Kobe Steel, Ltd. announced on March 15th that it has reached agreement with trading firm Sojitz Corporation to take a 33% equity share in Sojitz Resources & Technology Pty Ltd, currently a 100% owned subsidiary of Sojitz Corporation.
Sojitz Resources & Technology and Grange Resources Limited are conducting a Definitive Feasibility Study for Australia's Southdown Project. Sojitz Resources & Technology has a 30% stake in the project. By acquiring shares in Sojitz Resources & Technology, Kobe Steel will indirectly hold a 9.9% interest in Southdown.
The Southdown Project is a new iron ore project, which will produce magnetite pellet feed. This is pulverized magnetic iron ore, highly suitable for processing into pellets. The Southdown magnetite deposit is located approximately 90 kilometers northeast of the Port of Albany on the south coast of Western Australia. The project proposes to produce 10 million metric tons per year of premium magnetite pellet feed with about 69% iron content. First shipment is expected in 2015. The total cost of the project is estimated to reach approximately 250 billion yen.
In addition to acquiring shares in Sojitz Resources & Technology, Kobe Steel agreed with Sojitz Corporation to offtake 1.5 million metric tons per year of the magnetite pellet feed produced from the Southdown magnetite deposit, for at least 19 years. This will contribute to stable operation and cost reductions at the Pellet Plant at Kobe Steel's Kakogawa Works.
In the future, high-grade iron ore will decrease and iron ore prices are forecast to remain high. By participating in this project, Kobe Steel will be able to further increase its iron ore interests, helping to secure necessary resources and increase the competitiveness of its steel business.