African Minerals says China's Shandong seeking control of iron ore project

(Updates with details, background)

By Silvia Antonioli and Abhiram Nandakumar

March 3 (Reuters) - African Minerals said China's Shandong, its partner in the Tonkolili iron ore mine in Sierra Leone, is seeking control of the whole project, after taking on some of African Minerals' debt from banks and demanding immediate repayment last week.

London-listed African Minerals, which owns 75 percent of Tonkolili, has been battered by costs related to the Ebola outbreak in West Africa and a rout in iron ore prices over the last year.

This resulted in it having to shut its operations in Sierra Leone in late November over a lack of working capital and to default on repayment of a $250 million pre-export finance debt.

Last week, Shandong, which owns 25 percent in Tonkolili, bought control of the finance facility from group of banks including Standard Chartered (HKSE: 2888.HK - news) and Citi and demanded immediate repayment of the outstanding $166.7 million, which African Minerals could not meet.

The loan is secured against certain assets of the borrower, which allows Shandong to move against the assets.

"The lender has taken control of the holding companies (in the Tonkolili project) by appointing new directors who have a voting majority, and has taken steps to take control of African Minerals' 75 percent shareholding in the operating companies by appointing replacement directors to those companies," African Minerals said in a statement.

"The Company is seeking legal advice on the effectiveness of these actions."

No-one was immediately available at Shandong to comment.

Shares (Berlin: DI6.BE - news) in African Minerals have been suspended since Nov. 20 due to uncertainty about the company's future.

Also in November, its chairman and founder Frank Timis has bought the nearby Marampa iron ore mine from London Mining, which entered administration last year. (Editing by David Evans)