Establishing Mozambique’s Steel Industry

Baobab Resources ltd’s Tete Steel Project to form the cornerstone of Mozambique’s steel industry for the next 100 years, delivering robust investor returns and unprecedented local and national socio-economic benefits.


Tete Iron & Steel


Baobab Resources Ltd is wholly focused in Mozambique where it has discovered and defined 759Mt JORC compliant iron ore resource in the Tete province, one of Africa’s fastest growing mining, logistics and industrial centres. Baobab is developing the Tete Iron & Steel Project in partnership with the International Finance Corporation ('IFC'), which hold a 13% participatory interest.

The Tete Iron & Steel Project is ideally positioned at the confluence of all iron and steel making raw materials of iron ore, coal, power and water. By leveraging the Project’s unique access to these resources, Baobab intends to establish a vertically integrated mining and steel-making operation, producing steel products to supply the industrial, commercial and urban growth in Mozambique, as well as regional end-markets.

Baobab is working with the Metallurgical Corporation of China (‘MCC’), SRK, Hatch Goba, AOH-CES and ABB to complete a Bankable Feasibility Study (‘BFS’) of an operation producing 500kpa long steel products. The Company expects to complete the BFS in Q3 2016.


National & Regional Setting: the centre of rapid steel demand growth

With long-term political stability and a persistent real growth rate of 7% per annum, Mozambique is one of the fastest developing economies in Africa and an investment destination of choice.

The Tete province is central to three major regional growth areas:

  • The "Gas Belt" of northern Mozambique and Tanzania: where the development of the off-shore gas reserves in the Rovuma Basin will ensure that Mozambique becomes one of the world’s largest liquefied natural gas exporters, with a capital investment over the next decade estimated to be in the order of US$50bn to US$80bn.
  • The “Coal Belt” of central Mozambique, Zimbabwe and Botswana: the coal basins in the Tete province alone have the potential to produce up to 20% of the world’s sea-borne coking coal.
  • The Zambia-Democratic Republic of Congo "Copper Belt".

This region attracts the lion’s share of fixed capital investment in the Southern African Development Community (‘SADC’), with existing infrastructure – in particular international port, rail and road networks – being rapidly refurbished and expanded.

Significant investment is also being directed towards power generation. Mozambique is already home to southern Africa’s single largest hydroelectric scheme at Cahora Bassa and there are numerous other hydro, gas and thermal plants in the pipeline. These schemes, worth an estimated US$10bn, are expected to boost the Country’s generation capacity to 12,000MW.

The Explosive regional growth underpins a sustained and rapidly expanding demand for steel. Currently Mozambique consumes approximately 400,000tpa of steel, which translates to less than 15kg per person per year. Consumption is expected to double within the next decade, but even at double the per capita consumption, Mozambique will be a long way behind the curve in comparison to its regional peers – underlining the long-term growth potential not just in Mozambique, but in the neighbouring southern African region.

Situated 50km north of the provincial capital of Tete, the Iron & Steel project is centrally located in the heart of the regional development picture, ideally positioned to service the burgeoning Mozambican demand for steel as well as the neighbouring landlocked markets of Zambia, Malawi and Zimbabwe, which are almost entirely dependent on steel imports.


Bankable Feasibility Study

Baobab is looking to utilize the thermal coal being produced as a wash by-product on the Project's doorstep to convert its captive iron ore into value added steel. Being at the confluence of these key steel making ingredients is unique and presents a truly exciting opportunity.

Baobab's 759Mt JORC compliant iron ore resource is exceptional, with 550Mt of the inventory underlying a footprint of just 2.5 square kilometres at Tenge-Ruoni. At 0.5Mtpa of steel production, there are sufficient resources to support over 100 years of operation (the first 35 years of mining will be at a staggeringly low strip ratio of just 0.2).


