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Print [Ferro-alloys.com]Reuters - Metals explorer Baobab Resources is looking for a strategic partner to develop its pig iron project in Mozambique, where, due to recent gas finds, steel demand from the energy sector is expected to rise over the next few years.
Baobab owns an 85 percent stake in a project in the Tete region of Mozambique, which aims at a 2016 start to production of 1 million mt a year of pig iron, a key steelmaking raw material derived from the smelting of iron ore.
Small miners are finding it difficult to secure financing or find partners given the current economic climate but Baobab hopes its Tete project might become an acquisition target for steelmakers such as India's Jindal Power & Steel, which has already expressed its interest in investing in steelmaking in the southern African country.
Recent discoveries which have boosted Mozambique's gas reserves to around 150 trillion cubic feet, attracting energy majors to the resources-rich country, are expected to increase domestic demand for steel used to make tubes, pipes and other key products for gas extraction, over the next decade.
“Billion of dollars will be invested in the gas sector in Mozambique and they are going to need a huge amount of steel,” Baobab managing director Ben James said in a telephone interview on Monday.
“Our ideal strategic partner would be a steelmaker and in Mozambique we don't have shortage of names with Jindal, Nippon Steel, Tata Steel and Posco.”
Steelmakers Tata Steel owns a stake in an iron ore mine in Mozambique while Nippon Steel, South Korea's Posco, and Jindal have invested in coal projects in the country.
James said Baobab has been in touch with these firms for some time already over technical issues but now that Baobab has completed its pre-feasibility study, he expects to start more serious partnership talks.
ArcelorMittal, the world's largest steelmaker, in 2009 shut down Mozambique's main steel plant which it bought only two years earlier, blaming the closure on the financial crisis which depressed prices for the alloy.
The steelmaker has not, as yet, announced any plans to reopen the site.
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