New power contract facilitates Sierra Rutile's Area 1 restart
Mineral sands miner Sierra Rutile has restarted operations at Area 1 in Sierra Leone, facilitated by a new contract for additional power generation capacity.
The ASX-listed company has entered into an 18-month contract with Himoinsa Southern Africa for the provision of 7 MW of power supply. The contract, valued at about $2.1-million in upfront costs, includes ongoing expenses for equipment and staffing necessary to operate the power generation plant.
The new contract, combined with an existing 6 MW of diesel generators from a third-party provider, is expected to ensure stable and reliable power for the remaining life of the mine at Area 1. The new power units are anticipated to arrive on-site by the end of July.
Sierra Rutile has faced previous challenges with power supply, leading to production disruptions. The new power supply contract addresses these issues as the company’s existing power generation assets have reached the end of their useful life. Sierra Rutile determined that repairing and refurbishing these assets was not cost-effective given the remaining mine life at Area 1 and the age of the equipment.
The restart of operations is contingent upon the continuation of the third amendment agreement. Sierra Rutile and the Sierra Leonean government have been in negotiations since May 2023 to establish a new fiscal regime for Area 1. In January, Sierra Rutile issued a suspension notice after the government indicated that the third amendment agreement would no longer apply, reverting to the fiscal regime from November 20, 2001. The company argued that this change made ongoing operations in Area 1 economically unviable.
Earlier this month, the government directed Sierra Rutile to resume operations at Area 1 by the end of May, citing a violation of the Mines and Minerals Development Act owing to the suspension of operations earlier in the year.
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