Fortescue Metals Group has turned a couple of years of talk into a deal to start what looks like a trial iron ore mining operation in Gabon.
Fortescue’s interest in Gabon has been on the radar now for investors for more than a year now.
In August of last year, Fortescue revealed that a joint venture it had a majority interest in had signed an agreement with Gabon that will pave the way to study and obtain a licence to explore the Belinga iron ore project in the West African nation.
Fortescue had signed an agreement with the Gabon government in late 2021 to study the development of the iron ore project.
At the time of the August announcement, the project was being sought by Ivindo Iron SA, a joint venture in which Fortescue holds 80% interest. Africa Transformation and Industrialisation Fund of Abu Dhabi owns the rest.
The Gabon government will now get a free carried 10% interest in Ivindo Iron and the joint venture that’s owned by Fortescue and the Africa Transformation and Industrialisation Fund will control the rest.
Fortescue says it expects to start mining the Belinga iron-ore deposit in the second half this year after agreeing the legal, fiscal and regulatory regimes for the project which will allow for up to 2 million tonnes of ore to be produced a year while the partners study the economics of a larger (and vastly more costly) project.
There are reportedly more than a billion tonnes of ore there and according to historical drilling, some deposits have a high Fe (iron oxide) content of just over 64%. Iron ore from the Pilbara ranges from 55% to just over 62% Fe.
The deposits extend into neighbouring Cameroon and Congo. They have been known since the late 19th century, according to an old (a 1973 United Nations research paper on the deposits) and Bethlehem Steel of the Us was the first major steel company to take a look at them in 1955.
Chinese interests had sought unsuccessfully to develop the deposits more than a decade ago.
Most of the ore is to be found in heavy tropical rainforest (which will create environmental protests if not handled carefully) and lie 500 kilometres from the Gabon coast and the major city of Libreville.
Fortescue said the project will cost roughly $US200 million over 2023 and 2024 (or over a quarter of a billion Australian dollars).
“If it fulfils its promise, it will complement our Australian operations through enhancing our blended products, extending our mine lives and opening new global markets,” Fortescue Executive Chair Andrew Forrest said in Wednesday’s statement from the company.
But Gabon is next door to Equitorial Guinea where Chinese companies and Rio Tinto are competing to bring massive (and rich) iron ore deposits at Simandou into production later this decade.
From the limited data for the Gabon deposits, they seem similar in nature and iron ore content to the ones in Guinea and are also found a long way from the coast.
Fortescue referred to the similarities in its statement on Wednesday:
“The deposit sits in Archean aged rocks of the Congo Craton. The lithology and structure are typical of other greenstone belts that commonly host banded iron formations and itabirites found in other parts of West Africa such as the Simandou project. The Belinga geology and iron ore potential is similar in scale as Simandou in its early stages of exploration, with its multi-billion tonne potential and high grades,” Fortescue said on Wednesday.
Back in 2008 there was talk the deposits would be developed to a capacity of 30 million tonnes a year and would involve building the Belinga iron ore mine, a deep-water port in Santa Clara and 560 kilometres of railroad track from Belinga to Santa Clara in order to export the iron ore. It also includes two hydroelectric dams to provide power to the Belinga facility.
Originally project costs were expected to be $US3.5 billion. That would be a lot more than that now, 15 years later. The 560 kilometres rail track and port will add a lot of costs to the mining costs.
Fortescue shares rose 2% to $22.48 in the wake of the announcement of the project go-ahead.
