Sekota Mining Plc, a company formed by Luciano Frattolin and Beijing CBRF Technology Group Co. Ltd, secured a 20-year concession period to extract iron ore with an estimated total cost of half a billion dollars.
The agreement was signed by Motuma Mekassa, minister of Mines, Petroleum & Natural Resources (MoMPNR), and Luciano, a major shareholder and CEO of Sekota Mining on August 24, 2017, at the premises of the Ministry, on Asmera Avenue.
Sekota Mining Plc will explore the iron ore on the 242sqm plot of land. The area is located in Sekota, Ziquala, and Abergelle Weredas of Wahgemera Zone in Amhara Regional State, 740Km northwest of Addis Abeba.
The Company is intended to supply the ore to steel mill companies. Up until last year, there was a total of 148 steel manufacturing companies in the country, according to the Ministry of Trade (MoT).
After five years of exploration, the company outlined that the area has a reserve of 79 million tonnes of iron ore with a contained iron of 24 million tonnes.
The exploration was made by a Chinese firm named Sinosteel Institute of China. Sino conducted mineralogical and metallurgical analyses, which are used to identify mineral species and understand their characteristics and properties or detect surface and internal flaws, respectively, and determined their microstructural features.
Established in 1993, Sinosteel Corporation is an enterprise which is mainly engaged in developing and processing metallurgical mineral resources, logistics and trading of metallurgical raw materials and products.
Sekota Iron Ore is primarily composed of hematite, goethite and limonite.
The company is expected to produce 250,000tn of sponge iron annually. It will produce 50,000tn of sponge iron or Direct Reduced Iron (DRI) in the first year of production. This is expected to quadruple in the second year.
The company initially secured the license in February 2012. The first production of iron ore is scheduled for mid-2019 with 410 million dollars. The second phase of the project plans to start reinforcement bar production of all sizes, and in the third phase, the company will set up a prefabricated steel structure plant near the mine.
For the first phase, the company applied a loan request to the Development Bank of Ethiopia (DBE) – an amount of 1.2 billion Br.
“We had support from the Ministry to get the loan and we are also getting a good response from DBE,” Luciano told Fortune.
DBE normally charges a 12pc interest rate, but it is considering charging Sekota Mining only 8.5pc interest rate, according to Luciano.
For phase two and three, the company is dealing with Export–Import (EX-IM) Bank of China to get the finance.
The hematite iron ore mine is envisaged to produce sponge iron or DRI after the hematite ore is crushed by grinding using ball mill. To convert the mineral to sponge Iron, it uses local coal and limestone.
After the feasibility study of the project was finalised, the mining license application was endorsed to the Council of Ministers (CoM) by MoMPNR. The CoM approved the application on August 4, 2017.
“Before granting them the license, we reviewed their feasibility study and its findings well,” Motuma told Fortune.
This is not the first time that the Ministry has provided iron ore license to a foreign company. An Indian company MSP Steel & Power secured a license for the extraction of 1.5 million tonnes of magnetite and ilmenite in West Wellega, Oromia Regional State, for 10 years as a small scale mining production.
MSP set up an integrated steel plant in 2003 at Raigarh, Chhattisgarh, and manufactures pellet, captive power, bars and steel structures.
Sekota Mining is expected to decrease the number of billets and metal scrap imports to the country and create job opportunity for 200 people when it starts running at full capacity.
“As the local demand for iron ore is high, we will first focus in meeting that demand,” said Luciano.
Ethiopia imports one million tons of iron annually.
Luciano, along with Yonas Tadesse and Ermias Amelga of Access Real Estate, previously established Michot Real Estate Plc, but he left the company.
Ermias had aimed then to introduce the concept of steel structures in real estate development. Similarly, the third phase of Sekota’s project plans to step up high-rise prefabricated steel structure plants near the mine.
CBRF, one of the shareholders of Sekota Mining, had an annual turnover of one billion dollars and was equipped with 2,000 employees. It has experience in research and application or Direct Reduced Iron (DRI). It operates wholly-owned subsidiaries including CBRF Furnace Manufacturing, CBRF Equipment Manufacturing, CBRF Equipment Installation Engineering, CBRF Overseas Engineering and CBRF Engineering Design & Research Institute.
“We are planning to start operation within two or three months,” said Luciano.
Source : Fortune