The company has increased its share in the Guelb el-Aouj project in the north of the country from 15 per cent following the withdrawal of Saudi Basic Industries Corporation (Sabic) from the scheme in early November.

The shareholding cost a total of $375 million.

The iron ore processing plant, which will produce an estimated 7 million tonnes a year of direct reduction pellet for more than 30 years, is set to start production in 2010.

Development of the project will begin following the completion of a feasibility study, expected to be completed in January 2008. Construction will take about three years.

Both Sabic and Qatar Steel will be long-term offtakers for the project, which is expected to be largely export-oriented. 'We will offtake some of the product for the Qatar market,' says Hussain Murrar, business development manager at Qatar Steel. 'We will also be looking to sign offtake agreements with other steel companies.'

Sabic had agreed to pay $262 million for a 34.9 per cent stake in the project so it could reduce its reliance on iron ore imports from Sweden and Brazil.

Mutlaq al-Morished, chief financial officer of Sabic, says the company decided the expected return on investment was not sufficient.

The balance of the shares in the project is split equally between state mining company Societe Nationale Industrielle & Miniere and Australia's Sphere Investments. Sphere, in which Sabic and Qatar Steel together have an 18 per cent interest, is about to develop a drilling campaign on Mauritania's Lebtheinia Iron Project.

www.meed.com/industry