Severstal, one of the world’s leading steelmakers with interests in Liberia, yesterday, said it will unable to bring online its iron ore project in the West African country if it does not get a partner. The partner will be expected to help with investment and share risk, especially with continued slump in world iron ore prices.
The Russian company owns 100 percent of the Putu project through its subsidiary Putu Iron Ore Mining Co Inc,. The 13 km-long iron rich ridge is situated around 130km inland from the coast in eastern Liberia. The site is estimated to have up to 4.4 billion tonnes of iron ore deposit.
Having spent about $30 million on pre-feasibility study – which it completed in 2012 – Severstal was given a Class A mining licence by Liberia last year. This is an indication that the company responded positively to the requirements outlined in the Mineral Development Agreement (MDA).
Production is projected to commence in 2017, but as it stands, this may take longer if the Russian firm fails to find a partner. It requires $3.5 billion to fully develop the asset.
The price of ore has fallen by 60 percent over the past 12 months, reaching a ten-year-low of $47.08 in early April due to oversupply of the metal, as big miners such as Rio Tinto, Vale and BHP Billiton have increased production. Severstal communications officer Anastasia Mishanina, in an email reply, told Reuters that it would only be wise for the company to have a partner for the project. “In the current market situation, we consider Putu to go into production only in tandem with a partner with whom we can split investments and co-mitigate the risks associated with such a large development,” she wrote.
The Russian steelmaker increased its 61.5 percent stake in Putu to 100 percent in 2012 after its indirect subsidiary, Lybica Holdings struck a purchase agreement with Afferro Mining to buy its 38.5 percent interest in the project. It has so far invested about $150 million in Liberia and will spend more on developing its infrastructure in the coming year. It is due to construct a 150 km rail link and an intermediate port.
