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KOG IRO
Pioneer iron ore and steel p
to accelerate Nigeria’s industria
GI ON
production
al development
MINING | KOGI IRON
The wheels of full-scale industrialisation in Nigeria have been in motion for several decades following independence in 1960 and the establishment of a large-scale oil sector in the 1970s. However, achieving economic development through rapid industrialisation has remained a major challenge in Africa’s most populous nation and largest economy, which was still reliant on oil and gas for 65% of government revenues in 2018. Industrial development in Nigeria is generally constrained by high cost of supply and this is glaringly apparent in the raw materials market. Nigeria does not produce any domestic steel, which means its existing fabrication facilities are dependent on the import of all steel raw materials - most of which is scrap metal - to produce low quality items such as rebar and hot/cold rolled steel and wire coils. The high cost of importing scrap to produce low quality steel is an equation that has stunted industrial growth in Nigeria for too long and changing this requires a trailblazer. Step forward ASX-listed Kogi Iron. The company plans to deliver the country’s first fully integrated cast steel project on the Agbaja iron ore plateau in Kogi State, central Nigeria.
MINING | KOGI IRON
“Ours is a pioneer project,”
pivoted towards the idea of
Kogi’s managing director David developing a fully integrated Turvey proclaims. “There isn’t
steel production facility, a
any other steel production in
move that Turvey describes as
Nigeria so we have first mover
‘a real paradigm shift’.
advantage, but that comes with good and bad sides to it.
“The Nigerian domestic steel
There isn’t much policy with it
market has both current
because nobody else produces,
demand and significant
so we’re pioneering policy as
latent demand. If you can
well as producing steel.”
produce domestically than you are likely to benefit from
Kogi spent the best part of a
that latent demand. At the
decade exploring, discovering
moment, they are importing
and defining an iron ore
scrap steel at a very high price.
resource at the Agbaja Project, located approximately 200 km
“If we can match that price
South of capital city Abuja.
and over time lower it, then
The JORC-compliant mineral
we’re supporting the growth
resource on the plateau
of the local industry. I see it
has been estimated at 586
as a unique opportunity to be
million tonnes (Mt) with an
the first, but also to work with
in-situ grade of 41.3% Fe. The
the country in developing the
project is Nigeria’s only JORC-
policy for their first successful
classified iron ore resource.
integrated steel plant.”
The company’s original plan
In order to build a low-cost
for the project was to develop
steel producing facility, you
the mine and become an
need a few fundamental
iron ore export play, but
components, firstly a source of
after evaluating the difficult
suitable quality and quantity
logistics and escalating costs
iron ore. Tick. Reliable power
of exporting the ore, Kogi
supply is also a necessity.
MINING | KOGI IRON
Fortunately for Kogi, running quite nearby the iron ore deposit is a large gas pipeline, ideally suited to supply a gasfired power plant. Tick. “These are two very significant fundamental competitive advantages that are very rare in the rest of the world,” Turvey explains. Coal and limestone are the other ingredients required for steel making, and the company has noted that both can be drawn from local sources. Tick.
Feasibility study work The company completed a substantial amount of prefeasibility level work for the fully integrated project between 2014 and 2018, including the manufacturing of a sample steel product using iron ore mined from the Agbaja plateau and local coal. “We took bulk samples of our iron ore and local coal down to South Africa and Mintek produced internationally
marketable steel billet. Steel billet is a traded intermediate product, and that’s what we’re aiming at. We’re not looking at being a fabricator of rebar or the finished steel products, we’re looking at selling to the pre-existing steel fabricators.” In 2018 Kogi hired Fast Markets to conduct a market feasibility survey, taking in all aspects of the contemporary steel industry in Nigeria and West Africa. The survey concluded that Kogi would be able to sell 1.5 million tonnes
KO G I I RO N
AT A G L A N C E
STOCK TICKER ASX:KFE
MARKET CAPITALISATION
US$22.32 million (as of August 29, 2020)
j
per year of billet steel in
from existing Nigerian
Nigeria and into neighbouring
steel fabricators which will
countries.
be progressed into offtake discussions, although Turvey
Following the publication
stresses this will take time and
of the survey, Kogi received
the company must arrange a
several expressions of interest
strategy with the government
MINING | KOGI IRON
for the eventual replacement
production and it’s a mutual
Many of these components
of imports.
process. There has been quite
will not take long to update
a bit of time and effort spent
to a bankable level, such as
“As a pioneer, we have an
on pre-feasibility studies
the upgrading of the iron
obligation to listen to what the
on the steel side, including
ore resource to reserve
government wants because
environmental work. We’re
classification (at a cost of
there is no current steel
currently converting these to
approximately US$1 million)
bankable feasibility level.”
