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Baobab in talks with three Chinese contractors over Tete

Last updated: 20:06 23 Dec 2014 AEDT, First published: 21:06 23 Dec 2014 AEDT

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Baobab Resources (LON:BAO) is in discussions with the three large Chinese engineering groups over the definitive feasibility study (DFS) for its Tete pig iron and vanadium project in Mozambique.

The talks have covered completion of the ongoing DFS study; the performance of pilot scale test work; completion of basic engineering; providing process guarantees and ultimately providing Baobab with a project execution plan through an engineering, procurement and contracting (EPC) proposal.

Jeremy Dowler, Baobab’s chairman, said a positive conclusion with one or two of the interested companies would help attract Chinese financing and co-operation with potential strategic partners.

“Although this step will push out our time frame for completion of the definitive feasibility study, it should enable us to reduce project risk more rapidly and shorten the ultimate route to execution,” he said.

The growing relationship between China and Mozambique is very important for Baobab, he added.

“The confidence that one of the largest Chinese state owned entities has in our project and the potential to build industrial capacity in Mozambique over the next 50 years, encapsulates the wider cooperation between host and investing nations.”

Baobab posted a loss before tax of US$5.4mln (US$8mln) in the year to June.

It recently received its mining concession for Tete, which is valid for 25 years and can be renewed for a further 25 years.

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