Sundance Resources is waiting to find out if it has done enough to secure an extension to an agreement it has with the Cameroon government over its Mbalam-Nabeba iron ore project.

The junior explorer (ASX:SDL) has requested a voluntary suspension until Tuesday February 6 while the government decides whether it will grant another extension.

Sundance shares have lost 33.3 per cent since mid-February last year when it reached a 52-week high of 1.2c.

The Mbalam convention was signed by Sundance and the Cameroon government back in 2012 and paved the way for the development of the project.

An initial six-month extension to the convention expired on January 26 and Sundance was required to show substantial progress on funding the $1 billion project either by itself or with a credible partner before it could secure a further extension.

Just four days before the deadline, the company announced it had inked a binding memorandum of understanding with private Chinese firm Tidfore Heavy Equipment Group.

SDL shares over the past year.
SDL shares over the past year.

Under the deal, Sundance will sell Tidfore 51 per cent of its ownership in subsidiary Cam Iron, which has submitted a mining permit application for the Mbalam-Nabeba project, in exchange for help securing financing.

Tidfore also has a partnership with state-owned China Civil Engineering Construction Corporation to build the necessary port and railway infrastructure.

“Even though there is still substantial work required to obtain the funding required, the high quality, low costs and large quantity of the Mbalam-Nabeba iron ore fits well into the needs of the future of the Chinese steel industry,” chief Giulio Casello told investors when Sundance announced the deal.

“Together with our current partners we have the basics required to bring this project into production.”

However, the success of the deal hinges on Cam Iron being granted the mining permit over the project and the Chinese government providing security for potential financiers.

Stockhead also understands that Tidfore and Sundance are asking for a three-year extension, not the six months the Cameroon government previously said was on offer.

Sundance hasn’t previously had much luck with the Chinese.

Early in 2016, China Gezhouba Group pulled out of a deal to build the Mbalam-Nabeba project’s key port and rail infrastructure, preferring to wait until mining conditions improved.

Sundance had $1.6 million in cash and a fully drawn loan of $92.3 million at the end of the December quarter.

The company estimated it would spend $657,000 in the next quarter and that didn’t include any spend for exploration or development.

The Mbalam-Nabeba project, which straddles the border of Cameroon and the Republic of Congo in Central Africa, will be built in two stages.

Stage one is expected to produce sinter fines (iron ore powder) averaging more than 62 per cent iron at a rate of 40 million tonnes per year for around 14 years.

Stage two, which is now at a pre-feasibility stage, would extend the life of the operation by another 15 years producing high-grade itabirite hematite concentrate.

Itabirite is a term used to describe major hematite — the main source of iron — deposits ranging in scale from 1 to 4 billion tonnes.

Sundance was unable to comment on the matter.

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