ASX-listed steel-focused mining company Kogi Iron has confirmed the positive capex and opex economics of its Agbaja cast steel project in Nigeria following the conclusion of a review undertaken by Farnborough Engineering Consulting Services (FEC).
FEC is an internationally recognised leader in steel processing technology and an approved consultant for Export Credit Agency (ECA) financing.
As part of its review, FEC confirmed that Tenova conducted a very thorough testing regime on Kogi iron ore and have well documented the approach taken and the results they found.
The Tenova test work demonstrated that under pilot plant conditions the Kogi iron ore was successfully converted to a steel grade suitable to make quality steel billets.
The rotary kiln process suggested by Tenova for producing Direct Reduced Iron (DRI) was considered a robust and a proven process by FEC for the purpose proposed.
They also suggested that further removal of impurities would improve efficiency and reduce the operating cost of the plant.
FEC considered that the process and technologies identified by Tenova for smelting and refining the DRI in a Submerged Arc Furnace (SAF) is not new technology and that various companies globally utilise this SAF process on different quality iron ore, iron and steel feedstocks, and consumables.
However, FEC noted that the SAF is not proven at the proposed scale for Kogi’s type of iron ore and consumables. The FEC review investigated proposed capital costs (capex) as well as operating costs (opex).
The capex costs varied depending on the source of steel making equipment with European sourced product being considerably more expensive than Indian sourced product.
The company’s intention has always been to source equipment from India given the extensive experience Indian firms have in African and Asian steel projects.
Regarding opex, the review found that the largest proposed contributor was the cost of energy, but there are many variables that can alter and ultimately reduce the operating cost of the plant. This includes the source of power, undertaking post DRI separation, as well as introducing a beneficiation step.
Furthermore, the costs do not take into account any government incentives that may be present as part of Nigeria’s Economic Growth and Recovery Plan.
The FEC report has further provided confidence to the board to scope the terms for a full Bankable Feasibility Study (BFS) for Agbaja, with the aim to commence this work as soon as funding is secured.
Kogi Iron is proceeding with raising a total of $10 million for the BFS as well as sufficient working capital to take the project to financial close.
The company continues its negotiations with various parties regarding this targeted amount of funding and will update shareholders when definitive agreements have been reached.
In addition, the acting CEO and entire Kogi board will be travelling to Nigeria within the next three months to visit the site, meet with local community leaders as well as key government officials and potential partners.
Chairman of Kogi Iron Don Carroll comments:
“The company welcomes the results of the FEC review as it seeks to further progress the Agbaja cast steel project. Pleasingly the report builds on the work completed to date by Tenova regarding the proposed steel process configuration.”
“The proposed opex and capex amounts continues to provide the company with the strong belief that Agbaja will play an integral role in the Nigerian steel industry. The Company continues to progress the bankable feasibility study as well as negotiations with potential ECA financiers and looks forward to updating shareholders as further information comes to hand.”