian law company, Cam Iron, which the multinational Australian Sundances Resources is a majority shareholder with 90%.

After the withdrawal of the construction component of the ore terminal of Mballam in favour of a Chinese company, on July 10, the possibility of totally losing the exploration permit is no longer excluded.

In its financial report on September 30, the multinational company declared that its financial mobilization capacity is decreasing, ranging from $ 14.4 million (about 72 billion FCFA) in June 30, 2014, to 13.7 million (nearly 68.5 billion FCFA) June 30.

Therefore, the company had to proceed with austerity measures: reduction of 10% of the salary of its executives, freezing of certain fees, 40% reduction of its workforce and the number of expatriates in Cameroon, Congo and reduction of 80% of the contract.

Regarding its exploration permits in Cameroon which expires on July 27, 2017, Sundances Resources noted that it has to invest a minimum of 1.63 billion FCFA over the next two years. In Congo, the minimal financial investment was 3.55 billion FCFA on August 8, 2015.

But the multinational noted in its report, "Cam Iron and Congo Iron strictly speaking are not legally required to invest the amounts detailed in the exploration permit. However, a failure to achieve the minimum of expenditures could lead to permit such revocation."

In the same sense, a September 30, 2015 audit by Deloitte Touche Tohmatsu Limited members, society of English law firms, noted that Sundances Resources suffered a loss due to the payment of taxes of $ 78.30 million dollars (about 48 billion FCFA) on June 30, 2015.

"These indicators as well as other cases give material uncertainty which may cast significant doubt on the consolidated entity and the ability of the company to carry out this project and therefore, the consolidated entity and the company may not be able to realize its assets and this discredits its abilities in the course of the project.

Constant failure

Faced with multiple failures from Sundances Resources, the Cameroonian State quickly had to seek an alternative solution to build the Mbalam project ore terminal.

This is because, with the establishment of a special ad hoc selection Committee to a Chinese company for this project by Philémon Yang, Prime Minister on July 10, 2015 , Cameroon resumed a pane that had been entrusted, 05 June 2014 to Cam iron.

The contract with the Cameroon subsidiary of Sundances stipulated yet that it must close within six to nine months for the financing of the project estimated at 3 900 billion CFA francs in its different phases. Engineering Procurement Construction, for its part, should build the 510 Km of railway linking the mine of Mbarga to the ore of Lolabe in Kribi terminal, as well as the 70 km of rails connecting the mine of Nabeba in Congo and the Cameroonian railway.

This is to allow the evacuation of 35 millions of tons of iron per year to be produced by Sundance Resources. The Commission created by Philemon Yang must lead to the process of selection of "the Chinese company most qualified technically and financially to carry out the proposed work."

As such, it is responsible for receiving, compiling and analyzing the offerings of Chinese companies that have shown interest. And to develop contractual documentation to bind the State and Chinese financial institutions as part of the realization of the port and rail infrastructure of the Mbalam project.

For Hervé Atchom Ngagni, Project Support Manager at Camiron, the establishment of this new Commission conforms to the listing made June 30, 2015, by Giulio Casello, Executive Director of Sundances, which stated that: "the government of the Republic of Cameroon has agreed to raise 100% of the capital funds required for the rail and port infrastructure, through a loan in China and if possible in other friendly countries."

By yielding the infrastructure component to the Cameroonian State, Cameroon became 98% owner of the rail at the expense of Sundances who will settle for 2%. The Australian company also obtained the extension of its licence to exploration until July 24, 2017.