“Ours is a pioneer project. There isn’t any other steel production in Nigeria so we have first mover advantage” – David Turvey, Kogi Iron managing director
and the Fast Markets study,
off on the process guarantee
which should be a relatively
from a world expert.
straightforward task according to Turvey.
Critical path value drivers
Process flowsheet refining
These elements, along
tests are another important
with confirmation of a gas
aspect of the bankable
supply contract, comprise
feasibility work, particularly
the company’s ‘critical path
the chosen steel refining
six-month value drivers’ – a
technique to remove
plan formulated by the board
phosphorous – a well-known
to essentially de-risk and
contaminant. This refining
expedite key parts of the study
stage is not a big capital item,
following the onset of the
but it’s crucial to receive sign
COVID-19 pandemic.
MINING | KOGI IRON
RGN editor Jacob Ambrose Willson interviews Kogi Iron managing director David Turvey, August 17, 2020
“The bankable feasibility
supply contract, if not slightly
“We’ve received positive
will take up to 18 months to
afterwards.”
feedback and progressed
complete and we will need
relationships with the UK ECA
to raise US$8 million to fund
The design engineering will
and with other banks on the
it. But we will probably only
be the longest lead item on
debt side of project financing.
need $1-2 million for our key
the BFS because it is reliant
It relates to the unique
value drivers over the next six
on the refining process and
advantages of the Agbaja steel
months.
power supply being in place.
project and the quality of
Once design engineering is
the investment opportunity
“The steel test work in Sweden
complete, a six-month timeline
destined in the bankable
is expected to cost less than
is expected before equity and
feasibility study,” says Turvey.
$500,000 and will probably
debt financing is secured, in
take three months. Then the
Q2 2022 at the earliest.
market entry is likely to be hand in glove with the gas
As a result of the impact of the COVID-19 pandemic on equity
markets, and the subsequent
front end of the project can
aspects, and it has been
economic challenges that
be fast-tracked and de-risked,
no different for Kogi, who
have emerged in Nigeria this
while easing the short-term
finalised an early CDA back in
year, Kogi has decided to take
funding conundrum the
2016.
a phased approach to the
company would have faced
development of the project,
under the original plan.
which involves construction of a lower risk, smaller-scale steel billet plant.
Community support
The CDA details Kogi’s support for the local communities across four key areas: Education, health,
In Nigeria, mining companies
infrastructure (power
The plant’s design will allow
are obliged to draft community
and water supply) and
for expansion to larger scale
development agreements
employment. Recently, the
production capacity relative
(CDAs) for their projects
company has overseen the
to market demand, but the
far in advance of work on
installation of a water bore
phased approach means the
all technical and financial
and storage tank at one of
MINING | KOGI IRON
the remotest villages near
sustainability practices for all
the project, it has provided
water and wastes, and are in
education bursaries and
addition to the project itself
contributed to maintenance
supporting Nigeria’s ongoing
work on a key access road
path to industrialisation by
leading to the plateau.
providing a maiden source of domestic billet steel, after
“This has been rewarding for
years of reliance on expensive
me to watch and report. The
imported scrap for steel
sooner we can raise money
production.
to fund the feasibility study, the sooner we can plough
As the country’s first domestic
more into our community
steel producer, Kogi is also
development commitments.
working closely with the
I’m an explorer, I drive from
government to formulate an
the bottom up and unless I
appropriate policy framework,
have that community support,
thus opening the door for
it is not worthwhile.”
others to follow in Kogi’s
““We’ve received positive feedback and progressed relationships with the UK ECA and with other banks on the debt side of project financing. It relates to the unique advantages of the Agbaja steel project and the quality of the investment opportunity destined in the bankable feasibility study”
footsteps. When the fully integrated
“Nigeria has a lot of the
Agbaja project is operational,
Clearly, Nigeria has a lot to
ingredients that can make
Kogi expects to directly
gain from Kogi’s pioneer
this thing work – the iron ore
employ over 2,000 people and
project, but Turvey is keen
resource, potential low-cost
substantially more indirectly
to stress the mutually
gas and power supply, British
in related local businesses,
advantageous nature of the
law, improved sovereign risk
and the creation of a modern
relationship. “Now is the right
- and that is what attracted
mining and steel-making
time in a macro sense, because
me.” Now it is full steam
hub will bring innumerable
Nigeria is a big economy
ahead towards the trailblazer
benefits to the local
in Africa and it has highly
company’s six-month and two-
communities.
intelligent, highly skilled
year timelines to bankable
people with a drive to succeed.
feasibility and beyond.
These local ‘spin-off’ businesses will be based on
Published by Anderson Murray Media Ltd
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