The positive news continues to flow from Zanaga Iron Ore Company Ltd with the company today announcing that tests carried out by a leading European steel mill as well as an accredited European laboratory servicing the steel industry on the company’s cold produce pellets have returned positive results, with the pellets proving to perform within the industry acceptable limits for conventional pellets.
Zanaga Iron Ore Company Limited (ZIOC) is the owner of 50% less one share in the Zanaga Iron Ore Project based in the Republic of Congo (Congo Brazzaville) through its investment in associate, the other 50% + 1 share of the project is owned by £48 billion mining giant Glencore. The Zanaga Iron Ore Project is one of the largest iron ore deposits in Africa and has the potential to become a world-class iron ore producer.
On the surface this news may seem rather insignificant but those who understand the process of Iron ore mining and have followed the Zanaga project will realise how game changing Zanaga’s cold produce pellets have the potential to be and hence why this news is so important. Originally it was envisaged that the Zanaga project would produce an iron ore pellet feed concentrate, which is a finely ground concentrate which is exported to pelletisation plants to be converted into pellets. By skipping this step and creating pellets directly Zanaga would command a significant price premium and importantly generate much higher profit margins.
Conventional pellets are typically manufactured in plants that require high capital cost and major power demands which is not normally viable for smaller scale operations. However, the Zanaga Project Team has been working with a technology company which is seeking to achieve an alternative solution of pelletising iron ore concentrate by utilising a polymer binding agent capable of converting pellet feed into a pellet (Cold Pelletisation) at lower capital and operating cost than conventional pelletisation processes.
With high grade pellets such as what will be produced by Zanaga currently fetching as much as $132 per tonne when imported to China, if further test work on the cold pellets proves successful the Zanaga project looks like it has the potential to grow into one of the world’s most profitable Iron ore mines. With production of domestic iron ore concentrate and pellets falling rapidly in north China due to restrictions on open-pit mining, it seems like the future looks bright for the pricing of imported premium pellets such as Zanaga’s. With one analyst giving the Zanaga project a NPV of $2.8 billion at an Iron ore price $80 per tonne one certainly has to wonder what the NPV would amount to with cold produced pellets selling at $132 per tonne.
With the market cap of Zanaga Iron Ore Company Ltd currently sitting at just a touch over £50 million the shares are certainly worth considering. There is still a long way to go but if all does go to plan and development starts on the project shareholders should be looking at some major rewards. As with any mining company at this stage in its life cycle there are significant risks, there will always be a possibility that until financing is secured the project will not proceed, but things are starting to fall into place and that risk is reducing with each step the company takes towards financing.