INTERVIEW-Cape Lambert Resources pledges iron ore jobs in Sierra Leone

Maytaal Angel
Monday, 3 Feb 2014 | 6:30 AM ET

* Expects to start construction on Marampa project this year

* Lodged Marampa mining license application in late 2013

* Project initially to produce 2 mln tonnes of iron ore/year

LONDON, Feb 3 (Reuters) - Australia-based mining firm Cape Lambert Resources said it expects to start construction on its flagship Marampa iron ore project in Sierra Leone this year, pledging to employ locals and fund services in the post-conflict African state.

The firm, which late last year lodged its mining license application for Marampa, joins the likes of resource firms London Mining and African Minerals in tapping into the iron ore mining boom in Sierra Leone.

"We've asked for the same license agreement as London Mining and African Minerals and don't expect any difficulties. The government doesn't want different companies in the same industry on different contracts," Cape Lambert executive chairman Tony Sage said in an interview with Reuters.

He added it would take 18 months to reach full production, which will start at 2 million tonnes per year, but could go up to 5 million tonnes as African Minerals has expressed interest in buying an annual 3 million tonnes from Cape Lambert.

By comparison, London Mining produced almost 3.4 million tonnes of iron ore in Sierra Leone last year, while African Minerals exported 12.1 million tonnes, meaning an additional 2-5 million tonnes from Cape Lambert would not go unnoticed in GDP figures.

Sierra Leone, which was torn apart by a 1991-2002 war, reported economic growth of 15.2 percent in 2012 as iron ore production jumped to 6.6 million tonnes from 137,000 tonnes in 2011. Growth excluding iron ore was estimated at 5.3 percent.

"During construction we'll hire more than a thousand locals, so the community is really keen for us to start. We've built a couple of clinics and we're involved with nine local schools," Sage said.

On account of start-up problems at African Minerals in 2012, Sierra Leone's 15 percent growth fell well short of an IMF forecast of 51 percent, highlighting the risks for the country of tying its fortunes so closely to ore.

Prices of iron ore <.IO62-CNI=SI>, the world's second-largest traded commodity after oil, have fallen some 9 percent this year alone, again putting potential growth and mining revenues in Sierra Leone at risk.

Moreover many locals, backed by NGOs, political risk consultants and the International Monetary Fund remain critical of the degree to which the country's mining-fuelled growth is translating into actual development gains.

In this respect, iron ore miners could potentially enhance their contribution to growth and employment by processing iron ore into steel, thereby selling more expensive products to the likes of top ore consumer China.

But according to Sage, steel production in the country is about five or six years away on account of infrastructure problems that go beyond power, rail and roads to building ports that can handle products such as the alloy.

"Many of the people looking at our project say steel production is a very good option that they would look at - but that's a long way down the track," Sage said.

(Editing by Dale Hudson)