Iron Ore: Cameroon boosts Mbalam
(Business in Cameroon) - The Cameroonian iron ore project in Mbalam, once in doubt as a result of the iron and steel crisis, is back on track.
The Cameroonian iron ore project in Mbalam, once in doubt as a result of the iron and steel crisis, is back on track.
On 9 February, 2010, the President of the Republic of Cameroon, Mr. Paul Biya, participated in the iron ore exploitation project in Mbalam and asked various people in charge to review the terms of the project. This gigantic project totaling 2,5 billion dollars worth of investments, was affected by the world steel-making crisis which forced the Indian giant Mittal to interrupt some of its blast furnaces in 2008. The world leader of steel was forced to reassess its plan of a 35 billion dollar investment, made public in 2007, originally based on the growth of the global demand for steel, from 3 % to 5 % per year.
Given the economic situation and if recent renewal of cooperation restores the relevance of the project, the project still remains uncertain despite reliance on the promise that "the first boat load of iron ore extracted from Mbalam will leave Kribi Harbor in 2010 ".
Mr. Don Lewis, Chief Executive Officer of Sundance Resources Limited, the Australian allotted company of the iron deposit, and Mr. Geoff Wedlock, President and 90% stakeholder of Cam Iron, are two central actors in this project. They reaffirmed to the Head of State that next year’s fixed term would be respected.
The world economic situation has changed. In 2009, Arcelor Mittal reaped a 118 million dollar net profit, far from the 9,4 billion dollar net profit in 2008, but still a better result than the analysts’ forecast.
Given the economic situation and if recent renewal of cooperation restores the relevance of the project, the project still remains uncertain despite reliance on the promise that "the first boat load of iron ore extracted from Mbalam will leave Kribi Harbor in 2010 ". The Harbor itself must be built to accommodate iron ore carriers as well as the 450km, Mbalam-Kribi railroad. With all this in consideration it seems likely to expect feasibility studies for all these works.
This project remains a turning point for Cameroon, with an expected production of 35 million tons of iron ore per year over twenty years as well as the creation of 3000 jobs. The iron ore reserves are estimated at between 800 million and 1 billion tons of good quality iron ore.
Nevertheless, the Cameroonian project seems to ignore the regional dimension. The recent summit of the Economic and Monetary Community of Central Africa (CEMAC) highlighted their desire to integrate more state economies to increase benefit from the regional market of thirty million inhabitants. The regional market tends to be more diverse than the national markets, with sometimes around a million inhabitants (Gabon with 1 514 993 inhabitants and Equatorial Guinea with 633 441 inhabitants).
In this respect, Cameroon is well off as it represents 43% of the zone’s population with still everything to gain in a regional market with greater access. The Cameroonian iron ore project is in competition with the Gabonese project whose site in Belinga claims to have reserves of 1 billion ton, and 64% content. The construction site is expected to cost 450 million Euros and the first tons are planned for next year. In this region, a harbor in deep water would have to be built in Santa Clara, as well as 450 kms of railroad and a hydroelectric dam.
Regional rationality would push for integration of both projects as both countries are subject to national considerations, especially in terms of jobs. The question being posed is will they succeed in taking into account the regional scale? The authorities recently decided to merge both rival stock exchanges in Douala and Libreville which may be a good sign…