The Fortescue Metals Group Limited (ASX: FMG) share price is down 1% after the iron ore miner’s African news about the Gabon project.
Fortescue is one of the world’s biggest iron resource businesses. It’s currently heavily focused on Australia, but that could soon change.
Fortescue’s Belinga iron ore project update
The iron ore miner’s incorporated joint venture company, Ivindo Iron, has signed an exploration convention for the Belinga iron ore project with the Gabon Government. Gabon is a country in Western Africa. Belinga could be one of the world’s largest iron ore deposits.
This announcement came after the agreement announced in December 2021 between Fortescue and the Gabon Government that granted Fortescue an exclusivity period to study the opportunity to develop the deposit.
The exploration convention contains the key commercial and legal terms for the exploration of the project and enables the grant of exploration licences covering approximately 4,500 square kilometres. It envisages an exploration works program of approximately US$90 million over three years. If it turns out well, I think this could be positive for the Fortescue share price.
Who are Fortescue’s partners?
Ivindo Iron has been established in Gabon by Fortescue, which owns 80%, and its joint venture partner, the Africa Transformation and Industrialisation Fund (ATIF), which owns 20%.
In accordance with the Gabon Mining Code, the Gabon Government will receive a free ‘carry interest’ of 10% in Ivindo Iron after the future grant of the exploitation licence for the Belinga Project.
ATIF, based in Abu Dhabi, invests in high-added value projects and takes an active role in the sustainable industrialisation of Africa. It aims to help develop their exports of manufactured products.
What next?
Ivindo Iron plans to immediately commence exploration and studies after the grant of the exploration licences, with an initial focus on exploration work to determine the potential size and grade of the Belinga iron ore deposit and evaluate logistics solutions.
Fortescue said that it’s pursuing global opportunities in iron ore that align with its strategy and expertise.
The company is scheduled to hand in its FY22 result on 29 August 2022.
My thoughts on the Fortescue share price
A big move away from Australia is a change in strategy for Fortescue, but I think it could pay off.
Fortescue shares have been rising in recent weeks. I think it makes sense to buy commodity businesses when the price sinks and sentiment is low. I wouldn’t say it has reached that point yet, but if the iron ore price and the Fortescue share price drops then it could be worth jumping on. I’m personally waiting for Fortescue to go under $16 before buying more shares for my portfolio.
