(Ecofin Agency) - Nigeria has significant mineral reserves valued at $700 billion, including iron ore, but the mining sector contributes less than 1% to the country's GDP. 

Chart & Capstone Integrated Limited, a Nigerian firm, has partnered with China's Sinomach-He to develop an iron ore mining and steel mill. They signed a $1 billion memorandum of understanding, presented to Mines Minister Dele Alake during the China-Africa Cooperation Forum in Beijing.

On September 8, Minister Alake revealed that the project for the complex will be located in Kogi State, which houses large iron reserves. This State is also home to Australia's Macro Metals, which is developing the Agbaja project, containing 586 million tonnes of mineral resources and 205 million tonnes of ore reserves.

The $1 billion new iron ore to steel project planned for Kogi State is a major breakthrough in our efforts to promote local value addition in the solid minerals sector.

During President Bola Ahmed Tinubu's recent visit to China, I met with the project's promoters, Chart and… pic.twitter.com/WmIRtXhA17

— Dele Alake (@AlakeDele) September 8, 2024

While details on the project's development timeline and production capacity have not yet been provided, reports indicate that Sinomach-He will be the main contractor, managing engineering, procurement, and commissioning for the mine and steelworks.

If successful, this project could increase the mining sector's contribution to Nigeria's economy. The sector contributes less than 1% to the GDP despite the country hosting $700 billion worth of mineral resources. The steel mill would also help Nigeria export more value-added products to China, addressing a trade deficit of over $1 billion.

“I emphasized the recent shift from the pit-to-port policy, which allowed mining companies to export raw minerals, to a focus on local extraction and value addition. This change is crucial for creating jobs, facilitating skills transfer, and improving our trade balance,” Minister Dele Alake wrote on X.

⚡Singapore #IronOre fell below $90, for the first time in the last 22 months. Dalian iron ore drops by 1.4%.
??Most Chinese futures opened down in #China. Freight Index -6.2%, crude oil -1.9%. Shanghai #silver -3.3%, gold -0.5%. #copper -1%, #aluminum -0.5%, #nickel -0.7% #zinc… pic.twitter.com/Sd1g4A9bhm

— CN Wire (@Sino_Market) September 9, 2024

The global iron ore market currently faces a crisis, with prices plunging in recent months and expected to plunge further in coming years. At present, iron sells below $90 per tonne and is expected to decline to $78 per tonne by 2033. 

Meanwhile, Guinea is preparing to bring its Simandou deposit into production by 2025, while South Africa, Mauritania, Sierra Leone, and Liberia currently lead African iron ore production. It will be interesting to see how this development is taken into account by the continent's future iron ore producers.

Emiliano Tossou