The Zanaga Iron Ore Company has released the outcome of a positive pre-feasibility study undertaken by Xstrata on the Zanaga JV project in the Republic of Congo.

The optimum development scenario, at an estimated US$7.4bn capital cost, envisages a 30Mt/y project, producing a high grade (68% Fe) product to be transported to the coast via a 380km slurry pipeline. The project now progresses into a full Feasibility Study, which is to be completed in early 2014.

The estimated capital cost of US$7.4bn has also not changed significantly from Xtrata’s previous estimate of US$7.3bn. The estimated operating costs are US$23/t, or close to the US$21/t identified earlier.

Xtrata owns 50% plus 1 share in the project and it either continues with the project after the Feasibility Study, or it does not, with sourcing a potential strategic partner likely having a bearing on this.

Investec therefore consider it an uncertain investment, but given that ZIOC, and its 50% share of the project, is currently being valued at.US$150M, the risk appears to be well priced in.