VIDEO: Baobab, the iron ore producer in Mozambique’s coal belt

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.

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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 province.

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 America.

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 into production.

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.