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UK-listed Baobab Resources owns the only iron ore project in Mozambique’s booming coal region of Tete. Steel First met with md Ben James in Africa to discuss the challenges facing the project.
Located in the hot and hilly north of the East African country,
the Tete region boasts some of the world’s largest
untapped resources of coking coal, an essential ingredient in
the steelmaking process.
Tete’s coal riches have attracted many of the
world’s largest miners to the region, including
Vale, Anglo American and Rio Tinto.
For its part, Baobab plans to produce pig iron, vanadium and
titanium from its Tenge/Ruoni project in the east of the
Focus on pig iron
The miner’s main focus is on becoming a major
producer of pig iron, a refined steelmaking raw material which
is priced at a considerable premium to iron ore.
Baobab estimates that it will be able to produce pig iron at
$200 per tonne fob based on a production rate of 1 million tpy
from its Tete project, to sell to the Chinese market.
After raising its JORC-compliant resource by 38% in December
2012 to 665 million tonnes, the miner plans to produce as much
as 4 million tpy of pig iron, an upscaling of operations which
could bring down production costs considerably.
These ambitious production plans would make Baobab the
world’s largest pig iron producer, seeing it
overtake pig iron-producers in the CIS countries and Latin
The World Bank’s private-sector arm, International
Finance Corp (IFC), agreed to invest as much as $5 million in
Alternative Investment Market-listed Baobab in 2009.
A definitive feasibility study is set for completion this year.
Project financing would follow early in 2015, and construction
would take about 24 months for completion at the end of 2016.
Baobab is now looking for a partner to bring the Tenge project
Benefiting from its proximity to the Zambeze
river’s hydroelectric power source and the Sena
railway link, Baobab is confident that its Tenge project has
the right fundamentals to attract a project partner.
Indian steelmaker Jindal, which has its own operational coking
coal mine in Tete, is aiming to build an integrated steel plant
in the region, Jindal country head Manoj Guta told Steel First
in November 2012.
Mozambican miners have been badly affected by problems with
infrastructure development, however.
Rio Tinto’s ceo and strategy head resigned from
the mining major in the third week of January 2012, on a $3
billion impairment incurred by its Mozambique operations. The
company’s chairman blamed this on infrastructure
development being slower than expected.
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