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MINING | Kogi Iron
KOGI IRON Nigeria’s first primary steel production project
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MINING | Kogi Iron
Nigeria has the largest economy in Africa with a GDP of approximately US$376 billion in 2017 and is also the continent’s most populous nation, comprising of close to 200 million citizens according to latest UN estimates. Therefore, it is a great surprise to learn that Africa’s primary economic engine consumes only 6.8 million tonnes per annum (Mtpa) of steel, giving Nigeria one of the lowest levels of consumption per capita in the world. More than half of Nigeria’s steel demand is met from imported goods, with the balance provided by domestically produced, low quality steel largely from recycled metal. However, Kogi Iron plans to drastically enrich Nigeria’s domestic steel industry by setting up the country’s first integrated cast steel project in Kogi State. Kogi Iron is an ASX-listed company that has been in operation for around 10 years, with its primary asset the 100%-owned Agbaja iron ore project located near the town of
“About two years ago the idea was float ore exporter to a local steel producer. Th build a steel mill in front of the iron ore d Martin Wood, CEO and managing directo
Lokoja in central Nigeria. The project is
are in place at the project level, says Kogi
operated through Kogi Iron’s 100% owned
Iron’s CEO and managing director Martin
partner - KCM Mining.
Wood, and the resource has been estimated at 586 Mt with an in-situ grade of 41.3% Fe
All currently required licences and permits
from a 2014 pre-feasibility study.
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ted to pivot from being an iron he idea was that we would deposit.” or The company’s initial plan was to prove up
ore prices had receded after the China-
the resource, develop the mine and then
led boom ended in 2014, and the process
export the iron ore out of Nigeria. However,
of transporting the produce from Lokoja
it soon became clear that this wasn’t going
down to Warri Port in the South became too
to work, primarily for two reasons: Iron
complex.
MINING | Kogi Iron
Pivoting towards steel production “About two years ago the idea was floated to pivot from being an iron ore exporter to a local steel producer,” reveals Wood. “The idea was that we would build a steel mill in front of the iron ore deposit. “We’ve also got access to two local sources of coal and there is lots of readily available limestone in the region, therefore we have all the ingredients needed to produce steel for the home markets.” As it transpired, all the factors that made it difficult for the company to export its product lent themselves to becoming
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Logistically speaking, from the project’s central location potential offtakers could in the Southwest and Port Harcourt in the Southeast. In this scenario, Kogi Iron can truck its steel product down to these regions, as opposed to having to barge iron ore down a river before loading it onto a narrow gauge railway to eventually reach Warri Port. In addition, the integrated project would operate inside the Nigerian Tariff Barrier which is a major plus for the firm. Since deciding to pivot towards integrated steel production, Kogi Iron has carried out a number of tests on its iron ore to determine its suitability for the manufacturing of international quality steel products.
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The company employed consultancy groups
operational in Nigeria. In order to check
Tenova, SGS Bateman and Mintek RSA to
that thesis, we recently commissioned Fast
perform a bulk sample test work programme
Markets to carry out a market study for us.”
in July last year. The mineralogy specialists ran successful tests which confirmed the
The Fast Markets study concluded that Kogi
suitability of Agbaja iron ore to produce a
Iron would be able to sell one and a half
high quality steel product.
million tonnes of its steel product in Nigeria and into neighbouring countries, which is
Russia-based specialist Torex also confirmed
an encouraging sign for the company at this
the viability of Kogi Iron’s two local sources
stage.
of coal for use in the rotary kilns as part of the sponge iron process. “Once you know
Nigeria’s current domestic rolling mills
you can produce a high quality steel product,
predominantly use imported scrap metal to
then you know the project is a go,” Wood
produce low quality items such as rebar and
declares. “Our idea is that we are inured to
hot/cold rolled steel and wire coils. Therefore,
the international prices of coal and iron ore
the Fast Markets report indicated that
because we have our own supplies.
there will be no shortage of demand for the company’s higher quality material.
