Posted on 11 Nov 2011
Perwaja Holdings Bhd is expected to secure a sizeable iron ore mining concession from the Terengganu government “anytime soon”, according to industry sources.
To enable economies of scale, sources said, Perwaja's unit Perwaja Steel Sdn Bhd should ideally be given about 500ha in Bukit Besi to mine iron ore with a mining lease running for at least 10 years, which later will be subject to renewal.
The 2,400ha Bukit Besi area is believed to hold 50 million tonnes of iron ore reserves, which has the highest quality in Malaysia at 70% Fe (iron), the sources added.
Muhamad (inset) says there are many small iron ore minies in Malaysia, but the sector is set to become more competitive with the entry of big players.
(The higher Fe percentage means that the iron ores are carrying high quantities of hematite or magnetite also known as “natural ore” or “direct shipping ore”, which can be fed directly into iron-making blast furnaces for steel manufacturing.)
Industry sources told StarBiz that the state had agreed in principle to give Perwaja the concession to undertake the mining operation but this had yet to be made official.
Both Kinsteel Bhd and Maju Holdings Sdn Bhd are Perwaja's majority shareholders, with management control held by Kinsteel.
The sources added that apart from Perwaja, there were other companies being considered by the Terengganu government to undertake similar operations at Bukit Besi.
Iron ore reserves can also be found in Bukit Ibam, Lipis, Maran and Lanchang in Pahang.
Both Terengganu and Pahang are estimated to have in excess of 100 million tonnes of iron ore deposits.
As for Perwaja, the Bukit Besi iron ore mining area is about 80km from its billets and direct reduced iron (DRI) plant in Kemaman.
The company is in the midst of constructing a RM400mil concentration and pelletising plant in Kemaman.
“The pelletising plant will enable the bare iron ore to be used as feed material for its DRI plant, making it a strong case for Perwaja to own an iron ore mine,” said OSK Research in its latest steel sector update report.
The fact that Perwaja was originally a national project also raised the possibility of the company securing any upcoming iron ore mining concession in Terengganu or Pahang, it added.
Perwaja Steel's range of products include DRI, beam, blanks, blooms and billets, which in turn are used in the manufacturing, construction and infrastructure industries.
Meanwhile, Malaysian Chamber of Mines executive director Muhamad Nor Muhamad said: “Over the past three years, there have been an increase in the issuance and renewals of mining leases by state governments in mineral-rich states.”
Currently, there are about 50 iron ore mines scattered throughout Pahang, Johor, Perak and Terengganu.
Reflecting the increasing demand for the commodity, local iron ore production rose to 3.47 million tonnes last year from 1.47 million tonnes the previous year.
“There are many small iron ore operators in Malaysia working on less than 100 acres each. However, the sector is set to become more competitive with the entry of big players like Perwaja,” added Muhamad.
He said Perak had been actively issuing and renewing mining leases.
In 2008, the state had awarded HWG Tin Mining Sdn Bhd, a unit of Ho Wah Genting Bhd, a 10-year mining lease to mine tin and other minerals on 500 acres in Pengkalan Hulu with the potential for a further 500 acres as the work on the initial area progressed.
