The next milestone on the project will be the financial close. Nisco and Iran Mines & Mineral Industry Development & Renovation Organisation (Imidro), the state holding company in charge of developing the local mines and metals industry, are holding negotiations with the Belgium arm of Fortis Bankon providing buy-back financing for both packages (MEED 8:11:02; 6:9:02).

The larger of the two contracts was signed with a consortium of Germany's SMS Demag, Iran International Engineering Company (Iritec)and its Italy-registered subsidiary Irasco.

Worth $300 million-400 million, the contract calls for the construction of a 1.5 million-tonne-a-year (t/y) slab and lime calcining plant. The estimated $140 million contract to set up a 1.65 million-t/y direct reduction iron (DRI) facility was signed by Germany-registered Mines & Metals Engineering (MME). Nisco will be the operator of the plant.

Both the SMS Demag-led consortium and MME have mandated Fortis Bank to arrange financing for the two packages, but Imidro, which is expected to provide guarantees, has yet to confirm the appointment of the bank.

Financing will be arranged on a buy-back basis, applying a structure similar to the one used for the expansion of the Mobarakeh Steel Complex. The buy-back agreement will cover both the project's international and local content.

It is understood that talks are also being held between Imidro, Fortis and international steel traders to reach an offtake agreement. All arrangements are expected to be concluded in six-nine months.

Companies involved in the project are now negotiating the possibility of commencing engineering ahead of the conclusion of financial arrangements under an advanced cash payments system. 'Engineering is probably going to start early,' says a source close to the project. 'It will take at least six months to be completed and could be done during the financing negotiations. This way construction could begin immediately after all financial issues have been resolved.'