LONDON (Reuters) - Glencore Xstrata (LSE:GLEN) and junior partner Zanaga Iron Ore Company (ZIOC) (LSE:ZIOC) have cut back planned spending on the early stages of the co-owned Zanaga project and announced on Friday a joint search for funding.
News of a revised project design - which will mean lower expenditure as the mine will now be developed in stages - cheered investors in ZIOC, sending shares in the junior up 22 percent on improved prospects for the group's eponymous flagship investment. ZIOC owns 50 percent minus one share of Zanaga.
A project in the Republic of Congo which Glencore majority owns after its takeover of miner Xstrata, Zanaga is one of dozens of promising West African iron ore deposits held back by a dire lack of infrastructure, from rail and road to ports.
ZIOC said in a presentation to investors that the initial capital cost was reduced to $2.5 to $3 billion from a previous $7.4 billion (4.6 billion pounds). It was not clear on Friday how much funding could come from a new third party investor.
Glencore has made no secret of its dislike of greenfield projects - mines built from scratch - where cost overruns and delays have been frequent in recent years, and cost mining companies billions. It has preferred to highlight the prospects of a rival project in its portfolio in Mauritania, where there is an existing railway and a port with spare capacity.
Glencore said this week it had scrapped 44 of 88 projects in Xstrata's portfolio, most of them greenfield projects.
Friday's revised project design for Zanaga - which could use existing infrastructure - could make the project easier to finance as Glencore and Zanaga Iron Ore Company explore options.
The feasibility study will be completed in the second quarter of next year. An investment decision from Glencore would come only after that, it said on Friday.
Zanaga shares were over 32 pence, valuing the exploration company at almost 90 million pounds.
(Reporting by Clara Ferreira-Marques; editing by Keith Weir)