Kobe Steel to Invest in Southdown Iron Ore Project

Kobe Steel announced on Thursday the firm gets around 10% interest in Southdown iron ore development project in Western Australia from Sojitz Corporation to participate in the project. Kobe Steel invests total 25 billion yen for the development and interest. Kobe Steel agreed with Sojitz to purchase annual 1.5 million tonnes of iron ore from the project when the project starts shipment in 2015. With the investment, Kobe Steel’s captive iron ore increases from around 7% to around 20%. The firm seeks additional opportunities to invest iron making raw materials when the firm targets more than 30% of equity source.

Kobe Steel purchases 33% share in Sojitz’s Australian subsidiary, Sojitz Resources & Technology, which has 30% interest in Southdown project. Kobe Steel will have indirect 9.9% interest in the project. With the interest and offtake scheme, Kobe Steel improves stability and cost structure of pellet plant at Kakogawa works.

The project, of which Grange Resources of Australia controls 70%, is under final feasibility study. The project is to develop the mine located in 90 kilometers northeast of Albany port in south coast of Western Australia for around 250 billion yen. The project produces annual around 10 million tonnes of high quality magnetite pellet feed with around 69% Fe.

The parties try to realize the project with competitiveness in shorter transport from mine to port and in lower operation cost. The project launches the mining operation at first while the project is still eyeing potential pellet plant in Malaysia for additional value on the ore.

Kobe Steel secures annual 1 million tonnes class of iron ore interest through the investment while the firm already has small potion of iron ore interests in Namisa and MBR mines of Brazil. Kobe Steel’s captive iron ore source in purchase volume from mines with the interests will reach around 20% of annual 12 million tonnes of iron ore requirement.