SRK reported the total Probable Ore Reserve for the Tenge project of 72.5 Mt at an average Fe grade of 34.2% in February 2016. The reserve is declared in the Probable category based on the current level of confidence in the work completed to date after applying modifying factors. SRK allowed for 9.3 Mt of dilution in the reserve from low magnetic partings and dolerite dykes representing 12.8% of mined material. At the conclusion of the feasibility study the available Ore Reserves will be upgraded to the Proved category.


SRK also reported the proportion of the Measured and Indicated mineral resources within the 2016 Probable Ore Reserve pit shell.


Baobab has teamed up with the Metallurgical Corporation of China ('MCC') to complete the Bankable Feasibility Study on a 0.5Mtpa integrated steel mill. MCC is China's largest state owned enterprise servicing the steel industry and has designed over 90% of China’s current steel making capacity.

The feasibility study is assessing tried and tested iron and steel making technologies with a long commercial record of over 40 years and proven to work in Africa. The technology selection is modular, allowing for production expansion to complement local and regional growth profiles.



Like any magnetite project, a concentrate first has to be beneficiated. The concentrate is then sent on to the direct reduction stage where it is blended with the locally derived thermal coals and passed through rotary kilns to produce direct reduced iron (‘DRI’). The DRI is then smelted in an electric arc furnace where the ancillary titanium is separated from the hot metal as a slag by-product to be on-sold into a range of down-stream applications.

Vanadium, a key additive in the production of high strength steel, is also recovered from the hot metal before steel billets are cast. The billets are then hot fed to into the rolling mill to produce a range of long steel products, including:

  • Reinforcing bars - used to reinforce concrete and a critical component in the construction of all infrastructure, from single story dwellings, to highways, bridges, ports and hydro-electric dams;
  • Structural steel profiles – including round bars, flats and angles - produced to prescribed chemical and mechanical standards for structural applications in larger scale buildings and infrastructure; and
  • Wire rods - used to make everything from steel wire, rope and fencing products to nails, nuts and bolts.

The finished products are either bundled in lengths for transport or are hot-coiled.

The vanadium slag is further refined to a Ferro-Vanadium alloy product. Being a by-product from the iron making process, it is likely to be one of the lowest cost Ferro-Vanadium products globally.

The one hundred and twenty five mega watt initial power requirement will be met through a combination of co-generation, utilizing off-gasses from the kilns and furnaces, captive coal fired generation units and the Mozambican national electricity grid.

With captive iron ore, dolomite and water and access to low-cost coal, Baobab anticipates a lowest quartile cost of production. With the vanadium credit, the Tete Iron & Steel Project could redefine the bottom of the global cost curve.

World Steel Dynamics World Cost Curve for Wire Rod – Dec 2015 (US$/t) Chart

Environmental, Social and Relocation Studies

Baobab has submitted the preliminary Environmental, Social & Health Impact Assessment (‘ESHIA’) to the government of Mozambique and is finalizing its Resettlement Action Plan ('RAP'). A further addendum to the Environmental Licence application is being prepared to cover additional elements of the project not originally considered in the ESHIA scope of work.

Industrial Free Zone Application

Steel mills form the nuclei of large-scale industrial complexes, attracting a multitude of secondary and tertiary enterprises. For this reason, Baobab has applied for an Industrial Free Zone ('IFZ') status for the project and is working with the government to develop an IFZ master plan that will attract both local and international industrial players.

Watershed Project for Mozambique

All developing economies require a domestic steel industry to be able to rapidly "tool up". The Tete Iron and Steel project is of "game changing" importance for Mozambique. The project is attracting unprecedented government support and is strategically aligned with the 2015 presidential manifest and 5-year plan, which focuses on industrialisation and job creation.

The size of Baobab's resource and technology selection will underpin over 100 years of steel production and is scalable to meet the future demands of Mozambique and the region.

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. This, in combination with a growing national and regional steel demand, translates into a robust economic proposition delivering long-term investor returns. By ensuring that the entire value chain remains in-country, the project will also deliver unprecedented socio-economic returns at both local and national levels.