The first production of iron ore pellets from China Union's $2.6 billion Bong development in Liberia is expected within 18 months, Liberian National Investment Commission Chairman Richard Tolbert said.
Tolbert told Reuters the full $2.6 billion capital investment by the Chinese company, the biggest single foreign investment in the poor West African state, would be disbursed over a period of between eight to 10 years.
The contract signed this week between China Union and the Liberian government foresees 25 years of iron ore production from the Bong deposit, which is estimated to contain 300 million tonnes of low grade ore, he added.
"Within 18 months, we will see the first one-million-tonne pelletising plant up and running," Tolbert said in an interview following the signing on Tuesday.
He added China Union had also been granted a licence to explore for ore in an area adjoining the Bong deposit, which would open the possibility of increasing the ore resource.
The deal, which beat nine rival bids, went ahead at a time when many firms have scaled back or postponed African mining projects as metals prices have crashed in the past six months.
Most analysts believe a severe global recession will cut demand for industrial minerals for years to come, and there are fears this will also hit resource investments in Africa by China, which has announced multi-billion-dollar deals.
At a ceremony to mark the signing, Liberian President Ellen Johnson-Sirleaf said she hoped the China Union deal would encourage other investors to come to Liberia, which is still struggling to recover from a destructive 1989-2003 civil war.
"I am pleased to see this agreement going ahead. What the Chinese have done today shows their level of support for our quest to bring in investors ... We are anxious to see operations start," Johnson-Sirleaf said.
Iron ore prices on world markets have fallen to around $80 per tonne from a high of almost $200 per tonne last February as demand, particularly from Chinese steel mills, has collapsed.
Before its civil war, Liberia was the world's fifth largest producer of iron ore, and foreign investment in the mineral is a centrepiece of Johnson-Sirleaf's strategy of economic recovery.
China Union's investment in Liberia will be bigger than a $1.5 billion iron ore mining project in the West African state being developed by the world's largest steelmaker, ArcelorMittal.
Under its contract to mine the Bong deposit, which lies to the north-east of the capital Monrovia, the Chinese company intends to recondition the capital's port and build a hydro power plant to supply the city with electricity.
The contract includes a $40 million cash signature fee to be paid to Liberia once its parliament ratifies the contract and it is promulgated. This was expected in the coming months.
A $300 million signature bonus paid by China National Petroleum Corp to Niger for an oil deal last year drew criticism from rights groups, who said there was insufficient transparency on how it would be spent.
President Johnson-Sirleaf has promised zero tolerance of corruption. In September, Liberia disqualified two companies from bidding for another mining project on grounds of previous "acts of violation" by the firms.
As well as iron ore, Liberia aims to develop offshore oil. Anadarko Petroleum, Hong Kong Tongtai Petroleum, Repsol and Woodside have signed exploration deals.
Source: Reuters
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