Sierra Rutile (ASX:SRX) has been ordered by the Sierra Leone Government to restart operations at Area 1 by the end of May.
According to Sierra Rutile, the government is claiming that the suspension of the rutile mine in the Moyamba and Bonthe districts of the West African country is a breach of the Mines and Minerals Development Act.
Sierra Rutile, which has a market capitalisation of $50.93 million, says that while it does not agree its operating subsidiary has committed the breach alleged by the Government of Sierra Leone, the company intends to meet the 31 May deadline to resume operations.
In March, the company revealed it had suspended all mining and processing activities at Area 1 following unsuccessful attempts to reach an amended financial agreement with the government on the remainder of production from the mine.
Sierra Rutile also cited weak market conditions and technical and operational issues as reasons for the suspension.
The company, which alerted the market to its plans to suspend operations in late January 2024, believes reverting to the previous financial agreement with the government would render the Area 1 operation uneconomic.
Sierra Rutile was informed by the Sierra Leone Government in January that the existing financial regime set out in the third amendment agreement would be scrapped and the Area 1 operations would be covered under an earlier agreement put in place on 20 November 2001.
“Reverting to the previous fiscal arrangements would require a substantial payment to be made by Sierra Rutile to the [Government of Sierra Leone] in relation to the 2023 financial year, which would have a significant impact on the company’s financial and operational sustainability,” Sierra Rutile said at the time.
Negotiations have been ongoing since May 2023.
In preparation for the restart, Sierra Rutile is planning to finalise and enter into a contract to source additional power generation capacity. This will enable the existing powerhouse to be retired and ensure stable and reliable power for ongoing operations at Area One.
The Area One operation has a total resource of 142 million tonnes @ 0.97% for 1.37 million tonnes of contained rutile.
Sierra Rutile is a natural rutile producer and is focused on operating multi-deposit mineral sands mining operations in southern Sierra Leone.
Write to Aaliyah Rogan at Mining.com.au
Images: Sierra Rutile