“We will produce a cast steel product that will be sold to the rolling mills that are currently
MINING | Kogi Iron
DFS and project financing Kogi Iron is currently working through its definitive feasibility study (DFS) and has commissioned an independent engineering consultancy called McLellan and Partners to conduct an interim review of the company’s progress at the Agbaja project. “That review is going to give us objective numbers on the capex needed to build the project and the opex required to run the facility. It will also give us a pathway towards the full DFS, advising on things like what tonnage we should be producing and where we should be sourcing equipment from.” In terms of project financing, the firm has been in discussions with export credit agency (ECA) lenders for quite some time and has made sure that each potential ECA is kept firmly in the loop with regards to key milestones and news pieces. For example, after the Tenova, SGS and Mintek sample test work programme was completed, the results were shown to the ECAs in order to demonstrate that the work fits the necessary criteria. Kogi Iron will continue to share goals and milestones with potential lenders to keep itself ECA compliant. It has been indicated that ECAs will be willing “That means that when we finish all our
to lend up to 70% of the project cost, leaving
studies, assuming the DFS is positive, we will
the company with 30% to raise through
have taken ECAs with us on our journey and
equity. Kogi Iron is considering various
they will have a very short turnaround in
options for this equity raise, including a
deciding whether or not they can lend to us,”
second listing on an international exchange.
says Wood.
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“We are exploring a dual listing in London to raise the 30% capex to finish off the project. That would give us a good footprint in London and allow investors in who understand West Africa.”
“One of the options we are exploring is a dual
Wood believes the UK exchange has a very
listing in London to raise that 30% capex to
strong understanding of African markets
finish off the project. That would give us a
along with a large Nigerian contingent
good footprint in London and allow investors
residing in London, which makes it a highly
in who understand West Africa, steel and the
suitable option for a secondary listing. “That
long-term economics of the project.”
would be a conceivable path to market and liquidity for us,” he adds.
MINING | Kogi Iron
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A social licence to operate
you do for us. On several occasions he has said: ‘I know there is nothing in it for us now
Aside from moving through the technical
but we can see the future jobs and education
and financial aspects of the Agbaja project,
for Lokoja which are being driven by this
Kogi Iron has also developed a highly
economic engine you are building’. That’s a
attuned social licence to operate in Nigeria,
very sensible, mature approach and I love it.”
which is rooted in the notion of providing local, regional and national benefit from its
Kogi Iron also maintains strong relations at
presence in the country.
state and federal level, including with the Minister of Mines and Steel in Abuja. “When
On a local level, the firm has negotiated
we first had some steel produced from our
a thorough community development
own iron ore by Mintek, they sent us some
agreement (CDA) with the paramount ruler of
samples,” Wood explains.
the region, who presides over the more than 60 communities which will be impacted by
“I took a sample and gave it to the Minister
the development.
of Mines and Steel as a paperweight. It’s the first steel produced by Nigerian iron ore, so
“Through the paramount ruler, a local lawyer
he was really pleased about. It was a nice
and local dignitaries who represent the
gesture from us.”
stakeholders, we negotiated a CDA which ensured local employment opportunities in
Kogi Iron is making strong progress towards
both unskilled, semi-skilled and skilled roles,
its goal of developing Nigeria’s first primary
to ensure that local benefits will accrue.”
steel production facility, which is set to bring myriad benefits to the local communities in
Kogi Iron’s national subsidiary KCM Mining is
Kogi State and to the Nigerian economy.
led by a geologist named Alabi Samuel, who is Lokoja born and bred which has helped
Above all, Kogi Iron must be commended for
the company form strong relations in the
developing the operation in-country through
surrounding communities, not least with the
its 100% owned partner KCM Mining and for
paramount ruler.
advancing a project that will support Nigerian industry and Nigerian people.
“His [the Paramount Ruler] view is very overtly what can we do for you, not what can
ASX:KFE
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Published by Anderson Murray Media Ltd
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