TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH EQUATORIAL RESOURCES LIMITED (ASX:EQX) MANAGING DIRECTOR, JOHN WELBORNClive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from iron ore developer, Equatorial Resources Limited
(ASX:EQX), is Managing Director John Wellborn. John welcome to FNN. Can you start by introducing the Company?
John Welborn: Equatorial Resources Limited is an ASX listed company; we’re focused on the development of two large scale iron projects in the Republic of Congo.
Clive Tompkins: Thanks. So how long has Equatorial Resources been going and have you always focused on iron ore?
John Welborn: Equatorial Coal was the original company when I was appointed, and we acquired a hundred percent interest in the two projects we’re currently developing about twelve months ago. So the current story we’re involved in, which is part of a really exciting progression of large scale iron projects all along the west coast of Africa, has really been the focus of the Company over the last twelve months.
Clive Tompkins: John for viewers not familiar with your stock, who are your major shareholders and what’s your market cap?
John Welborn: Today our market capitalisation is around $320 million and we’ve raised about $60 million during the last twelve months. And predominantly out of the UK, there’s a real appetite for the development of the iron ore industry in Africa. And our four largest shareholders, the major participants in those fund raisings have been four large institutional groups, being M&G, Parlour Investments, J.P. Morgan and BlackRock.
Clive Tompkins: John you operate in the People’s Republic of the Congo which has an image of political instability. What’s the reality?
John Welborn: We’re really proud to be operating in the Republic of Congo; it’s a stable, friendly, West African country. Former French Colony, so it needs to be distinguished from the Democratic Republic of Congo or the DRC, which is a separate country and the former Izia. And you know there are issues around the name going right back to Joseph Conrad of ‘Heart of Darkness’. People see the word of Congo as describing some of the risk elements that you mention.
However, the modern Republic of Congo is a progressive economy. It’s got a very well established oil industry and in fact about 90% of their revenue comes from the oil industry. And for that reason the Government are very promotional of the mining industry. They see it as an opportunity to diversify their revenue base. They passed a new mining code in 2005 and it’s seen as a stable and economically progressive country. And we’re very happy to be operating there.
I mean I often joke about the Congo that there’s a boulangerie on every corner, but it really is more French than France at the moment. They’re a very bureaucratically French system and all the systems of government going right down to the Marcry and the local representations; they’re very much based on a French political system. So we’ve got a stable French environment to operate in West Africa.
Clive Tompkins: Now to your projects starting with your Mayoko-Moussondji project in the southwest. At this stage, what do you know about the
size of the resource and grades?
John Welborn: In July and August of last year, we flew a detailed airborne magnetic survey over the entire thousand square kilometre tenement of Mayoko-Moussondji, and the results of that generated a 2.3 to 3.9 billion tonne exploration target. So what we know it’s potentially a great deal of mineralisation, a globally significant mineralisation.
We’ve also done a lot of surface sampling and mapping. And that delivered surface grades from the hematite outcrop of up to 62% iron, very low impurities and that’s given us a lot of confidence that there’s potential for very high-grade direct shipping or mineralisation there. And we’re now involved in a very aggressive drilling campaign to prove up, both that very large target as well as the quality of that reserve.
The geological model is built around what is a classic South American or West African ore body, being a very large body of banded iron formation magnetite with a weathered zone on the top, often described as a hematite cap. And it’s that weathered zone where we find an enriched hematite potential that we’re looking to define a sufficient quantity of direct shipping, or to justify a start-up programme.
Clive Tompkins: And John you have a maiden resource estimate due first quarter next year. Once you’ve reached this milestone, what’s next for the project?
John Welborn: Well it’s going to be exciting reaching that milestone, we’ve got three drill rigs working at the moment and we’re looking to add to that programme. And it’s not necessarily a chronological addition because one of the interesting things about Equatorial Resources is that while we’re involved in that exploration campaign and while we’re proving up and hopefully announcing that maiden resource at the end of the first quarter of next year, we’re at the same time involving quite detailed engineering studies around the existing infrastructure, being the railway that runs from the project all the way to the port and at the port.
And so the delineation of an initial resource will really enable us to use those engineering studies to put into a scoping study, and provide the market with some real guidelines around the time frame and costing and development of our project.
Clive Tompkins: And Mayoko-Moussondji is fortunate to have a rail line running through the project. What is it used for at present and have you secured access?
