Mota-Engil Africa has been chosen as the Engineering, Procurement and Construction (EPC) contractor to build the port and rail infrastructure for a project.

Sundance Resources Limited, an Australian firm leading the multi-billion iron ore projects in Mbalam (Cameroon) and Nabeba (Congo) has clinched a deal with a leading international engineering and construction company, Mota-Engil Africa, as the contractor to build the US$3.5 billion port and rail infrastructure for the Mbalam-Nabeba Iron Ore Project.

The binding and bankable Engineering, Procurement and Construction (EPC) contract for the construction of the Cameroon portion of the port and rail infrastructure component of the project was signed in Yaounde, Cameroon, on 5 June 2014 in a colourful ceremony chaired by Prime Minister Philemon Yang.

Components of the Infrastructure Development Mota-Engil Africa’s role includes detailed design, construction, testing and commissioning of the 510-km railway from the Mbarga mine in Cameroon to the Mineral Terminal Facility at Lolabe on the west coast of Cameroon, the 70-km rail spur line from the Nabeba Mine in the Republic of Congo (Congo-Brazzaville) to the Cameroon railway; and a 35-Mtpa deep water Mineral Terminal Facility, including stock yards, capable of loading ‘China-max’ vessels. Standard Bank was also chosen as the financial partner. Sundance CEO and Managing Director Mr Giulio Casello, is quoted in a press release issued after the event as saying that, “the appointments of these groups marked a pivotal point in the project’s development.

Mota-Engil Africa is a globally-recognised European engineering and construction company with extensive experience in building transport infrastructure for large bulk-commodity mining projects in Africa. Alongside Standard Bank, with their Africa-focused strategy to promote business investment in the region, both are a fantastic fit for Sundance and the project,” Mr Casello said.

He added that the decision by Mota-Engil Africa and Standard Bank to take on the key roles of engineering and construction contractor and lead debt funding arranger is a major vote of confidence in not only Sundance and the project, but also in the central African countries of Cameroon and Congo “The Mbalam-Nabeba Iron Ore Project will be one of the lowest cash-cost producing assets in the world. Now that we have confirmed capital costs for the project, I believe it is positioned as the most attractive large-scale, high grade iron ore project in the world that is ready for development, he said.”

Discussions, Sundance sources say, are well advanced with a wide variety of potential funding partners; Export Credit Agencies, Development Funds and Commercial Banks have reportedly already expressed interest in providing debt funding.

Sundance, Standard Bank and Mota-Engil Africa are also advancing plans for an alternative funding strategy based on an Own Operate and Transfer model for the port and rail infrastructure. Discussions on this strategy are underway with specialist infrastructure operators and financiers. The EPC contract signed between CAM IRON and Sundance and Mota-Engil Africa was part of three other concessions agreements signed during the same ceremony to give shape to the much heralded project.

These included a revised convention of the project signed between the Minister of Mines, Industries and Technological Development and officials of Sundance and CAMIRON, a mineral terminal concession agreement signed between the Minister of Public Works and the Chairman of the Steering Committee of the Kribi Deep Seaport project and a railway concession agreement between the Ministers of Public Works and that of Transport.

Chairing the ceremony, Prime Minister, Head of Government, Philemon Yang, said government holds the project in high esteem given its envisaged socio-economic fallouts and would not relent any effort in ensuring that it succeeds.

“The iron ore project expertise of Australia’s Sundance Resources, together with the rail and port construction capability of Mota-Engil Africa and the financial strength of Africa’s largest bank Standard Bank, make a formidable team to develop the Mbalam-Nabeba Project which will bring significant employment benefits and economic growth to our country,” he said.

Like the Prime Minister, the President of the project’s steering committee, Louis Paul Motaze, said government on November 29, 2012 signed a mining convention with Sundance and the company was given 18 months to show proof of mobilising the about FCFA 3,000 billion needed for the first phase of the project. The June 5, 2014 event, he said, was proof of the fact that the project is on a good footing. “Government made sure that the infrastructure proposed by the contracting firm meet international standards and will be in line with the railway national master plan as concerns rail infrastructure,” he said.

Another milestone of the project was the signing of a long-term off-take contract with a leading global commodities trader, Noble Resources International, to buy all the production for the first 10 years of operation outside that allocated to project equity participants.

According to the Chairman of Sundance, George Jones, all will be done to meet the needs of government and the population. Meanwhile, the General Manager of the Portuguese firm, Gilberto Rodriguez, pledged to use the experience in infrastructure development coupled with its long stay in Africa to give Cameroon infrastructure that will transform the future of the country and the image of the continent. The four to five-year project, he said, will recruit about 5,000 people and will greatly subcontract with Cameroon’s companies.

What Experience For the Portuguese? The Mota-Engil Group is a multidisciplinary Portuguese construction company with an international presence that spans across 21 countries. It established its African operations in Angola in 1946. Mota-Engil Africa, which is a subsidiary of Mota-Engil SGPS, is currently building a stretch of railway 245-km long in Malawi that is part of the Nacala Corridor, a facility for transporting mining products from the Moatize coal mine in Mozambique that is operated by Brazilian mining group Vale.

What Gain For Cameroon? In the words of government’s Lead Financial Adviser for the project, Mr. Serge Yanic Nana, President of FINANCIA Capital, the Mbalam project is more an infrastructure than a mining project because more than 80% of the capital expenditures will be allocated to finance infrastructure. “From an infrastructure standpoint, the stakes for the government of Cameroon are as follows: Construction stake concerns the implementation of railway infrastructures that meet the global standards in order to provide Cameroon with world-class facilities; Third Parties Access stake relates to the mitigation of the monopoly risk given the status of CAM IRON as the construction and operating contractor.

The access of Third Parties to the facilities will depend upon sovereign decisions from the Cameroonian State. This provision will enable an easy access to mining companies operating in neighbouring countries without any interference from CAM IRON S.A.,” he said. Expansion capacity stake, he added, concerns the flexibility in the design of the infrastructure that should allow for an expansion capacity from 35 to 100 mtpa.

The mining companies that will apply for an access to the infrastructures will incur the Financing Costs of this expansion. “The total cumulated revenue for the State will amount to FCFA 300 billion over 10 years from the start of Operations (Phase I) and much more over the next 15 years (phase II). It is worth noting than two third of the iron ore will come from the mines located in Congo while 100% of the iron ore processed with a beneficiation facility (phase II) will come from the mines in Cameroon,” Mr Nana specified