Qatar Steel in $2bn Mauritanian venture

A Mauritanian affiliate of Industries Qatar said on Sunday it is moving ahead with a $2.1 billion iron ore plant in the Saharan state after completing a feasibility study.


State-controlled Industries Qatar's subsidiary, Qatar Steel Co, bought 49.9 per cent of the Al Qalb Al Og iron ore venture in northern Mauritania for $375 million (Dh1.4bn) in November after larger Gulf rival Saudi Basic Industries Corp (Sabic) pulled out, saying returns would be too low.


According to the study published on April 7 for the developers, which also include Australia's Sphere Investments Ltd and Mauritania's state-owned iron ore firm Société Nationale Industrielle et Minière, the scheme's capital costs will be $2.14 billion.


A prelimary study in February said project costs would rise 13 per cent to $2.15 billion from $1.9 billion due to "cost escalation".


The consortium has won a 30-year exploitation licence for the project operating company, Qatar Steel said in a statement on the bourse website on Sunday.


The project will target 7 million tonnes a year of direct reduction pellet.


"As part of its acquisition of 49.9 per cent of the project, Qatar Steel is entitled to the equivalent off-take from the project on an annual basis," the firm said.


The remainder will be sold on to North African and Middle East producers, it said.


Demand for steel in the Gulf Arab region is surging as governments pour more of their record oil revenues into infrastructure, tourism and real estate. Contractors in the region are working on more than $2.4 trillion of projects, according to Dubai-based consultancy Proleads.


Qatar Steel sold about 1.5 million tonnes of steel in 2007 and is looking to double sales by 2012, according to its end of year financial results.


In contrast, the Gulf's largest steel maker Saudi Basic Industries Corp can produce about 5.5 million tonnes a year of steel, according to the website of Arab Steel, an industry association.


Qatar Steel accounted for about 37 per cent of sales for Industries Qatar in 2007 and about 17.2 per cent in net profit. (Reuters)