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Hebei Iron and Steel Group, of China and South Africa’s Industrial Development Corporation (IDC) $4.5 billion steel project is continuing apace, with a detailed feasibility study set to be completed in Q1 2015.

IDC CEO Geoffrey Qhena said the project would be developed in Limpopo Province and would draw its iron-ore resources from the magnetite tailings in the Phalaborwa area.

Qhena was speaking at the State-owned development finance institution’s annual results presentation in Johannesburg on Thursday.

Project funding

The $4.5 billion steel project will be rolled out in two phases, the first would cost R2.7 billion for 3 million tons by 2017. About R1.8 billion will be allocated to the second phase for 2 million tonnes by 2019.

Both phases will be funded through a combination of debt and equity.

Domestic excess capacity

Qhena said the international market will be target in addition to the domestic market, which had excess capacity, however, the mill would be target regional markets, he said.

The first three-million-ton phase was expected to be completed by 2017 at a cost of $2.8-billion, with the second two-million-ton phase to be introduced by 2020 at a cost of $1.7-billion.

Flat and long products

The initial phase of the project would produce flat and long products similar to those already available in the South African market, said IDC’s Mining and Manufacturing divisional executive Abel Malinga.

“The production will focus on products for the the automotive sector. The flat products produced at the plant will be used for military vehicle technology,” Malinga said.

He said however that the aim for the second phase was to produce steel products and grades not currently manufactured domestically.

The project could not be justified on South Africa’s steel demand alone, but infrastructure plans in the country and regional demand supported investment in the sector.

Malinga estimated that the yearly demand for steel in sub-Saharan Africa would rise to 31-million tons by 2020.

Signing of MOU

Hebei and the IDC signed an MOU outlining the Chinese steel group’s intention to take a 51% stake in the mill, construction of which was scheduled to begin in 2015.

Hebei already owns iron-ore and copper mining assets in South Africa, having participated in a consortium established to buy Rio Tinto’s 57.7% interest in Palabora Mining Company for $373-million.

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