JOHANNESBURG (miningweekly.com) – Mozambique-focused miner Baobab Resources was nearing the conclusion of the selection process of a Chinese partner to conclude a feasibility study at its Tete iron project, in Mozambique.

The company has been in detailed discussions with steel industry specialists Sinosteel Equipment & Engineering and The China Metallurgical Group Corporation, the Aim-listed company said in a statement on Thursday.

The partner would also assist the miner in performing pilot scale test work and provide an engineering, procurement and construction contract proposal with industry standard process performance guarantees.

"With the technical merits of the project well-established in the prefeasibility study and subsequent definitive feasibility study test work, Baobab's management team has been focused on investigating opportunities to reduce the initial capital expenditure required,” MD Ben James said.

He added that, by adopting Chinese procurement, a more technically and commercially favourable path to production could now be pursued. “A process guarantee on the selected flowsheet will not only deliver enhanced project economics through improved capital efficiencies, but will also, by way of accessing associated financial institutions, significantly reduce the timeframe to financial close and subsequent project execution,” James noted.

Baobab had also conducted bench scale test work on a 1.5 t iron-ore sample with Beijing Shenwu Environment & Energy Technology Company (Shenwu).

Shenwu was one of the largest high-tech enterprises in China, specialising in research, development and marketing of energy-saving and emission reduction innovation technologies. The test work was trialling an alternative reduction technology to the well-established rotary kiln process. Results were expected in March, after the Chinese New Year holiday period.

Meanwhile, James pointed out that the company was also pleased to have the ongoing support of its joint venture (JV) partner in the Tete project, the International Finance Corporation (IFC). “The IFC is an ideal development partner for a project of this scale in Africa," he said.

The IFC elected not to contribute its 15% of project expenses towards the unincorporated JV for the 2014 calendar year. In terms of the provisions of the agreement between Baobab and the IFC, the IFC  would incur a dilution in its percentage participation rights in the agreement from the current 15% to 12.88%. The IFC remained a 3% shareholder in the project.

The IFC gave the company the necessary assurances of its long-term commitment to the development of Baobab's Tete project. It intended to contribute its 12.88% of project expenses in this year.