The chief executive of African Minerals has resigned just six months after joining the troubled iron ore miner which has seen its shares suspended from Aim and been forced to shut operations at its largest mine.
African Minerals last week failed to make a coupon payment of $17m due on a $400m bond after it was unable to come to a funding agreement with Shandong Iron and Steel Group, its Chinese partner, which owns a 25 per cent stake in the company’s flagship Tonkolili mine.
The miner said “it is unlikely that such a payment will be made in the near future”. adding that, in the event that a funding solution is successfully reached, “it is highly likely that the outcome would leave little or no value for African Mineral’s shareholders”.
Alan Watling, the outgoing chief executive, said: “I feel I have lost the respect of — and for — our partners [Shandong]. In these circumstances I feel I have done all I can and am left with no option other than to resign.”
The mining group has been crippled by a collapse in the iron ore market triggered by overcapacity and rising costs associated with the Ebola crisis in Sierra Leone where its mining operations are based.
Shares in the company lost 95 per cent of their value before trading was suspended on London’s junior market in November.
The company said its shares would remain suspended and the Tonkolili project would stay “in care and maintenance” until the uncertainty about its financial situation was resolved.
“In the current circumstances the board do not consider it appropriate to appoint a replacement CEO, and will consider this and the board structure further once there is a clear path to recommencement of operations,” the company said in a statement.
Shandong had agreed African Minerals could fund the lossmaking Tonkolili mine with $284m held in a restricted bank account which was originally earmarked for the mine’s second phase of expansion. However Shandong withdrew access to the funds after the miner had used up $182m, forcing it to halt operations.
Yuen Low, analyst at Shore Capital, described Mr Watling’s resignation and the decision not to replace him as “as an ominous sign”.
London Mining, another Sierra Leone-based iron ore miner, went bankrupt last year as larger rivals including BHP Billiton and Rio Tinto ramped up production at much lower cost, driving down global prices and leaving heavily indebted smaller miners unable to break even.
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