JOHANNESBURG (miningweekly.com) – London-listed junior Baobab Resources could significantly scale up its pig iron and ferro-vanadium project, in the Tete province, with an increased production scenario studying a two-million-tonne-a-year operation.
The new model returned pretax net present value (NPV) of $2.4-billion, a pretax internal rate of return (IRR) of 26%, capital expenditure (capex) of $1.98-billion and a payback period of three to four years.
Baobab’s initial prefeasibility study (PFS) worked on a base-case one-million-tonne-a-year pig iron production model, which estimated a capex of $1.14-billion, returning a pretax NPV of $1.3-billion at an internal rate of return of 22% and a payback period of four to five years.
The increased production scenario also proposed a modelled mine life of 22 years, using about 20% of the global 727-million tons resources, which suggested further upside potential.
Baobab stated that the coproduction of ferro-vanadium alloy added significantly to the project’s revenue stream and represented a byproduct credit of about $66/t of pig iron, up from $65/t as per the initial PFS.
“These two-million-tonnes-a-year results go a step further, demonstrating the ability to significantly scale up production at Tete, ratcheting up the NPV and IRR figures and thereby providing at least two economically attractive options for incoming strategic investors,” Baobab MD Ben James said.
The Tete province hosts some of the largest undeveloped coal reserves and appears to have the potential to produce up to 20% of the world’s seaborne coking coal within the next decade.
Global pig iron consumption currently stood at about 70-million tonnes a year and about 350-million tonnes of scrap iron, with the seaborne pig iron market at a modest 15-million to 20-million tonnes a year.
Pig iron is favoured because it is low in impurities and has a consistent density, which mitigates the deleterious components of scrap iron, highly alloyed modern versions of which have higher deleterious components.