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Chinese steel firm Shandong Iron and Steel Group plans to invest $700m iron ore processing plant at its Tonkolili mine in Sierra Leone. Shandong currently exports all of the ore it produces at its mine to the Port of Qingdao in China in an unprocessed state.

The investment, which was discussed by Sierra Leone’s President Ernest Bai Koroma during a visit to China last week, would represent the biggest industrial investment in the country’s history and provide a long-term boost to the national economy.

The iron ore prices have risen 89% so far this year, reaching a high of $82.4 a tonne on the 7 December and interest in African iron ore has begun to pick up recently. The government of Sierra Leone is keen to see the construction of the plant sanctioned before the recovery speeds up. It appealed to Shandong to consider the venture earlier this year.

A delegation from the China Iron and Steel Association visited the country in late November and members of the Association have since spoken optimistically about the scheme’s potential. The Association’s vice president, Hou Jun, said last week that capital investment of $700m will be required, with all production still likely to be shipped to China. Freetown responded that it will begin drawing up potential incentives to ensure the project’s development, however, it was unclear whether the workers required would come from China or sourced locally.

The project adds to the narrative of African states seeking to process more of the mining commodities that they produce. It has long been argued that the continent needs to capture more of the value-added benefits of its raw materials, from agricultural produce to iron ore and bauxite. Guinea already processes a lot of its bauxite, but Liberia still ships all of its iron ore in a raw form. The completion of a processing plant in Sierra Leone would increase pressure on ArcelorMittal to take the same step in neighbouring Liberia.

Shandong Iron and Steel Group has only been involved in Sierra Leone for four years. It bought a 25% stake in Tonkolili from the UK’s African Minerals Ltd (AML) in 2012 but AML was badly hit by falling iron ore prices, so Shandong bought the remaining equity for just $170m. It currently exports all production as direct shipped iron ore (DSO), which means that it is unprocessed aside from some primary crushing, screening and blending at the mine.

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December 20, 2016

China invests $700M in African iron ore

Chinese steel firm Shandong Iron and Steel Group plans to invest $700m iron ore processing plant at its Tonkolili mine in Sierra Leone. Shandong currently exports all of the ore […]
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