African Minerals says no cash to meet debt payment

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Feb 10 (Reuters) - African Minerals Ltd said it did not have money to make a $17 million coupon payment due Feb. 10, two months after a cash crunch forced it to shut down its iron ore operations in Sierra Leone.

African Minerals, battered by an Ebola outbreak in Sierra Leone and a rout in iron-ore prices last year, said it was unlikely that it would be able to make the payment relating to its $400 million convertible bond in the near future.

The company, which is struggling to shore up its depleted finances, has bank debt of $276 million, $400 million of convertible bonds and also owes trade creditors.

Plunging iron ore prices due to a flood of cheap ore from majors BHP Billiton (NYSE: BBL - news) and Rio Tinto (Xetra: 855018 - news) and the spread of Ebola have driven mining costs up in West Africa, straining balance sheets and forcing companies to search for fresh funds.

African Minerals said on Tuesday that it was still in long-term funding talks with Shandong Iron and Steel Co Ltd , its Chinese partner on the Tonkolili project.

The company, however, added that the Chinese firm had made claims against the suspended Tonkolili operations, diminishing its value further.

"In the event that a funding solution is successfully reached, it is highly likely that the outcome would leave little or no value for AML's shareholders, due to significant balances owed," the company said.

While African Minerals has managed to stay afloat, it tried in November to sell a part of its stake in the Tonkolili iron ore mine as fund dried up.

Unable to find a buyer, it shut operations at the mine in December and had since managed to limp forward using cash released by Shandong.

Peer London Mining collapsed last October and was forced to sell its Marampa mine to a company established by African Minerals' Executive Chairman Frank Timis.

African Minerals' London-listed shares have been suspended since Nov. 20. (Reporting by Esha Vaish in Bengaluru; Editing by Gopakumar Warrier)