Mozambique Signs Iron Ore Mining Contract

The Mozambican government and Capitol Resources on Monday signed a mining contract in Maputo for the extraction and processing of iron ore in the western province of Tete.

The contract was signed by the Minister of Mineral Resources and Energy, Leticia Klemens, and the Managing Director of Capitol Resources, Ben James. Capitol is a subsidiary of the Australian mining company Baobab Resources.

The mining concession is located in Chiuta and Moatize districts, covering an area of 19,878 hectares, including 4,484 hectares on which an iron and steel factory will be built.

The project, budgeted at around 20 million US dollars, will create 3,550 jobs in the construction phase. When the mine and factory are operating, they will have a permanent staff of 2,110.

A new 41 kilometre road will connect the concession area to Moatize town, and it will draw its power from a 58 kilometre electricity transmission line.

Speaking at the signing ceremony, Klemens said that five per cent of the shares in the project are reserved for the Mozambican state, and 10 per cent will be sold to Mozambican citizens and institutions via flotation on the Mozambican Stock Exchange (BVM).

The government, she said, wants the country's mineral resources to be exploited in a sustainable manner, which results in transforming the social and economic structure, providing benefits that will improve Mozambican living conditions.

"To achieve these goals, participation by the national business class in the mining value chain is fundamental", added Klemens.

James said the mine and factory will not have a significantly disruptive impact, in that less than 50 households will need to be resettled.

"We are working with the local government and with the affected households to identify an adequate resettlement area as close as possible to the mine", he said. "This will allow people to remain within their communities and to benefit from employment opportunities".

James said the environmental licence for the project was approved last week by the Ministry of Land, Environment and Rural Development. "We are now ensuring development and financial partners for the broader project", he added.

Baobab Resources claims on its website that this is a "watershed project"for Mozambique, since "all developing economies require a domestic steel industry". It claims there is enough iron ore in the concession area to guarantee steel production for 100 years.

"With its captive iron ore, abundance of low cost coal and geographically competitive location, Baobab will be operating at the bottom of the global steel cost curve", the company says. "This, in combination with a growing national and regional steel demand, translates into a robust economic proposition delivering long-term investor returns".

Source: AIM