John Welborn: The railway line that runs through the project was built by a company called Comilog who still operate a manganese mine in the Gabon. They’ve since switched over to another railway. But they built that railway in the late fifties and they operated it for thirty years to transport between 2 and 3 million tonnes of manganese, and they stopped using the railway line in 1990. So the railway line was built for bulk commodity. For the last twenty years it’s been used by the Government for a weekly passenger train.
So it’s quite an exceptional advantage rail project that there’s an operational railway line, that runs through it. Currently it has one hundred percent latent capacity in that there’s only a weekly passenger train on it. We’ve begun studies; we confirmed the widely accepted view that the capacity of the line is around 10 million tonnes a year. And while there needs to be an accelerated refurbishment programme on the railway line and some maintenance, it’s in operating condition.
Clive Tompkins: And what about port facilities?
John Welborn: The Port of Pointe-Noire is one of the deepest water ports in central and West Africa. It can handle Panamax vessels. The loading facilities that Comilog use for their manganese have been deconstructed and that area of the Port is now a key container hub - in fact services the whole of that area of Africa. So at the moment the railway line runs all the way from our project to right onto the wharf, but they no longer use bulk loading facilities.
So what we’re looking at and we signed an agreement in December last year with the Port, to co-operate with us in looking at the capital expenditure required, and the operating parameters around building loading facilities that we’ll need to transport the ore from the railway car into a boat. And we’ve got a number of options and we are progressing those studies.
Clive Tompkins: Now to your other project Badondo in the northwest. What do you have and when did you acquire the project?
John Welborn: We acquired both projects together and while we’ve done a lot of work on Mayoko-Moussondji, we’re just starting to do some work at the Badondo iron project. And it’s a really exciting area because we’re close to some major companies that are developing projects. Obviously led by the Australian group, Sundance Resources and their emblem project is about ninety kilometres away from Badondo.
And closer to us, we’re fifty kilometres south of Core Mining who own the Avima project and we are fifty kilometres north of the Belinga project owned by the Chinese group, CMEC. And all of these companies are looking at developing transport infrastructure to service their projects. We flew an airborne magnetic survey in December at Badondo and it’s identified a target of over 2 billion tonnes of iron mineralisation. In profile it looks very similar to the Sundance Resources emblem project and we’re looking to get on the ground, and put some drill holes in that in December of 2011.
Clive Tompkins: On to corporate matters. What’s your cash position and are you funded for the rest of the year?
John Welborn: We’ve got around $50 million in the bank at the moment and we also own a 20% interest in African Iron. So cash and securities as at today’s date is around $82 million, so we’re very well-funded for our exploration programme over the next twelve to eighteen months.
Clive Tompkins: Good and is it your intention to become an iron ore producer with Mayoko-Moussondji your key asset?
John Welborn: We had an ambition to become a major player in the iron ore space in Africa. And having grown up in Perth in Western Australia and seeing the development of the world’s largest mining companies based on the assets of the Pilbara, I see the exciting area of these projects being developed in Africa, as the story of the next ten or twenty years of iron ore in the world. It really is the third grade iron ore province.
Equatorial Resources with our two hundred percent owned projects, have the capacity to be a major player in that. We have both a short term goal and a long term goal. The short term goal is to get into production at Mayoko-Moussondji around the advantage of having existing infrastructure. We’re modelling to do a five million tonne a year operation from Mayoko-Moussondji, using the railway and the port. And we’re developing as quickly as we can a resource inventory to justify that scale of project.
In the longer term, both at Mayoko and at Badondo, there are a number of places we are looking at building high capacity, bulk commodity transport infrastructure which would enable the development of very large scale projects.
Clive Tompkins: Last question John. Where would you like to see Equatorial Resources twelve months from now?
John Welborn: We’ve progressed an enormous amount over the last twelve months. Twelve months ago we had just purchased two projects; we had very limited geological information and no in-country staff. Today we’ve got more than one hundred and twenty workers; we’ve got offices in Perth, in London, in the port city of Pointe-Noire and a very large administration and exploration base at Mayoko. And we are developing those facilities at Badondo. And we’ve got three drill rigs working and we’re doing engineering studies on port and rail solutions.
We have enormous amount of activity, we’ve got a great investor shareholder base and a good register, and we’re well funded. In twelve months’ time I’d like to see us with an inferred resource and an indicated resource at Mayoko-Moussondji. Well on the way to defining the potential of Badondo and well progressed towards a feasibility study, around a $5 million tonne a year production capacity from Mayoko-Moussondji.
Clive Tompkins: John Wellborn thanks for introducing Equatorial Resources.
John Welborn: My pleasure, thank you very much.
ENDS
