The Fortescue Metals Group Limited (ASX: FMG) share price is under the spotlight after signing an iron ore agreement in Africa.
Fortescue signs iron ore agreement
Fortescue has announced that through its joint venture company Ivindo Iron, it has signed the mining convention for the Belinga Iron Ore project in Gabon with the Gabonese Republic.
Ivindo Iron is owned 90% by the Belinga Joint Venture Company (of which Fortescue owns 80% and the Africa Transformation and Industrialisation Fund owns 20%). The Gabon Government will own the other 10% of Ivindo Iron.
This will see the first mining planned for the second half of 2023, and “open growth opportunities” for Fortescue Metals and Fortescue Future Industries (FFI) throughout Africa.
The mining convention governs all the legal, money and regulatory regimes for the 4,500 sq km which comprises the Belinga project, including early development for production of up to 2 million tonnes (mt) per year, while studies advance potential designs of a large-scale development. A large project could help the Fortescue share price.
Fortescue leader Andrew Forrest said that this “emerging iron region is potentially massive”. If it fulfils its potential, the idea is that it will complement the Australian operations by “enhancing” its blended products, extending the mine lives and opening new global markets.
The capital estimate for the early stage mining development is approximately US$200 million, with investment over 2023 and 2024.
Andrew Forrest comments
The Fortescue founder and executive chair Andrew Forrest said:
The Gabonese Republic chose Fortescue to develop Belinga not only due to our strong track record of delivering major projects, but due also to our company wide commitment to use our major industrial scale and expertise to assist heavy industry combat climate change.
The climate threat is now incorporated as a key risk by government’s the world over. Critically, it’s considered a threat to Gabon’s rich natural heritage.
Geological mapping and sampling programs have confirmed our initial thoughts that this new West African iron ore hub may well one day prove to be among the largest in the world.
Final thoughts on the Fortescue share price
If Fortescue can grow its iron production outside of Australia, I think that’s probably a good thing for diversification purposes. Africa could be the next place for significant resource extraction if miners work collaboratively with governments.
I wouldn’t call the Fortescue share price a buy right now because it has risen around 50% since late October 2022. I’d wait for a lower price.
