Kogi Iron is slowly but surely making steady progress in moving its Agbaja steel project in Nigeria up the value curve.
With a feasibility study underway, securing finance requires intensified effort – as does the need for the country to reinforce its investment attractiveness, MD DAVID TURVEY tells LAURA CORNISH.
There can be little doubt as to the quality and size of the Agbaja project.
Kogi Iron holds a land position which covers a large part of the Agbaja Plateau, which hosts an extensive, shallow, flat-lying channel iron deposit with an indicated and inferred mineral resource of 586 Mt with an in-situ iron grade of 41.3% iron, including 405 Mt at 45.1% iron contained in oolitic-style mineralisation – reported in accordance with the JORC Code (2012).
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Impressively, this already large resource covers only 20% of the prospective plateau area within two licences – meaning the potential to expand the resource is significant.
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“Large, flat lying ore bodies offer great value in the iron ore sector. The ore is near surface so it is easy to extract and with a soft consistency is also easier to process.
“And while the in-situ grade requires removal of impurities from the ore to produce an iron ore concentrate containing 53 – 56% iron – the operating cost to produce a final concentrate product is significantly below that of fine-grained, magnetite-dominant, hard rock deposits, which are typically costly to mine due to being narrow and steep, while requiring very expensive grinding as well,” Turvey states.
Taking a different approach
Having a quality ore body is only one component to delivering a successful project. Of equal importance is the end user and the costs associated with delivering product to that end user market.
“The Kogi Iron board saw the greatest value opportunity emanating from Agbaja in serving the local Nigerian steel market, which despite having known occurrences of iron mineralisation and small, poorly defined deposits, does not produce any of its own iron ore and steel but instead is known to pay elevated prices to import scrap metal steel from other regions,” Turvey points out.
“Considering Nigeria is one of the largest economies in Africa, its economic growth is being hindered by its inability to produce its own steel products needed to support infrastructure and industrial growth,” he continues.
The decision was consequently taken for Kogi Iron to expand its strategic direction – which now incorporates the construction of a steel plant that can feed and support the local market to replace imported scrap steel raw materials. This has been well received by government and reduces the usual challenges associated with securing off-take agreements.
“The potential to do this cost effectively further supports our narrative. Nigeria is a world-class producer and exporter of oil and gas products which drives strong export revenue.
With a gas pipeline that runs adjacent to our ore body, the ability to deliver low cost steel production is high. Considering iron ore and electricity are the largest cost components for any steel producer, this puts us at a distinct advantage,” Turvey highlights.
And while Kogi Iron is looking for government and market transparency in terms of import parity pricing to replace scrap steel at present, the MD is quietly confident that the cost to produce steel locally has the potential to be significantly lower.
Where to from here?
A pre-feasibility study completed in 2014 concluded that Agbaja had the potential to produce a 55% iron ore concentrate for export of between 4 and 6 Mtpa.
When Turvey joined the company in 2019, he immediately saw the barriers to entry and risks in iron ore export markets and infrastructure costs and has since brought the project back in size and scope – taking cognisance of the cash needed to build the project and the investor perception challenges that Nigeria still faces.
“Our current bankable feasibility study (BFS) is focused on evaluating development of a staged steel project, starting with relatively small-scale steel production, which can be incrementally expanded based on economic demand and commercial merit– a smart move considering the impact of COVID-19 on the country.
“Even so, at this small-scale we need to secure approximately US$8 million funds to complete the BFS which we may raise in phases to preserve value and minimise shareholder dilution as we progress forward.”
Kogi Iron did start excavation of a small-scale trial iron ore mining pit during July (~50m x 30m x 5m deep), using a local Lokoja-based company. The trial iron ore mining and subsequent studies provide key inputs for the feasibility study, including:
- Geological mapping, sampling and assays to inform and support the iron ore reserve estimate;
- Materials characterisation of overburden and iron ore as basis for cost-effective design of ore beneficiation plant;
- In addition, the company plans to evaluate the environmental, social and governance (ESG) impacts, benefits and local business opportunities from its mining and processing iron ore including:
a) Water and tailings management
b) Building and road materials
c) Horticulture and agronomy
For Turvey, the key at present is focusing on three main value drivers that are critical in the project’s development after which the rest of the study work will “fall into place”.
This initial work requires the company to raise and spend US$1 to 2 million over the next six months which will enable it to complete the following:
- Technical component: Refining test work for the removal of impurities (phosphorus). Kogi Iron has selected a Tier 1 engineering group in Sweden for the process guarantee on this test work.
- Securing a draft gas supply agreement as a 10-year renewable contract for significant gas volumes at a competitive price. This contract would be the basis to attract third party public-private partnership (PPP) investment in construction and operation of a gas-fired electricity generation facility with cornerstone electricity offtake by Kogi’s steel project.
- Government-sanctioned market entry policy based on import replacement price parity to support offtake agreements with current steel fabricators (local customers) and market transparency.
“Securing each one of these value drivers is likely to significantly increase interest in Kogi Iron’s story – which should hopefully reflect in market activity, liquidity and increase in our share price,” Turvey envisions.
“This could see the company attract corporate activity or become the target of a takeover by another steel producer or industrial group, but Turvey is comfortable with this potential pathway.
“The board and my roles are to bring our project up the value curve to a point where others see and realise the value, especially when it requires working closely with government policy and the community.
“My previous experience with mining and related industrial projects in emerging economies such as Indonesia, Malaysia and Saudi Arabia provides me with confidence in Kogi Iron’s opportunity.” he concludes.